THE THREE MAIN PARTIES’ ECONOMIC PROMISES
All of the three contending parties are attempting to claim the centre — that’s where the votes are. But the Liberals have separated themselves with a tax- and- spend platform,
LIBERAL PARTY
Liberal leader Justin Trudeau argues it’s time to invest in the country’s future while interest rates are low, with large- scale public spending and deficit financing on a short- term basis.
The big plank in the Liberal program is a massive plan to invest in infrastructure. It would nearly double federal spending on infrastructure to $ 125 billion over 10 years. The money would be directed at roads, bridges, municipal public works and public transit.
The Liberals promise to set up a Canada Infrastructure Bank that would lend money at preferential rates to provincial and municipal governments.
“All parties are in favour of boosting infrastructure; it’s a matter of degree,” said Doug Porter, chief economist at BMO Capital Markets. “Increased spending at the federal level is highly defensible.
“We’ve been dealing with sluggish global growth for years and that may be the case for the next five years. We should be looking at ways to stimulate the economy.”
But not all economists agree there’s a big payback to the economy from infrastructure investment. While it’s often said that it helps to improve productivity, there’s no clear evidence of that, says Philip Cross, former chief of economic analysis at Statistics Canada.
“I’m not so sure. Paving roads? How is that contributing to productivity? I’m scratching my head at times. I wouldn’t want to pour money endlessly into it. At some point you can be wasting money.”
One byproduct of the Liberal plan is that it would run a deficit of as much as $ 10 billion a year over three years to pay for those spending commitments.
“It doesn’t matter much because there is room for Canada to run a deficit if it chose to,” said Cross. The country’s debtto- GDP ratio has continued to fall, making future deficits more affordable. And in a $ 2 trillion economy, a $ 10 billion deficit is relatively trivial.
“I’m just of the camp that it’s not worth doing at this point,” Cross says.
The centrepiece of the Liberal tax platform is a middle- class tax cut for Canadians with taxable income between $ 44,700 and $ 89,401 per year. The cut from 22 per cent to 20.5 per cent would be worth as much as $ 670 per person per year.
It would be financed by a tax increase on top income earners through the introduction of a new tax bracket of 33 per cent on annual incomes over $ 200,000. The Liberal Party has said its plan would be “revenue neutral” with the tax cut of $ 3 billion offset by the additional $ 3 billion in taxes on the wealthy.
However, economists have expressed some skepticism over the ability to collect that much. “High income people and corporations are relatively adept” at minimizing their tax bills, noted Porter of BMO Capital Markets.
At the same time, Trudeau would create a new targeted child benefit rather then the universal benefit now in effect. His plan would be income- tested “to ensure that it is targeted to the middle class and those working hard to join it.” All families with children that have household income below $ 150,000 would receive more per month than under the current plan, he says.
As part of the same reform, the Liberals would cancel the $ 2 billion income- splitting measure introduced by the Conservatives for two- income households with children. Economists have criticized income splitting as a benefit that helps only a minority of families.
It’s not yet clear how a Liberal government would fund its new child benefit, which would cost as much as $ 4 billion a year.
CONSERVATIVE PARTY
The Conservatives, by contrast, want to position themselves as the party of low taxes and balanced budgets. Prime Minister Stephen Harper argues that in an unstable global economy Canada can’t take risks on new tax- andspend schemes of the kind the two opposition parties are pushing.
The Tories have already enacted family- friendly measures such as enhanced child tax benefit and income- splitting for families with children that could cut a household’s income tax bill by as much as $ 2,000 per year.
And they’ve rolled out more, like a permanent home- renovation tax credit that allows 15 per cent of renovation from $ 1,000 to $ 5,000 to be written off.
Other tax measures are targeted to shore up Conservative support. For example, there’s $ 30 million in tax credits promised for service club members, such as a Rotary Club, who could write off part of their membership costs.
For workers and businesses, they’ve committed to reducing payroll taxes. Employment Insurance premiums would come down by about 20 per cent from $ 1.88 per $ 100 of insurable earnings in 2016 to $ 1.49 per $ 100 in 2017. The party has also pledged not to increase the payroll taxes that finance the Canada Pension Plan.
The Conservatives promise to lower the small- business tax rate to 9 per cent from 11 per cent over the next four years — a measure they say would provide $ 2.7 billion in tax relief to nearly 700,000 small businesses.
They balanced the books a year ahead of schedule with a $ 1.9 billion surplus in 2014- 15 and they’re sticking to a projected surplus this year, although the economic slowdown might make that goal tougher to reach.