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The most recent group to release an alternative federal budget for consideration in the run up to the real thing next Tuesday is unlikely to garner much support from the business and advisor communities.
As well as arguing against expected tax cuts from Ottawa, the Canadian Centre for Policy Alternatives says some past tax-related benefits, such as boosts to RRSP limits, should be rescinded in favour of increased social spending.
“The federal government currently enjoys a fiscal situation of unparalleled prosperity and flexibility,” say the report’s authors. Rather than focusing on tax cuts, they argue that “Canadians will be much better served by the reinvestment of surplus funds into a range of public services and programs that directly address the most important problems facing our society: poverty, housing, infrastructure, jobs and the environment. Ottawa can do all this within the constraint of balanced budgets and with no increase in overall taxes.”
On the environmental front, the CCPA proposes to enhance current programs for promoting and implementing energy efficiency and conservation in homes and establishing a National Renewable Energy Expansion Program by expanding support for low impact renewable electricity generation. It also suggests phasing out the $1.4 billion in annual federal tax expenditures to the oil and gas industry and implementing a company car tax shift, modeled after successful programs implemented in the United Kingdom, to encourage employees to drive more fuel efficient company vehicles.
Where the report will likely lose the support of businesses and advisors inclined to be sympathetic or amenable to the above suggestions is in its treatment of RRSPs and seniors’ benefits.
“This program is costly, net tax expenditures on RRSPs alone is estimated at $8.8 billion in 2007, and overwhelmingly benefits high-income earners,” say the report’s authors. “In 2007, you would need to earn almost $106,000 to make the maximum RRSP contribution.
The CCPA would also limit the tax assistance for private retirement savings through RPPs and RRSPs to an annual dollar amount that is twice the average industrial wage — a maximum of $14,795. “The increased tax revenue from this change could be used to help fund the 15% increase in Guaranteed Income Supplement benefits.” The group says this measure would save $630 million in 2008 and 2009.
The report also proposes to increase the capital gains tax to 75% in order to reverse the loss of approximately $2.4 billion in tax revenue from the federal treasury expected in 2008 and 2009, and eliminate any special treatment for employee stock options, saying the savings produced by the elimination of the stock option loophole will save roughly $250 million. It goes on to say a further $484 million would be saved by eliminating the 50% deductibility for meals and entertainment expenses.
“The CCPA believes it is time for a major review of the retirement income system to address the needs of the changing workforce and the concerns of Canadians who face the most uncertainty as they move into hold age,” say the report’s authors. “This will require better legislative and regulatory protection of private pension plans and improvements to public and contributory pension programs.”
Filed by Kate McCaffery, Advisor.ca, kate.mccaffery@advisor.rogers.com
(04/28/06)