OTTAWA – The Liberal government is planning to pile on more than $100 billion in public debt over the coming years as part of an ambitious strategy to revive economic growth.
The Liberals’ first budget predicts that big spending on investments like infrastructure will boost the country’s real gross domestic product by 0.5 per cent this year and one per cent in 2017-18.
The budget projects deficits of $29.4 billion this year, $29 billion in 2017-18, $22.8 billion in 2018-19, $17.7 billion in 2019-20 and $14.3 billion in 2020-21.
Budget revamps tax benefits for families, focuses on low and middle income
Ottawa is revamping the tax benefits for families with young children in the federal budget to put more money in the wallets of low and middle-income families starting in July.
However, the changes announced Tuesday will see families earning more than $150,000 a year generally receive less under the new Canada Child Benefit program.
Finance Minister Bill Morneau said nine out of 10 families will receive more than they do under the existing programs.
“That is money in the pockets of mom and dad,” he said. “Money that can go directly to eating healthier food, paying the rent and buying new clothes for back to school.”
The new program will pay up to $6,400 per child under six and up to $5,400 per child for those aged six through 17. However, the benefits begin to phase out starting at $30,000 in net family income.
Under the current system, families with $30,000 in net income and one child under six would have received $4,852 in child benefits and $3,916 if the child is six through 17.
The changes were a key plank in the Liberal campaign platform.
They replace the current Canada Child Tax Benefit, National Child Benefit and Universal Child Care Benefit.
Ottawa is also eliminating income splitting for couples with children as well as phasing out the children’s fitness tax credit and the children’s arts tax credit.
The fitness and arts tax credits, worth up to $150 and $75 respectively for those who claim them, will be cut in half for 2016 and eliminated for 2017.
The changes for families come as Ottawa also makes changes to some of the tax credits for students and increases the guaranteed income supplement for single seniors starting in July.
The government is eliminating the education and textbook tax credits effective next year because it said they were not targeted based on income. The tuition tax credit will remain unchanged.
Education and textbook tax credits carried forward from years before 2017 will still be claimable in 2017 and subsequent years.
The government is also cancelling plans to allow the donations of real estate and shares of private corporations to be included in the income tax exemption on capital gains for donations.
The change, which was announced in the budget last year by the Conservatives, was set to start next year.
— Justin Trudeau (@JustinTrudeau) March 22, 2016
Federal budget targets affordable housing, homelessness and child care
Almost 119,000 Canadian families who are living on the street or on the verge of becoming homeless could find themselves with new or refurbished affordable housing units under federal spending unveiled Tuesday.
The Liberals first budget after being elected in October sets aside $2.3 billion over two years for affordable housing, including doubling spending on a federal affordable housing program and adding $111.8 million to help 61 cities tackle the ongoing challenge of homelessness.
Many of the 570,000 units of social housing the government funds nationwide have older systems that aren’t energy or water efficient, or are in dire need of repair after years of declining federal investment.
The budget also sets aside $89.9 million over two years to create or renovate more than 3,000 shelter spaces for women escaping domestic violence that are either in short supply or non-existent in many communities.
The money is part of a larger push by the government to tackle a number of social issues, including child care.
The government has banked $500 million for child care next year as incentive to the provinces to sign on to a proposed national child care system.
— Kent Hehr (@kenthehr) March 22, 2016
Liberal budget seeks to defer future cuts to small business tax rate
A Liberal campaign promise to cut the small business income tax rate appears to have itself landed on the chopping block.
Instead, the rate will remain at the current 10.5 per cent on the first $500,000 of active business income.
Today’s federal budget says future decreases would be put off, but does not say when they might resume.
The move contradicts the Liberal campaign commitment to stick to the existing schedule that would have seen the small business income tax rate drop from 11 per cent last year to nine per cent by 2019.
That plan was part of the previous Conservative government’s 2015 federal budget.
Finance Minister Bill Morneau did not directly answer a question on why the government decided to put off future decreases.
He told a news conference ahead of his budget speech that in his view, the budget was a good one for small business.
“We know that for small businesses the most important thing is to have an economy that’s working,” he said. “That’s what we want for Canada.”
During the election, all three main parties were actively courting the support of small business by sticking to the Tories’ small business tax rate plan.
But then Liberal leader Justin Trudeau created a minor controversy when he suggested small businesses set up as private corporations were a way for people to avoid paying taxes.
His political opponents pounced, with the NDP calling on him to apologize and the Conservatives accusing him of saying all small businesses were nothing but “tax scams.”
Criticism also came from the Canadian Federation of Independent Businesses, which said there was no evidence to support Trudeau’s assertion.
The Liberals countered that they were relying on studies by economists to back up their claim.
Despite that, they pledged to lower the rate to nine per cent by 2019, while at the same time ensure its benefits went to small businesses and not wealthy individuals.
Morneau said the Liberal budget’s focus on the middle class benefits small business because it will provide them with more customers, as it will give more people more money to spend.
Liberals to pump $1.87 billion into culture, including promised funds for CBC
The country’s cultural sector gets a $1.87-billion boost over five years in a Liberal budget that aims to reshape the economic narrative.
It keeps a promise to restore and increase funding to the CBC beginning with $75 million this year and $150 million for four years after.
But the money comes with a commitment to also create a five-year accountability plan for the national broadcaster.
Pledges for more money for Canada Council for the Arts, the National Film Board and Telefilm Canada are also met, but the money is less than promised during the campaign.
National museums also receive new injections of cash, $386 million in total, with additional funding earmarked for two in particular the Science and Technology Museum and the National Art Gallery, both in need of repair.
Finance Minister Bill Morneau says the spending speaks to the budget’s theme of promoting innovation because that’s also about believing in the talent and creativity of Canadians.
— Bill Morneau (@Bill_Morneau) March 22, 2016
Federal government to spend $500,000 to gather data on foreign homebuyers
Ottawa is spending $500,000 to help understand the role of foreign homebuyers in the country’s housing market.
The cash in the federal budget is going to Statistics Canada to help develop methods for gathering data on home purchases by foreign buyers.
The government says comprehensive and reliable data on the number of homes sold to foreign buyers does not exist right now.
The plan may involve collaboration with the provinces, including British Columbia, which recently announced plans to have homebuyers disclose whether they are citizens or permanent residents of Canada or another country.
Many believe the Vancouver housing market has charged ahead in recent years due to an influx of wealthy foreign buyers.
The rapid rise in home prices has pushed the price of detached houses well over $1 million in Vancouver and raised questions about affordability and sustainability for the market.