Harper government to spend $6.5-million to promote tax-cutting record

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The Harper government is spending $6.5-million of public funds to promote its tax-cutting record in an advertising campaign centred on what is shaping up as a key election issue.

The 11-week campaign, called "Tax cuts … working for you," will run until March 27 - right around the time an election would start if the Conservatives were defeated over the March budget. But even though the ads mention Canada's Economic Action Plan - the government's two-year stimulus program launched in 2009 - most of the measures in the ad were announced in 2006.

Some of the tax cuts are so small, like the $4-million spent each year on the Tradespersons' Tools Deduction, that the cost of advertising the tax cut is actually more than what the government loses to offer the tax cut.

"It's hard not to see this as anything but government electioneering at taxpayer expense," said Canadian Taxpayers' Federation president Kevin Gaudet.

Meanwhile, the greater economic value of the very tax cuts that are featured in the ads - which the government describes as tax expenditures - is being questioned in a new report from the C.D. Howe Institute.

In a 2011 "shadow budget" released Thursday, the institute notes the number of these credits has increased to over 260 from about 227 in 1999, complicating the tax code and raising compliance costs. Trimming them back could add $2-billion a year to Ottawa's bottom line, the report states.

"Politically, it's hard to do," acknowledged the institute's president, Bill Robson. To get around that, Mr. Robson suggests the government strike an expert independent panel to go through the various tax credits to find out which ones work and which ones could be scrapped.

A spokesman for the Canada Revenue Agency said the purpose of the ads is to ensure Canadians are taking full advantage of all available tax measures.

After a week of budget demands from the three opposition parties, Thursday saw several business groups put forward their very different suggestions as to what Finance Minister Jim Flaherty should deliver next month. The Canadian Federation of Independent Business, the C.D. Howe Institute and PwC - the new name for PriceWaterhouseCoopers - all released reports Thursday that support the government's plans to continue cutting corporate taxes, among other proposals.

In a meeting with Mr. Flaherty Thursday, the CFIB says it urged the minister to soften planned hikes in "payroll taxes" through breaks on EI premiums for businesses that hire new workers.

Just four months ago, the minister managed to quiet a growing controversy over higher Employment Insurance premiums when he announced that EI premiums would not rise by the planned maximum of 15 cents per $100 of insurable earnings over the coming years.

But the compromise - scaling back the annual rise to five cents this year, 10 cents in the years to come - is still a hike the CFIB says hurts hiring.

The CFIB also strongly urged the minister to reject calls from the Liberals and New Democrats for an expanded Canada Pension Plan, which the small-business group says would also lead to more payroll taxes.

The opposition Liberals are supporting breaks on EI payroll taxes, partly to challenge Conservative accusations that they are the party of high taxes.

The C.D. Howe Institute urges Ottawa to balance the books a year earlier than its 2015 target, or risk big debt headaches down the road.

The report notes that with wild fluctuations in bond markets around the world and the likelihood that interest rates will soon rise, the safe bet for Canada is to start lowering its debt load as soon as possible. It warns that an interest rate rise of one percentage point above the government's baseline fiscal projections in 2012 would add more than $10-billion to the federal debt by 2015.

"The sooner Ottawa stops borrowing and starts repaying, the better Canadians will weather bad news on that front," it states.

According to Finance Canada, the federal debt will grow from $519.1-billion in 2009-10 to $626.1-billion in 2015-16. As a percentage of Canada's Gross Domestic Product, the debt is expected to peak at 35.3 per cent in 2011-12 before dropping to 30.8 per cent in 2015-16.