National Newswatch
National Opinion Centre

What is a Fiscal Surplus For?

For the Harper Conservatives, a fiscal surplus is the means to provide tax cuts for the affluent while posing as good fiscal managers.

To achieve a balanced budget, the federal government has imposed deep cuts to federal program spending. The impact of these cuts on services to Canadians is real, and will be felt even more in the future.

We were told that these cuts were necessary to balance the books. But the real priority is tax cuts for the affluent.

The government forecasts a deficit of $2.9 billion in this fiscal year, (2014-15.) Yet there would almost have been a surplus this year if the government had not decided to introduce family income splitting for the current tax year of 2014, at a cost of $2.4 billion in the fiscal year 2014-15 in terms of reduced revenues.

Over one half of all Canadian families with children under 18 – the target of the scheme — will not benefit at all from this measure, which leaves out single parent families and two earner families where both partners are in the bottom tax bracket earning less than about $45,000 per year.

The big winners are high income, single earner families where the higher earner has an income of at least $75,000 per year. They will receive tax refund cheques of $2,000 on the eve of the 2015 election.

In the context of rapidly rising income and wealth inequality, it is outrageous that the Conservative government’s priority is to introduce a tax measure that will actually worsen inequality and do nothing to lower child poverty or to fund a badly needed child care program.

Family income splitting, plus modest increases to the Universal Child Care Benefit or UCCB, have swallowed up about one half of the fiscal surplus over the next few years, according to the Parliamentary Budget Office. This leaves very little room for new investment initiatives.

While the federal government will soon be running a surplus, most provinces are still running deficits and are being forced to cut health, education and social service spending. They are not being helped by the federal government, which is capping the rate of growth of transfers.

The Economic and Fiscal Update shows that transfers to other levels of government will be stuck at 3.2% of GDP moving forward. Health care transfers will grow only in line with economic growth, even as health care costs increase at a faster rate than economic growth due to an ageing population.

Both the International Monetary Fund and the Parliamentary Budget Office have recently noted that the federal government could boost the rate of economic growth and government revenues by investing in infrastructure like mass transit. Yet very little is left to invest in measures that could boost both jobs and productivity over the next few years.

The Economic and Fiscal Update amply confirms that the priorities of the Harper government are not the priorities of Canadians.

 

Andrew Jackson is Senior Policy Advisor to the Broadbent Institute.

The views, opinions and analyses expressed in the articles on National Newswatch are those of the contributor(s) and do not necessarily reflect the views or opinions of the publishers.
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