2 May 2006

Expect big tax relief in budget

The following article is excerpted from the 2 May 2006 edition of “globeandmail.com”.

Prime Minister Stephen Harper will move to establish the fiscal reputation of his new government today with an inaugural federal budget that sources say will include the largest tax-relief package in the recent past.

The first Conservative budget in 13 years is expected to include a reduction in the goods and services tax, breaks for transit riders, aid for tradespeople and a $1,200 annual allowance for parents of children under six years old….

The Tory budget must also resolve a dilemma created by Mr. Harper's campaign pledge to rescind recent Liberal income-tax breaks to fund the GST cut. If they repeal these breaks, the Tories risks being labelled tax hikers, undermining their claim that Canadians will be better off under a Conservative government.

Earlier, Ottawa considered cutting middle-income-tax-bracket rates instead, but economists have warned there may not be enough fiscal room for these reductions.

It remains to be seen what relief the Tories enact to more than make up for repealing the Liberal breaks.

Still, sources said today's budget will provide tax relief that is being advertised as the most substantial set of breaks in a number of years….

The Harper government, awash in unexpected cash due to tax revenue from booming
resource prices, plans to put its own stamp on federal spending, boosting… border infrastructure, police officers and the military.

Front and centre for defence will be a commitment, in keeping with election campaign promises, to purchase a fleet of strategic or long-haul aircraft — likely four aircraft, sources say — at a cost of about $250-million (U.S.) apiece….

Much of the budget will focus on the party's five priorities, which include the GST cut, the daycare allowance, a crackdown on crime, a political accountability act and a pledge to reduce medical waiting times. ….

The budget's main appeal is expected to be to the Tory political base: middle-class voters in rural and suburban Canada….

The document is also expected to include:

– A transit-pass tax credit for commuters,

– A federal tax credit on spending of up to $500 for parents of children under 16 years old in sports programs, to provide a break for registration fees and memberships,

– A tax deduction on tools of up to $500 for tradespeople,

– An increase in the threshold for the small-business tax rate and a reduction of the tax rate on small businesses,

– A textbook tax deduction and an exemption for scholarship income,

– An exemption for the first $500,000 of capital gains from taxation for transferring family fishing assets,

and reinstatement of the corporate income-tax relief cancelled by the Liberals in their deal with the NDP for the 2005 budget….