How the Liberals can pay for their platform
TheStar.com – Opinion/Commentary – Those who say the Liberals must either renege on some of their campaign promises or jettison their pledge to balance the budget in 2019 are missing at least three other options.
Nov 18 2015. By: Carol Goar, Star Columnist
Economists, policy analysts and pundits agree that Prime Minister Justin Trudeau has two unpalatable choices: renege on some of his campaign promises or jettison his pledge to balance the budget in 2019.
The release of Parliamentary Budget Officer Jean-Denis Fréchette’s fiscal update set off a furry of speculation about which the Liberals would do.
The debate was familiar. For roughly 30 years politicians and commentators have chewed over the same binary choice. But there aren’t two options; there are at least five.
Before examining them, let’s put Fréchette’s Nov. 10 report in perspective. Ottawa’s budget watchdog adjusted the numbers in former finance minister Joe Oliver’s April 21 budget to take account of lower-than-projected oil prices, continued slow growth and the 23.4-per-cent reduction in employment insurance premiums scheduled by the Tories in 2016.
His bottom line: “In the absence of new policy measures,” Ottawa faces baseline deficits of $3 billion to $5 billion in each of the next five years.
But there will be new policy measures. The Liberals were elected with a mandate to pour $5 billion a year into infrastructure, stimulating the economy and boosting employment. They intend to cut EI premiums by half the amount the Conservatives proposed. And they have promised to create 40,000 jobs for young Canadians.
If these actions are not enough, there are other steps they can take:
– The first is to clean up the tax credits, deductions, exemptions and deferrals (known collectively as “tax expenditures”) that cost Ottawa billions of dollars. The Conservatives brought in at least 70 of them. But past Liberal governments created them, too.
These hidden expenditures cost approximately $150 billion a year in foregone revenue. As Auditor General Michael Ferguson noted in his April report, no one is tracking or evaluating these measures.
There are dozens of tax breaks the Liberals could eliminate. To name a few: the employee stock option deduction ($720 million a year), the lifetime capital gains tax exemption for small business shares ($620 million), the deduction for union and professional dues ($895 million), the children’s fitness tax credit ($115 million), the children’s art tax credit ($38 million), the textbook tax credit ($33 million), the flow-through share deduction ($205 million), the apprentice vehicle mechanics’ tool deduction ($4 million), the deduction for clergy residences ($90 million), the first-time homebuyers’ tax credit ($115 million). The list could go on for pages.
A few Tory tax expenditures are worth keeping — the earned income tax credit, for example — but many are not.
– A second alternative is to stop spending money on Conservative priorities. The Liberals were never in favour of jailing young offenders for drug possession and other non-violent crimes; detaining unsuccessful refugee claimants; building mega prisons; auditing charities whose leaders spoke out against government policies; buying top-of-the-line stealth fighter jets; or airing prime-time government ads.
They could recoup a bundle by scrapping these expensive policies.
– A third choice is to terminate, or substantially scale back, corporate subsidies. Right now, there is a request for $1 billion from Bombardier sitting on the prime minister’s desk. Chrysler came calling last year. Over the last half century, Industry Canada has disbursed $22 billion to businesses ranging from oilsands developers to ice cream parlours, high tech manufacturers to pizzerias. The assumption is that these handouts boost growth and create jobs, but no government has provided credible evidence to back up this proposition.
Trudeau has told Bombardier it will have to make a strong business case. “We’re going to make sure that decision is taken on what is in the best interests of Canadians.” That — followed by a rigorous cost/benefit analysis — would be a good lens to apply to all subsidy requests
.
Some of these possibilities were explicitly cited in the mandate letters the prime minister issued to his ministers; others were hinted at. Trudeau and his advisers are clearly aware they can’t borrow their way to their goals.
If the economic headwinds grow stronger, the Liberals may have to forsake some of their campaign commitments or miss their balanced budget target. But those aren’t their only choices — and not their best ones.
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Tags: budget, economy, featured, ideology, standard of living, tax
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