Conservative budget musings
The Conservative budget unveilled yesterday can be summed up as follows: GST cut by 1%. Child-care allowance of $1200 per year. Mass-transit tax credits of 15.25%. Increase on income tax to the lowest tax bracket from 15% to 15.5%.
This is probably the worst vote grabbing budget since, well, the Liberals in the last parliament. The only difference between this one and the Liberal one is that this one has some damaging effects should it reflect the long-term policies of the Conservative party.
The first danger is that it can expand further the disparate gap between rich and poor and while still leaving the burden of taxation on the shoulders of the middle class.
Take for example the GST reduction of 1% which offers a Canadian consumer $1 savings for every $100 spent. Now using the average credit card purchase in Canada, which is about $99 (including GST and PST), as a metric to determine the average consumer purchase in Canada one can see that is a less than exciting enticement or savings to the majority of Canadians. The reality is only large ticket items and/or annual purchases greater than say $10,000 would be really noticable benefit to a consumer. The only consumers who truly benefit are the rich.Now to explore the child-care allowance paired with an income tax increase to the lowest tax bracket. Doing some number crunching on the income tax increase will shows that at the top of the low income bracket, $36,378, will eaual an increase of only $181 per year. Not that scary but combine that with the child-care allowance, which will actually increase a taxpayers net income, and you can have an interesting side-affect. That is that it could potentially push some taxpayers into the next tax bracket and thus a significant increase in taxes!
The other danger is the reduction of our budgetary surplus from $37.2 billion last year to just $600 million this year1. That's cutting it a bit close should a flood or other unforseeable disaster hit we could end up in a deficit year.Arguments that this budget will spur growth because of the GST reduction are both optimistic and unecessarry. What has kept the Canadian economy booming and detached ourselves from the trouble down south has been a combination of Alberta oil, smart interest rate management and federal budgetary surplus. Remove the later and that becomes one less thing to count on. Good thing this government is only a minority and this budget will be scrapped with the next parliament.