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If Canada is to return to financial health by paying down debt, holding the line on spending isn’t enough: government must cut waste and reduce overall spending.

Federal budget balanced without tax hikes



This column originally ran in the Winnipeg Free Press on Apr. 22, 2015 The best thing about the 2015 federal budget is that it’s balanced and future generations won’t have to pay for it. Second best is the tax relief for small businesses who will use those savings to create jobs and drive growth. And the federal government is balancing the budget and lowering taxes while maintaining funding to Manitoba’s provincial government.
This balanced budget provides the opportunity to start climbing out from under more than $600 billion in federal debt. Right now every Canadian owes more than $17,000 as a personal share of the federal debt. There are kids in elementary school who are seeing a balanced budget for the first time and it’s sobering to consider that they will almost certainly take their own kids to school before the current debt is cleared. The pain currently caused by this debt is considerable. The federal government loses about $30 billion to interest payments every year. That’s more than $80 million per day that doesn’t go into hospitals or highways and it certainly doesn’t go back into family budgets through tax cuts. This budget is projected to post a modest surplus of $1.4 billion and that money is being dedicated to debt reduction. That’s a small step forward on a mountain of debt, but it is a positive step nonetheless. Debt reduction has to become a higher priority in the future. Paying the mortgage is the first line item in every family budget, but paying down debt is always the last line item for the government’s budget. In this budget the only debt reduction comes from the leftovers found in the form of a small surplus.

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Manitoba has 35,298 small businesses with 99 employees or less. Many of these businesses will benefit as the federal small business tax rate falls from 11 per cent to 9 per cent by 2019. Governments aren’t good at creating jobs, but government can help by getting out of the way. When small businesses have a few extra dollars they expand and when they expand they create jobs. Tax relief for small business is one of the best ways to strengthen Canada’s economy. This broad-based tax cut for small business stands in sharp contrast to the corporate welfare for the auto sector. The budget includes $100 million for the Automotive Supplier Innovation Program. Distorting markets by picking winners and losers is not the way to build a healthy economy. Further, adding new complexities to the densely tangled tax code puts a premium on aggressive accounting while stifling productivity. The best tax cuts are broad-based and give taxpayers the ability to set their own priorities and maximize market opportunities. The federal government held the line on personal taxes, but this budget strengthens a powerful tool Canadian families already use to protect their financial security: Tax Free Savings Accounts (TFSA). TFSAs give Canadians the opportunity to grow without the proceeds being eroded by taxes. In the past, TFSA contributions were limited to $5,500 per year. The government is now raising the limit to $10,000. That’s a sound financial tool Canadians can use to save for retirement or renovations. It’s also a safety net in case of car problems or career setbacks. There are those who decry the TFSA increase as forgone government revenue and a concession to the rich. They are wrong on both counts. First, government is not entitled to taxpayers’ money – the default is for our own money to stay in our own pockets. Second, the rich already have the financial flexibility and available expertise to minimize their tax liabilities while middle-class Canadians benefit greatly from this simple and accessible opportunity to protect their savings. Balancing this budget is a significant achievement, but the government has yet to conquer its spending problem. The Conservative government has already significantly increased spending since taking office. This budget shows government spending will grow at an alarming place. By 2019-20, spending will rise by another 16 per cent or $48 billion. If Canada is to return to financial health by paying down debt, holding the line on spending isn’t enough: government must cut waste and reduce overall spending. From a provincial perspective, Manitoba’s federal funding remains secure. Federal health and social transfers to the provinces will continue to go up. On top of that, Manitoba’s mismanaged economy remains weak enough to qualify for welfare payments of hundreds of millions through the equalization program. For Manitoba Finance Minister Greg Dewar the federal budget isn’t providing any excuses for a failure to balance the provincial budget. This federal budget makes Canada stronger. It achieves balance and starts to reverse the slide into debt. It provides tax relief to small businesses. It provides families with expanded TFSAs and maintains transfer payments to the Manitoba government. Our kids will pay for past deficits, but this budget may mean our grandkids won’t be paying for new debts.


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