The new year brought with it some new tax cuts. The second cut to GST (initially scheduled for 2011) was implemented today, reducing the tax to 5%. Promise made - promise kept! Way to go, Stephen Harper! Just like 18 months ago it was sure nice to have the travel agent refunding a couple dollars on a reservation because the tax on the return ticket was lower. Not bad for a first day...
Canadian businesses too saw some tax relief today. The 1.12% corporate surtax is gone and the rate was reduced from 21% to 19.5%. Small business rate is down from 12% to 11%. That should help our businesses overcome the economic slowdown brought in by the high loonie and by the "sub-prime" mortgage crisis in the US.
Some economists suggest that the government should have reduced personal taxes instead. Well, that's already there since the last "mini budget". Not only the 0.25% increase to the lowest tax rate (the one we've seen on our 2006 tax returns) is gone and the rate is back to 15%, applied retroactively to all of 2007. The personal exemption is higher than initially proposed by the Liberals ($9600 vs $9039), giving every individual an extra $84 in tax savings. Then there's the new employment income tax credit brought in last year. It effectively adds $1019 to the personal exemption, providing employed individuals with an extra $153 tax break.
And let us not forget the kind of tax cuts we'll never get from the Liberals - family-friendly tax cuts. The spousal exemption is now equal to the personal exemption ($9600 vs ~$7600). A ~$2000 difference saves the single income families about $300 a year. And, thanks to the $2038 child amount, families receive a ~$306 tax credit for every child. So the CTV news anchor was wrong when he claimed that personal income taxes are still where the Liberals had left them.
Compared to 2005, an individual who has to get by on $30,000 will be saving about $400-$450, depending on his spending habits. While the tax-and-spend zealots like to downplay those small tax cuts, presenting them as "2 cups of coffee a day", that money would come in quite handy in case, let's say the car breaks down. A single-income family with three children will be saving at least $1800. That's 150 a month back in the family budget, not a few extra cups of coffee a day for the breadwinner.
But where will the government go from here? Stephen Harper suggests we shouldn't count on any new tax cuts to come because of the economy slowdown. How about freezing the spendings then? Preventing program spendings from increasing in 2005/06 alone brought us three consecutive surpluses of about $13B each. That was enough to provide for all those nice tax cuts and to slash over $30B from our debt. So how about a similar spending freeze for 2008/2009 (and for what's left of 2007/08)?
Just keep the spendings under control, use the taxpayer-owned Bank of Canada to restructure our debt and to bring down hefty interest payments, ensure that our money is used to fund essential services, not to bankroll special interest groups - and there will be plenty of savings to pass along to the taxpayers.