PAYING FOR NDP ELECTION PROMISSES

Panel 1 in the Table below provides cost estimates for most of the NDP election promises so far. In some cases it was not possible to provide estimates since not enough detail was provided.  NDP promises include a two point cut in the small business tax rate (already implemented in the budget by the Conservatives); extension of the accelerated capital cost allowance for two years (also already implemented by the Conservatives); an innovation tax credit for machinery used in research and development; an additional one cent of gas tax for the provinces for infrastructure; a transit infrastructure fund; increased funding for social housing; a major child care initiative; increasing ODA funding to 0.7 per cent of Gross National Income (GNI); and restoring the 6% annual escalator to the Canada Health Transfer.

The last three proposals are by far the most expensive. According to the NDP, it would take eight years to reach their goal of a million childcare spaces, at an annual cost of $5 billion when fully implemented. No cost estimate or timetable has been provided as to when the target of 0.7 percent of GNI for ODA funding would be reached.

 

 This is not surprising given that the federal government currently spends about $4.5 billion annually (0.24 % Of GNI) on international assistance.  Increasing this ratio to 0.7% of GNI implies a tripling of the current cost to about $13 billion and rising every year thereafter.

Increasing the CHT back to 6% per year would cost an incremental $600 million in 2018-19 rising to about $2 billion by 2019-20.

 

The total cost of the NDP proposals could amount to around $800 million in 2015-16 rising to roughly $11.5 billion in 2019-20. These estimates assume child-care costs of $2.5 billion and incremental funding for ODA of $ 4.2 billion in 2019-20 (a gradual increase in funding over 10 years).

 

Panel 2 provides estimates of how the NDP plans to pay for their election promises.  First, there are funds still available in the April budget beginning in 2016-17. Using the Bank of Canada forecast growth of 1% for this year, we have estimated that there would be a deficit of $1.6 billion in 2015-16. We have not adjusted the April budget’s fiscal projections for the outer years, but they could well be lower.

 

To fund these promises, the NDP is proposing to increase the general corporate tax rate, but have not indicated by how much.  A one-point increase in the general CIT would yield about $1.8 billion annually. We have assumed a phased increase of two points in the CIT raising the rate from 15 per cent to 17 per cent.

 

Like the Liberals, the NDP would repeal income spitting and maintain the existing maximum annual contribution to the TFSA. Based on these assumptions total available funds from these three initiatives would be about $1.2 billion in 2015-16 rising to $6.2 billion in 2019-20.

 

Panel 3 provides an estimate of the net impact of the proposed spending and revenue increases on the April 2015 budget balance. The net impact of the NDP platform to date would leave the April budget with a small deficit in 2015-16, followed by small surpluses in the next two years. The budget would be close to balance in the outer years. Without the increase in the CIT, the budget would be in deficit in every year.

 

New Democratic Party

 

 

 

 

 

 

 

 

2015-16

2016-17

2017-18

2018-19

2019-20

(millions of dollars)

         

 

 

         

 

    1. Uses of Funds

         

 

         - Cut small business tax rate

 

150

570

660

355

-15

          - Extend accelerated capital cost

         

 

                 allowance for two years

 

2

10

10

10

10

          - Innovation tax credit for machinery

10

40

40

40

40

                 used in R&D

         

 

          - LSVCC Tax Credit

 

?

?

?

?

?

          - Infrastructure (1ct of gas tax)

   

420

1000

1250

1500

          - Transit infrastructure fund

 

325

1300

1300

1300

1300

          - Increase funding for social housing

 

?

?

?

?

?

          - $15 a day child care

 

250

1000

1500

2000

2500

           - Increase ODA funding to 0.7% of GDP

90

350

1400

2800

4200

         - Support for Aboriginals

 

?

?

?

?

?

          - Restore 6% escalator to CHT funding

   

550

1250

2000

           - Total

 

827

3690

6460

9005

11535

 

         

 

    2. Sources of Funds

         

 

        - Budget 2015 Fiscal Balance

 

-1600

1700

2600

2600

4800

 

         

 

         - Policy Commitments

         

 

           - Increase corporate general tax rate

 

578

2313

3700

3700

3700

           - Cancel income-splitting

 

499

1995

2050

2100

2165

           - Reduce annual contribution to TFSA

85

160

235

295

360

                 to $5,000

         

 

           - Total

 

1162

4468

5985

6095

6225

 

         

 

          - Total Source of Funds

 

-438

6168

8585

8695

11025

 

         

 

    3. Net Impact

 

-1265

2478

2125

-310

-510

 

 

 

 

Add new comment