Will a low profile review of federal tax expenditures lay the groundwork for tax fairness in the Spring federal budget?
Last Spring, federal Finance Minister Bill Morneau announced that his Liberal government would be undertaking a comprehensive review of tax “expenditures” found in the federal tax code. According to Morneau, the aims of the review are to simplify the system and make it more progressive. In the process, he hopes to find $3 billion in savings. A panel of “external experts” was appointed “to ensure that the review is informed by a range of perspectives”.
While little known to the general public, the review is of enormous importance. Every year, Ottawa spends about $110 billion on programs such as health transfers to the provinces, the Canada Pension Plan, Employment Insurance, and other line item programs that comprise the federal budget. These expenditures, as with all direct spending, are put before Parliament for examination. Through this “Estimates” process, information on the costs and impact of these programs is available to the public.
Far less visible and transparent is the roughly $100 billion the federal government forgoes annually in so-called “tax expenditures”. These exemptions, deductions, credits, rebates and surtaxes are not subjected to the same kinds of parliamentary accountability mechanisms that are applied to more direct government spending. Moreover, many of these expenditures (including all exemptions and deductions), while legally embodied in the federal tax code, have huge implications for the fiscal situation of the provinces in that they also define the tax “base” against which all personal and corporate income taxes are levied at the provincial level.
Given the sheer scale of these tax expenditures, there is a strong argument for subjecting this hidden tax spending to the same oversight and public debate as any other spending. This is especially true given just how regressive (i.e. favouring the affluent) many of these expenditures are. If the government wants to provide billions of dollars in tax breaks to the richest Canadians, it should have an obligation to justify these gifts to the vast majority of Canadians who don’t benefit from such largesse.
The last comprehensive evaluation of the federal tax system was the Carter Commission of 1966. It’s clearly time to take a top to bottom look at our tax system to see if it is the truly progressive system the public deserves. Continue reading
In last night’s debate, Harper, Trudeau and Mulcair put forward very different tax and family policies.
In this post, Canada Fact Check examines the different proposals put forward by the three major parties regarding personal taxes and family policy.
The NDP has proposed a $15-a-day national child-care strategy, the Conservatives’ family tax package features income splitting, and the Liberals have released a proposal that creates a new Canada Child Benefit. Continue reading
Trudeau and Mulcair sparring on the deficit partly reflects tactical positioning and partly reflects real policy differences.
With at least one poll suggesting Tom Mulcair’s New Democratic Party is within reach of securing a historic NDP majority government, the debate between the two opposition parties over fiscal policy has become considerably more pointed.
In this post, Canada Fact Check takes a look at the latest polling numbers and then assesses the fiscal positions being staked out by the Liberals and NDP.
First, the most recent polling numbers.
The latest polls
A Forum Research poll for the Toronto Star shows the NDP with enough support to win 174 seats – a slim majority in the expanded 338 seat house. The Liberals now sit in second place with 30 per cent support, while the Conservatives are slipping and have the backing of just 23 per cent.
Regionally, the Forum poll shows the NDP well ahead in four provinces with 54 per cent support in Quebec, 41 per cent in Manitoba and Saskatchewan, and 39 per cent in British Columbia.
In Ontario, the race appears to be quite a bit tighter with Forum showing the New Democrats leading with 36 per cent, the Liberals in second with 33 per cent and Harper’s Tories at 26 per cent support.
The Liberals lead in the Maritimes and the Conservatives remain ahead in Alberta.
In contrast to the Forum poll, other recent polls have not shown the NDP with sufficient support to secure a majority government. That said, all recently published polls have shown the NDP with at least a slight lead over rival parties. Continue reading
In their willingness to propose an increase in the Corporate Tax rate, Tom Mulcair’s New Democrats have the edge on the question of which opposition party has a truly progressive tax program.
Canada Fact Check continues its election coverage with a look at the likely tax planks in the NDP and Liberal platforms.
Mulcair and Trudeau on Harper Tax Cuts
First, both Liberal leader Justin Trudeau and NDP leader Tom Mulcair have announced that if they form a government, they will cancel the Conservative “Family Tax Cut”, an income-splitting measure that primarily benefits higher-income earners. Both parties would also cancel the increase in the Tax free Savings Account (TFSA) to $10,000 which also largely benefits higher-income earners.
The Family Tax Cut, announced in the fall by Prime Minister Stephen Harper, would allow couples with children under 18 to transfer income for tax purposes up to a maximum tax savings of $2,000.
An analysis of the initiative by Parliamentary Budget Officer (PBO) Jean-Denis Fréchette found that the benefits of the measure will primarily go to “medium-through high-income households”. In fact, the PBO says families in the bottom 20 per cent of income would receive next to nothing from the tax cut.
Mulcair and Trudeau on Personal Taxes
In his most significant tax proposal, Trudeau has promised that a Liberal government will raise personal income taxes on individual income over $200,000 a year while at the same time reducing rates for middle income earners.
The current top tax bracket starts on income over $138,586 with a rate of 29 per cent. Trudeau proposes to add a new tax bracket starting at $200,000, with a rate of 33 per cent. Liberals suggest this will raise about $3 billion, which they propose to re-allocate into a reduction of the middle tax-bracket rate from 22 per cent to 20.5 per cent, affecting income in the range from $44,701 to $89,401.
NDP leader Mulcair has not endorsed an increase in the top personal income bracket to date, but has promised to close the tax loophole currently enjoyed by senior executives who exercise stock options. Mulcair says the new revenue (approximately $750 million/yr.) would be re-directed to low-income families through an enhanced Working Income Tax Benefit and an enhanced National Child Benefit Supplement. Continue reading