The Conservative government's recent tax cuts have added $1.6-billion to the deficit so far this year, but Ottawa remains on track to post a smaller deficit than the year before.
Finance Canada released monthly tracking figures for Ottawa's bottom line on Monday that show the federal government posted a $3.2-billion deficit in October, in contrast to a $2.5-billion deficit in October, 2013. The report said this reflects a $1.6-billion downward adjustment to revenues based on the year-to-date impact of two personal income tax cuts announced that month that were effective immediately: income-splitting for families with children under 18 – which the government calls the Family Tax Cut – and the doubling of the Children's Fitness Tax Credit.
Over the first seven months of the fiscal year that started April 1, the federal deficit stood at $3.95-billion, a significant improvement over the $12.8-billion deficit recorded between April and October of 2013. However the figure is $1-billion higher than the government's stated target of posting a $2.9-billion deficit this year.
Monthly spending and revenue figures can fluctuate significantly.
Prime Minister Stephen Harper's government announced several tax cuts this fall, including the two family tax cut measures. Two additional tax cuts will take effect in 2015, including enhanced monthly payments to parents with children under 18 through the Universal Child Care Benefit and an increase in the child care expense tax deduction.
The government also announced a two-year tax credit for small businesses in September.
Finance Minister Joe Oliver's Nov. 12 fiscal update indicated that the expected cost of all of these measures will be $3.2-billion this year, $5-billion next year and then slightly less than $5-billion-a-year going forward.
The update also indicated that the government expects a deficit of $2.9-billion this year, meaning the package of tax cuts announced this fall had the effect of moving Ottawa from a projected surplus to a projected deficit.
The government is projecting a $1.6-billion surplus in 2015-16. The Prime Minister recently insisted that the surplus will be achieved even with lower oil prices, which have a negative impact on federal revenues.