Federal Budget 2010
Overview
Federal Finance Minister Jim Flaherty mounted a podium in the House of Commons on Thursday, March 4, to table his fifth Budget, the second of the current minority Conservative government and the second in succession to follow a period of prorogation of the House.
The Minister described the Budget as a "jobs and growth budget" that completes the government's Economic Action Plan announced last January and "will help solidify Canada's economic recovery and sustain our economic advantage now and for the future." Outside commentators, however, generally characterized it as a "stand-pat," "stay the course," "cautious" or even "timid" Budget that contains no major surprises or significant shifts in government economic or fiscal policy. Specifically, it does not propose to raise taxes or cut major transfers for health care, education or pensioners.
The Budget projects a federal budgetary deficit of $53.8 billion in fiscal 2009-10 and a further $49.2 billion in 2010-11, but sharp declines thereafter leading to a deficit of only $1.8 billion in 2014-15. This outlook reflects the government's confidence in longer-term economic recovery as well as the intention to move away from stimulus spending to fiscal restraint, the Minister said. He also forecast that Canada would return to balanced budget status before any other G7 country.
Among proposed and continued spending programs aimed at stimulating and maintaining economic recovery are $3.2 billion in personal income tax relief including upgrading the basic personal tax credit and raising child benefits; over $4 billion in unemployment benefits including some EI premium relief; and $7.7 billion to stimulate infrastructure and housing construction. The Budget also proposes investment of $1.9 billion to "create the economy of tomorrow," including $600 million to strengthen research and development efforts in Canada.
The Minister pledged increased restraint on government spending, most notably by slowing the projected growth of spending on defense and foreign aid. There are, however, few proposed cuts to program spending. He also promised to freeze the total amount spent on government salaries, administration and overhead. This includes freezing the salaries of the Prime Minister, other ministers, members of parliament and senators, as well as the budgets of ministers' offices.
While the Budget does not propose major fiscal policy shifts, it contains a number of fairly significant tax-related measures. For example, the government confirmed its commitment to cut the corporate tax rate to 15 percent by 2012, which the Minister noted will be the lowest corporate tax rate in the G7.
Other noteworthy tax-related proposals include closing some perceived tax loopholes to promote fairness, and the elimination of remaining tariffs on imported machinery and equipment. These and other provisions are discussed below.
Read Smythe Ratcliffe's Federal Budget Newsletter available in PDF format below.
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