Economic bender preceded Ottawa's mini-budget
Tax breaks the highlight in last financial plan
By TERRY WEBER
Globe and Mail Update
When the Liberal government released its last financial plan - a mini-budget delivered ahead of the November 2000 federal election - the economy was on a bit of a bender.
Surging revenues had swollen the country's coffers as the good-times - which began in the late 1990s - rolled on.
Many economists had forecast that growth would continue for several years.
But it didn't.
This time out, Ottawa will probably have to do more with less and few are expecting the deep tax cuts and spending seen just over a year ago.
The tent pole of the mini-budget was a five-year, $100-billion tax plan, with cuts aimed at benefiting Canadians at every level, particularly those in the middle class, with the creation of a new tax bracket for people with incomes between $60,000 and $100,000. The tax rate for that level was cut to 26 per cent from 29 per cent.
The tax rate for those between $30,000 and $60,000 was lowered to 22 per cent, from 24 per cent. The income-tax rate below the $30,000 mark fell to 16 per cent from 17 per cent. The Child Tax Benefit was also increased by $100, starting in July 2001, on top of a $200-increase that had already been scheduled.
For taxable income over $85,000, the federal government eliminated the 5-per-cent surtax.
On average, the Finance Department said, personal income taxes would fall by an average of 21 per cent by 2004-2005 because of the combined impact of measures in the mini-budget and the previous federal budget in February 2000.
The financial outline also called for a $10-billion payment on the public debt - which stood at $564.5-billion - in 2000-2001, following on the heels of a $12-billion payment the year before.
Leading up to the election, the mini-budget was aimed squarely at taking on the Canadian Alliance party, which had earlier vowed a five-year $124-million plan that it said would cut the tax rate to 17 per cent on all incomes up to $100,000 and fix the rate at 25 per cent for all incomes above that level.
The mini-budget - buoyed by burgeoning surpluses - also reiterated Ottawa's commitment to $23.5-billion over five years in spending on health care and child care. New spending included $500-million for the Canadian Foundation for Innovation and $100-million to support the participation of Canadian researchers in international projects.
Another $100-million was set aside over five years for the Social Sciences and Humanities Research Council to bolster education and learning. Smaller universities were also given a clearer run at $250-million in previously announced funding by dropping a requirement that they match federal research grants.
Ottawa also set aside $1.3-billion to help low-income Canadians deal with what were then soaring fuel and heating costs, offering a rebate to anyone who qualified for the goods-and-services tax credit. The measure gave individuals $125 each, while families got $250.
Seeking to strengthen the technology sector, the mini-budget also implemented a number of measures designed to foster growth.
Ottawa announced plans to lower the inclusion rate on capital gains to 50 per cent from two-thirds to encourage investors.
As well, the statement increased the availability of tax-free rollover deferrals - moving an investment from one company to another without cashing out - to $2-million from $500,000. Businesses with annual revenue of up to $50-million - up from $10-million - would also be eligible. This change was also effective immediately.