Thoughts on the new budget

Fiscal imbalance - that was the keyword in today's budget. It wasn't an easy job to come up with a new equalization formula, especially after the Conservatives promised to keep the oil and gas revenues out. Yet it seems like Jim Flaherty managed to find the solution. Not sure if it was really the money that Duceppe liked about the budget or if Duceppe simply didn't like the recent polls which didn't show the Bloc among the favourites. Either way he's agreed to vote for the budget, thus postponing the new election.

But what about others? Many were disappointed, myself included. I was looking forward for the government to bring back the pre-election tax cuts, most of which were repealed last year to make way for the GST cut. That didn't happen. Instead the government announced new spending, boosting program expenses to almost $200B and introduced some targeted tax cuts, none of which will affect me. Yet there are still few things I like about the budget. Such as:

$2000 child exemption which increases the amount that families with children could earn tax free. It should've been introduced long ago. So far, only Saskatchewan had similar tax credit on a provincial level. Now it's also available federally.

Spousal exemption is brought at par with personal exemption. While it doesn't eliminate the tax discrimination against single-income families, it's a step in the right direction. Single income families earning up to $37,000 will no longer have to pay higher federal income tax than dual-income couples. Other single-income families will see their tax burden reduced by over $200.

Incentives for those who save for children's education. The $4000 annual contribution limit is eliminated. Lifetime contribution limit is increased from $42,000 to $50,000. Canada Education Savings Grant goes up from $400 to $500. Yes, encouraging savings is somewhat better solution than raising the student loan limits.

Fair taxation for businesses. Manufacturing and processing companies are given some tax breaks through accelerated Capital Cost Allowance. Corporations that use offshore to avoid paying taxes in Canada will no longer be able to deduct the interest expenses incurred on foreign investments. That's not something I would object.

But what about the new levy on "gas guzzlers"? Many of my friends are furious over it. Yet it looks like the government simply didn't have much choice. Something had to be done to stop the opposition from portraying Conservatives as "anti-environment". A plan that would include actions rather than just long-term targets was long overdue. Kyoto stands for taxing production. The government came up with the only alternative which is to tax consumption. So I guess that's the least we could get away with. And the most we could get of a budget when the Conservatives are 30 seats short of a majority.