The Liberal Mini-Budget

Shifting the Tax Burden Onto the Backs of Low-Income Earners

On October 18, the federal Liberal government introduced a mini-budget in preparation for its early election announcement. The budget contains proposals for tax cuts of $100 billion over the next five years. It also includes $500 million in new funding for universities and research facilities. At least $10 billion will go towards debt reduction in this fiscal year.

With the dissolving of Parliament and the setting of a federal election for November 27, the mini-budget remains a glorified election promise. In fact, many have expressed the opinion that it was little more than a cynical attempt by the Liberals to steal the thunder of the Canadian Alliance by implementing tax cuts and debt reduction exceeding that proposed by the Alliance in its election promises. At the same time, the Liberals are portraying the Alliance proposals as favouring the rich, while theirs will put money back into the pockets of those who need it the most.

If one looks at the actual figures, however, it is clear that the vast majority of the tax savings in the Liberal mini-budget, if it is ever actually implemented, will go to wealthy Canadians. While the tax break for low income Canadians (those with incomes of less than $30,754) will be one percent, the highest tax bracket (over $61,509) will get reductions of three percent. In addition, the five percent debt-reduction surcharge on incomes over $85,000 will be eliminated and capital gains taxes will be cut dramatically. Corporate tax rates will also be cut by one percent, resulting in a total reduction of seven percent over the past four years.

Even if the proposed fuel rate rebate is taken into account, low income Canadians will receive tax cuts of several hundred dollars, at most. In contrast, someone earning in excess of $100,000 per year can expect a minimum tax reduction of $8,000, not including the capital gains reductions. These which will result in savings of thousands of dollars per year more for those who use their excess income to speculate in the financial markets. In other words, far from putting money back into the pockets of those who need it the most, the net result of the Liberal tax cuts is to shift a greater proportion of the tax burden onto the backs of low-income Canadians.