ST. JOHN'S, N.L. (CP) - Say goodbye to Liberal income tax cuts and hello instead to a Conservative GST reduction, to be introduced in the upcoming federal budget, Prime Minister Stephen Harper suggested Wednesday.
The minority Conservative government intends to stick to its own tax-reduction plan rather than worry about keeping Liberal income tax cuts introduced late last year, Harper said following a speech to a Newfoundland business group.
"The measures we'll be proceeding with will be our own measures," Harper said in response to repeated questions about whether he'll try to maintain the existing Liberal tax cuts in addition to the Tory's own tax plans.
"Our program will be different than the Liberals, but it will also be more generous overall."
That's consistent with Harper's message during the federal election campaign, when he said a Conservative government would need to roll back the Liberal income tax break to pay for his own tax plan.
The Tory program promised a two percentage point cut to the Goods and Services Tax, including an early one-point cut from the current seven per cent.
For the first time since the Jan. 23 election, Harper said Wednesday the first cut will come in his government's first budget - although he didn't provide a budget date.
However Conservative MP Lee Richardson said Wednesday the budget will come in the first week of May.
Finance Minister Jim Flaherty gave a major speech in Toronto on Tuesday that was devoid of tax cut specifics, although he had previously refused to rule out maintaining the Liberal cuts while still reducing the GST.
Harper now appears to have killed that possibility.
It is likely because the government can't afford both, says Don Drummond, chief economist with TD Bank and former senior Finance department official.
Ottawa is enjoying higher than expected revenues, and the budget surplus for the fiscal year that ended March 31 will likely be about $2 billion more than expected, totalling about $10 billion. Analysts say the current year should see an extra $3 billion, for a surplus worth as much as $12 billion.
But at least $3 billion in annual surpluses have been traditionally set aside in rainy day funds that become debt repayments if not needed for crisis management.
The Conservatives also have numerous other costly election promises to keep, including a new family allowance program that begins in July.
The Liberal income tax cuts alone - including both an increase in the basic exemption for all taxpayers plus a reduction in the lowest tax bracket - cost more than $4 billion per year.
And the annual price tag is almost $5 billion for Harper's one point cut in the GST.
"I don't think they have the financial wherewithal to do both," said Drummond.
Yet reversing income tax cuts that Canadians are currently seeing on their paycheques is a tough political sell, predicts the economist.
"Doing away with them is going to be a lot more difficult than (Harper) ever imagined."
There's been speculation the Tories are looking for a way to keep part of the Liberal tax reductions.
Harper's remarks Wednesday suggest they'll instead attempt to sell a set of smaller, narrowly focused tax breaks as income tax relief.
He told his St. John's audience he eventually intends to implement tax credits for students' books, workers' tools and children's sports equipment - all of which he called income tax reductions.
Yet those are so targeted that most Canadian taxpayers won't ever see a benefit, said Drummond.
Still, Harper pledged to deliver "tax reduction for every single Canadian family," through the lower GST.
"The cut in the GST will benefit everyone, including those who have modest or low incomes, because it's the one federal tax everyone pays," said the prime minister.
Another of Harper's showpiece promises, the new family allowance plan, won't actually deliver nearly as much benefit to families as the Conservatives have suggested, said Olivia Chow, NDP critic for children and youth.
Many modest income families will see other benefits clawed back if Harper goes ahead with his plan to replace Liberal child-care transfers to provinces with a direct family allowance scheme, said Chow, citing a study by the non-partisan Caledon Institution of Social Policy.
"This government wants to give with one hand and take away with other," Chow said in a statement Wednesday.
The Caledon study suggests the Conservatives should deliver their family allowance plan through the existing child tax benefit program so that modest-income families won't see so much clawed back.
Many tax breaks and other social programs are based on family income, so when the Tories boost those incomes, corresponding amounts are taken back.
http://start.shaw.ca/start/enCA/News/NationalNewsArticle.htm?src=n041289A.xml
The minority Conservative government intends to stick to its own tax-reduction plan rather than worry about keeping Liberal income tax cuts introduced late last year, Harper said following a speech to a Newfoundland business group.
"The measures we'll be proceeding with will be our own measures," Harper said in response to repeated questions about whether he'll try to maintain the existing Liberal tax cuts in addition to the Tory's own tax plans.
"Our program will be different than the Liberals, but it will also be more generous overall."
That's consistent with Harper's message during the federal election campaign, when he said a Conservative government would need to roll back the Liberal income tax break to pay for his own tax plan.
The Tory program promised a two percentage point cut to the Goods and Services Tax, including an early one-point cut from the current seven per cent.
For the first time since the Jan. 23 election, Harper said Wednesday the first cut will come in his government's first budget - although he didn't provide a budget date.
However Conservative MP Lee Richardson said Wednesday the budget will come in the first week of May.
Finance Minister Jim Flaherty gave a major speech in Toronto on Tuesday that was devoid of tax cut specifics, although he had previously refused to rule out maintaining the Liberal cuts while still reducing the GST.
Harper now appears to have killed that possibility.
It is likely because the government can't afford both, says Don Drummond, chief economist with TD Bank and former senior Finance department official.
Ottawa is enjoying higher than expected revenues, and the budget surplus for the fiscal year that ended March 31 will likely be about $2 billion more than expected, totalling about $10 billion. Analysts say the current year should see an extra $3 billion, for a surplus worth as much as $12 billion.
But at least $3 billion in annual surpluses have been traditionally set aside in rainy day funds that become debt repayments if not needed for crisis management.
The Conservatives also have numerous other costly election promises to keep, including a new family allowance program that begins in July.
The Liberal income tax cuts alone - including both an increase in the basic exemption for all taxpayers plus a reduction in the lowest tax bracket - cost more than $4 billion per year.
And the annual price tag is almost $5 billion for Harper's one point cut in the GST.
"I don't think they have the financial wherewithal to do both," said Drummond.
Yet reversing income tax cuts that Canadians are currently seeing on their paycheques is a tough political sell, predicts the economist.
"Doing away with them is going to be a lot more difficult than (Harper) ever imagined."
There's been speculation the Tories are looking for a way to keep part of the Liberal tax reductions.
Harper's remarks Wednesday suggest they'll instead attempt to sell a set of smaller, narrowly focused tax breaks as income tax relief.
He told his St. John's audience he eventually intends to implement tax credits for students' books, workers' tools and children's sports equipment - all of which he called income tax reductions.
Yet those are so targeted that most Canadian taxpayers won't ever see a benefit, said Drummond.
Still, Harper pledged to deliver "tax reduction for every single Canadian family," through the lower GST.
"The cut in the GST will benefit everyone, including those who have modest or low incomes, because it's the one federal tax everyone pays," said the prime minister.
Another of Harper's showpiece promises, the new family allowance plan, won't actually deliver nearly as much benefit to families as the Conservatives have suggested, said Olivia Chow, NDP critic for children and youth.
Many modest income families will see other benefits clawed back if Harper goes ahead with his plan to replace Liberal child-care transfers to provinces with a direct family allowance scheme, said Chow, citing a study by the non-partisan Caledon Institution of Social Policy.
"This government wants to give with one hand and take away with other," Chow said in a statement Wednesday.
The Caledon study suggests the Conservatives should deliver their family allowance plan through the existing child tax benefit program so that modest-income families won't see so much clawed back.
Many tax breaks and other social programs are based on family income, so when the Tories boost those incomes, corresponding amounts are taken back.
http://start.shaw.ca/start/enCA/News/NationalNewsArticle.htm?src=n041289A.xml