The National Post is reporting that the federal Conservatives are planning on a “mini-budget” packed with a number of new tax cuts. Some ideas being considered are:
- A further 1% reduction in the GST.
- A broad-based tax cut that will “save the average middle-class family around $700 a year”, which sounds like a 1% cut in the lowest tax bracket from 15.5% to 14.5%.
- Moving forward the already planned cut to corporate taxes from 21% to 19%.
Apart from the political considerations of cornering the federal liberals, the tax cuts may be aimed at fending off criticism over the mounting federal surplus. Just weeks after announcing that the government posted a surplus of $13.8 billion in 2006-07, we find that the surplus in just the first quarter of this fiscal year came in at $6.4 billion.
A friend of mine likes to say that tax cuts are just smoke and mirrors because what the government gives with one hand, it takes away with the other. Sure enough, it was widely reported that Toronto has succeeded in imposing punitive new taxes under new taxation powers granted to the city by the provincial government. Starting next year, Toronto residents will pay $60 extra to renew their license plates and face a significant new land transfer tax, ranging from 0.5% to 2%, when buying a home. Now, other municipalities in Ontario will be clamouring for similar taxation powers. There goes the tax savings we don’t even have yet!
