Mr. Oliver has finally delivered his long waited budget. Conservatives are now spreading out across Canada selling their view of responsible fiscal management (i.e., deficit elimination) and lower taxes (income splitting and increased child care benefits).  The election is off and running paid for by taxpayer dollars.

The so-called “political pundits”, and the media have been quite impressed by the clever way the budget painted the Opposition Parties into a “political corner”.


The budget, of course, is just a “fantasy” document. It is based on very optimistic economic and oil price assumptions for the next five years. These assumptions have resulted in large “fantasy” surpluses in the outer years, which have allowed the government to make a lot of “fantasy promises” that would actually take affect after the “2019” election, not the 2011 election. What is amazing is that the media and the pundits regard the 2015 budget as something that could actually happen.  The 2015 future budget promises will never happen.


Nevertheless, the 2015 election will be based on this “fantasy” budget. The economic and fiscal assumptions that underlie the budget will have to be used by the Opposition Parties, unless they want to create their own “fantasy” worlds. This would not be a good idea.


According to the media the budget has created a real dilemma for the Opposition. If the Liberals and the NDP want to implement their own policy agendas then they will have to reject Conservative proposals (i.e., tax cuts), raise taxes, or go into deficits. None of these options would be politically appealing although an economic case could be made for running small structural deficits. The NDP have already said they would increase corporate taxes.


So where does this leave the Opposition Parties Are they painted into a corner or is there a “door” that will take them into a different political narrative.


In fact there is a very good door and it wide open. Either the Liberals od the NDP just have to step through it.


This election will be run primarily on which Party can deliver the best “tax cut” for Canadian families. It should also be run, of course, on which Party can put forward a credible plan to strengthen economic growth and job creation, and hopefully this will happen.


Regardless, tax cuts for Canadians will be front and center in the election debate. It started last October when Prime Minister Harper announced his family tax cut package, and it was announced again in the budget.


The Opposition Parties need to offer Canadians a better “tax cut” plan; a plan that would provide a larger income tax cut for all Canadians, not just a chosen few, while at the same time strengthening economic growth and job creation. Restructuring the tax system can provide such a plan.


The first step would be to restore the two points to the GST that were eliminated by the Conservatives, against the advice of all economists. The second step would be to give the entire proceeds from the GST increase (e.g. $14 billion annually) to Canadians, through lower income taxes and improved child care benefits (e.g., enrichments to the Canadian Child Tax Benefit).


Additional revenues for income tax cuts could also be found by eliminating income splitting for high-income families with children under18 (about $2 billion), and by eliminating many of the unfair and unnecessary “special” tax breaks (about $1.5 billion) introduced by the Conservatives.


 In total this could amount to about $17.5 billion that could be “given back”, not just to a few groups as the Conservatives are doing, but to all Canadians. It would constitute the biggest personal income tax cut in Canadian history.


The Conservatives would try to attack this tax cut plan by saying the Opposition are raising taxes, but this would be nonsense, since it would be a fully funded tax cut plan with no increase in the deficit or in the debt.  It would simply be a better tax structure that would benefit all Canadians not just a chosen few.


It would present Canadians with a choice: a tax cut plan with a very large broad based cut in income taxes and an increase in GST of $2 for every $100 spent; and the Conservatives Plan, with a small income tax cut for selected groups and $2 less in GST for every $100 spent.


But the different tax plans would do more than that.


Economists generally agree that a tax system that relies more on consumption taxes and less on income taxes is a better system for encouraging savings and investment. Such a tax structure would provide greater support for economic growth and job creation than the Conservative tax structure.


Two clear and very different tax proposals would make for a very interesting election.


All we need is one, or even both, of the Opposition Parties to take up the challenge and give Canadians a real choice.














Add new comment