OTTAWA — The first budget from Stephen Harper's minority government targeted middle-class voters yesterday with $26-billion over three years in highly visible tax cuts that Canadians will notice in stores, on buses and at work.
The budget, introduced by Finance Minister Jim Flaherty, lays out 28 separate tax reductions, many of which are targeted measures chosen in a clear effort to appeal to working families and to make tax relief tangible for Canadians.
"Canadians pay too much in tax. It's holding families back," Mr. Flaherty told the House of Commons as he tabled the first Conservative budget in 13 years. "It makes it harder for small businesses to create jobs and opportunities. It discourages innovation and investment."
The cuts include a promised one-percentage-point reduction in the GST, tax credits for public-transit users and youth-athletic programs, and a $1,000 grant for apprentices, among several others. The minority Tories will almost certainly have no more than three budgets to demonstrate to voters that they deserve a majority government the next time Canadians go to the polls.
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But even as they showered tax reductions on Canadians, the Tories stuck to an election promise to rescind a Liberal income-tax break enacted last November. The budget effectively raises income taxes by boosting by one-half of a percentage point the rate paid at the lowest income bracket. The Liberals had reduced taxes in that bracket by a full point last year.
This rate change means lighter-than-expected paycheques starting July 1 for many Canadians, working out to $62 more income tax this year and $124 in future years, according to the Canadian Taxpayers Federation.
However, the Tories moved to safeguard themselves from charges they're hiking taxes overall by introducing a surprise wrinkle in the two-year budget package: a break for working Canadians called the Employment Credit that should deliver about $155 in tax savings when fully implemented next year.
The measure will allow employed Canadians to claim a credit of up to $250 this year and $1,000 next year for work expenses -- without presenting receipts to Canada Revenue Agency.
"This is the measure that squares the circle and enables the government to say every taxpayer will be better off after this budget was tabled," says John Williamson, executive director of the Canadian Taxpayers Federation. "Without it, some taxpayers would have ended up paying more."
The budget maintained only a soft focus on Mr. Harper's five priorities. While the GST cut and the Conservative child-care plan were both announced, there was no extra cash for the health-care guarantee.
There was money for RCMP officers to combat crime, but the budget had little new to say about accountability.
The budget sparked criticism from both the Liberals and the NDP, who said they would not back it. However, the minority Tory government appeared to be safe after Bloc Québécois Leader Gilles Duceppe quickly signalled his caucus would support it.
"The most important thing is the commitment to settle the fiscal imbalance. The real budget will be next year," Mr. Duceppe said. "Meanwhile we don't want to bluff like the two other parties are doing."
Liberal Leader Bill Graham criticized the plan for raising income taxes.
"Basically it does not address the needs of middle-income Canadians," he said.
The NDP's Jack Layton added that his party cannot support the billions in corporate tax breaks the Tories are proposing.
"We will vote against it, but we will propose amendments. If Mr. Harper would accept a few changes, we're here to improve the budget, but we'll see," Mr. Layton said.
He added that he was disappointed with a lack of measures to aid aboriginals.
The Tories argued that their new cuts -- which will be seen at the cash register and when Canadians fill out their year-end tax forms -- will more than make up for the cancellation of the Liberal cut.
The budget hews closely to the Conservative election platform and also includes previous promises for a $100-a-month daycare allowance for parents of children under six years of age. Both the GST cut and the daycare allowance will kick in July 1.
"For this government, supporting families means providing choice in child care for all Canadian families," Mr. Flaherty said.
Other measures include a textbook tax credit that will cost $260-million annually, a break for fishermen when they transfer property to their children, added tax relief for seniors, and a new $500 tax deduction for the cost of tools. There will also be a $2-billion injection for farmers over two years.
