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The Companion Advisor:
Taxes & EstatesThe 3-D Budget: Debt, Deficits and Disappointment Cash-strapped Canadian families, who are losing jobs and struggling to put food on the table, are getting a tax break in the Stephen Harper Conservatives' "Make it or Break It" budget. But will they ever pay for it. After a decade of sweet surpluses in Ottawa - which made Canada the envy of the world particularly now in this biggest economic meltdown since the Great Depression - we're heading back into the red "big-time." By the time all the bailout dust settles, we'll be $85-billion in the hole over the next five years, exploding Canada's net debt to a massive $545 billion. Remember: Today's debt - tomorrow's taxes. Meanwhile, low-income and middle-class families - many who, on average, work for almost six months of the year just to hand over their paycheque to the taxman - are getting a break. Lower-income families will save about $30 a year, after Finance Minister Jim Flaherty hikes the basic personal income tax exemption by $220 to $10,330. Middle-income families will save anywhere from $250 to $500 a year, as Flaherty also raises income thresholds for those in the 22% and 26% tax brackets. The tax breaks are estimated to cost Ottawa some $1.8 billion this fiscal year. "It (tax relief) is a step in the right direction," commented tax crusader Kevin Gaudet, federal director of the Canadian Taxpayers Federation. Still, he gave Flaherty's budget a "D" grade. The failing mark, Gaudet says, stands for "debt, deficits and disappointment." Bottom line is if Flaherty's rosy projections of coming out this mess don't come true, our soaring debtload will climb even higher, meaning a bigger tax burden for future taxpayers. Some critics argue Flaherty had no choice. With his back against the wall, some preached spending Canada's way out was his only option, while global economies crumble under a raging credit crunch (Iceland's bankrupt government just failed, people are rioting in the streets in Greece, and 75,000 global jobs were lost in just one day this week). And so, just as in song "Hey, Big Spender" - Flaherty, whose budget shoes were steel-toed work boots, doled out money to all, promising to save 190,000 jobs this year, with the lowly taxpayer footing the bill. The ailing auto industry gets another $2.7 billion in short-term loans. Our banking sector - who've been putting the boots to lowly consumers by hiking credit card and lines of credit rates - gets another $70-billion infusion, while Ottawa increases funding to buy back mortgages from $75 billion to $125 billion. Flaherty is even giving himself and the Canada Deposit Insurance Corp. new powers. The CDIC, which insures up to $100,000 in deposits per member financial institution, may even become a bank and offer lines of credit. These new powers also mean Flaherty can get tough with banks who gouge consumers. There's $7 billion for infrastructure spending, $1.5 billion for retraining programs, and $3 billion for renovators, with consumers who remodel getting a tax credit up to $1,350. Yet, even though Newfoundland is a new "have" province, while Ontario sinks to "have-not" status to now get $347 million in equalization payments and an $880 million increase in Canada Health Transfer payments - nothing was done to make EI (Employment Insurance) payments fairer. Flaherty did boost the number of weeks unemployed, eligible workers could collect from 45 to 50 weeks, but benefits levels remains at a low of 55% of earnings. Meanwhile, laid off workers in cities like Toronto, Ottawa and Oshawa still have work more hours to collect benefits, than their counterparts in the Atlantic provinces. And Flaherty also didn't listen to labour experts who wanted the number of hours worked for EI eligibility to be reduced to 360, from the current 420 to 900. In his own riding of Whitby-Oshawa, the misery grows and grows. Latest stats show 4,200 more Oshawa workers collected EI in November, a whopping 99.1% increase from 2,110 in November 2007. In total, another half a million Canadians were forced to resort to EI, up 12.3% from a year ago, while Canada lost another 70,600 jobs. Experts warn job losses will continue to stack up this year. Still, our jobless rate remains at 6.6%, compared to a staggering 14% in the 1980 recession. Cash-strapped consumers, carrying record debt of $1.3 trillion, may be thankful for Flaherty's tax cut. But they're angry their tax dollars are bailing out the very ones who allowed this economic disaster to implode on the world. We need trust, but there is none. And today, all of Flaherty's numeric wizardry may not mean a thing if the Liberals join the NDP and Bloc and pull the plug.
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