CTF Rates Federal Budget 2005

The Good, the Bad and the Ugly

*Personal income tax relief starts out measly, rises by 2009
*More money down the Kyoto sinkhole – Talk of green taxes
*Program spending in 2004/05 up 11.8% – Original target was 4.6%
*But Wait (a Little) More Good: Debt re-payment continues and federal gas tax revenue finally starts to flow to cities

Ottawa: The Canadian Taxpayers Federation (CTF) reacted to the 2005/06 federal budget, which was tabled in the House of Commons by Finance Minister Ralph Goodale this afternoon.

The Good: Tax Relief for Canadians

"Starting in 2006 Canadian taxpayers will have a little more money in their pockets thanks to a higher personal income tax exemption, but the initial tax savings is laughable although it will grow overtime," said CTF federal director John Williamson. "In 2006 an individual taxpayer’s personal income tax bill will be cut by a measly $16, but rise to $192 a year in 2009. The savings for two-income families will be $32 in the first year and $384 by 2009, whereas families with a stay-at-home spouse are slightly short-changed with savings of $30 in 2006 and $370 in 2009."

"Despite Ottawa’s multi-year and multi-billion dollar surpluses, which really represents an ongoing over-taxation of Canadians, the government is delaying until 2009 what is at best described as modest tax relief until 2010," noted Williamson.

The Bad: More Tax Money for Kyoto – Still No Plan

The federal government will continue its largely ineffective Kyoto Protocol strategy of spending billions of dollars. Budget 2005 commits $1-billion into a Clean Fund to encourage business to reduce greenhouse gas emissions; another $200-million will be dedicated to wind power; $300-million for the Green Municipal Fund; $225-million for home renovations; and $97-million on hydro development. More ominous for taxpayers is the potential shifting of strategies: The Case for Green Taxes (see annex four of the budget, page 314-327), in which the federal governments makes a public policy argument in favour of a green tax.

"Despite all assurances that any new taxes introduced that will be offset by taxes in other areas, taxpayers are deeply concerned this sort of rhetoric will result in new taxes and a higher tax burden for Canadians," said Williamson. "The CTF opposes a ‘green tax’ and will loudly oppose any new increase that does not include an equivalent reduction in other broadly-based taxes, for instance lower personal incomes taxes."

The Ugly: Budgets Not Being Followed, Spending Set to Shoot Up (Again)

Under Prime Minister Paul Martin, the Liberal government’s program spending (this figure excludes public debt charges) totaled $141.4-billion in 2003/04 (last year), it increased to $158.1-billion in 2004/05, and will jump to $161.3-billion in 2005-06. In addition, estimated gross surplus figures will be $3.0-billion this year, $4.0-billion in the coming fiscal year, and $5.0-billion in 2006/07.

"The government appears incapable of living within the budgets it has set for itself. For instance when the budget was tabled last year, Minister Goodale said program spending in 2004/05 would be $148-billion. When the Economic Update was delivered in November we were told it would, in fact, rise to $151-billion. And today the budget reveals spending in 2004/05 will be $158-billion. Ottawa missed its original budget target by an astounding $10-billion. This is not a government that is budgeting responsibly and its actions make a mockery out of future spending projections, which should be increased by at least a factor or two."

"Since the budget was balanced, program spending has risen 48 per and is projected to climb by 82 per cent in 2009/10," Williamson noted. "Mr. Martin’s spending still outpaces the combined growth of inflation and population growth, which breaks his own Budget 2000 pledge that spending will be limited to inflation and population growth."

More Good: The Debt & Surplus Picture

"We are pleased Minister Goodale will reduce the debt by $4-billion this year," Williamson stressed. "And we applaud the federal government for reducing more than $60-billion in net debt over the past 8 years. Unfortunately the government has again refused to implement a legislated debt reduction schedule. Debt servicing will chew up $35-billion this year, an astonishing 20 cents of each dollar collected. Ottawa should set yearly debt reduction targets as was done with the deficit and make those targets the law."

And a Little More Good: Infrastructure Initiatives — Cities & Communities Agenda

The 2005 budget will – finally – begin to share federal gas tax revenue with municipalities. Last year, Ottawa rebated the GST paid by city governments. In 2005/06, the share of the federal gas tax dedicated to cities and communities will be $600-million. By 2009-10, the share will increase to $2-billion, representing 5 cents per litre. Since 1999, the CTF has advocated dedicating half of the federal fuel tax revenue with all Canadian municipalities regardless of size. Ottawa collects approximately $5-billion in fuel taxes, yet returns a paltry 3 per cent to roads.

"Early in February the Infrastructure Minister John Godfrey announced Ottawa would allocate gas tax revenues on a per capita basis," noted John Williamson. "We completely agree with this approach because it treats all municipalities equitably and includes all cities, big and small alike. We believe the money should be used for infrastructure projects, highway maintenance and roads. The government appears to be doing what we have advocated on this file, and that’s good news for taxpayers."

John Williamson
Canadian Taxpayers Federation
www.taxpayer.com

The full text of this posting including tables and figures is available at:
http://www.taxpayer.com/main/news.php?news_id=1926