Budget 2009: Reaction mixed among industry groups

The Canadian life and health insurance industry welcomed the broad-ranging fiscal stimulus measures set out in the Economic Action Plan announced by Finance Minister Jim Flaherty.

“The industry is supportive of initiatives to promote financial stability and maintain efficient and well-functioning markets, as well as the tax relief provided to Canadian consumers,” said Frank Swedlove, president of Canadian Life and Health Insurance Association (CLHIA).

Insurers particularly lauded the repeal of Section 18.2 of the Income Tax Act, which restricts the deduction of interest for certain investments in foreign subsidiaries. “This would have put Canadian multinational companies at a competitive disadvantage to foreign competitors,” Swedlove added.

The industry also reacted positively to Flaherty’s initiative to create the Canadian Life Assurance Facility, which will put Canadian life insurers on an equal footing with their foreign counterparts, who benefit from guarantee programs provided by their home governments.

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Budget deficits mean higher future taxes, says Knowledge Bureau

Despite sweeping tax cuts for low- and middle-income households, Evelyn Jacks, president of The Knowledge Bureau, a financial services education institute, noted today’s deficits will surely become the taxes of tomorrow. “Canadians will inevitably see higher taxes as a result of the federal government’s plan to stimulate the economy with deficit spending.”

Tuesday’s federal budget projected a deficit of $33.7 billion for fiscal 2009–10 and $29.8 billion for 2010–11.

“Already, the federal and provincial taxes every Canadian pays on income and capital are by far the largest destroyer of wealth over a lifetime. These deficits won’t help,” Jacks said.

She noted the government’s deficit plans would be particularly worrisome to boomers, who, at 10-million strong, comprise the largest percentage of Canada’s tax base. “When boomers retire and begin to access Canada’s pension and healthcare systems in ever greater numbers, a shrinking labour force won’t be able to support the increased demand for spending at current taxation levels, and higher taxes will result.”

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Canada’s charities and non-profits disappointed by budget

Not everyone, however, was as pleased with the budget. Canada’s charities and non-profits were disappointed the finance minister failed to acknowledge their role in helping vulnerable Canadians, and that he remained silent on the issue of federal funding to their sector.

Marcel Lauzière, president and CEO of Imagine Canada, a national charitable organization, called it a missed opportunity. “We’ll be looking for those assurances and watching to make sure these organizations are not subject to cuts as they, too, struggle in this economy to serve Canadians in their communities,” he said.

Imagine Canada had put its weight behind three industry-specific initiatives that would have contributed to the capacity of charitable organizations to maintain mission-critical services in an era of declining resources. The measures included a moratorium on further funding cuts; an increased tax credit for the next three years for any new giving up to $15,000; and finally, earmarking a portion of federal spending on projects that contribute to community and social infrastructure, in addition to being sizable construction initiatives, including arts and culture, and sports and recreation infrastructure initiatives.

Lauzière was somewhat heartened to see the budget did make funding provisions for culture and sports.

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Mortgage industry welcomes federal decision to support homeowners

The Canadian Association of Accredited Mortgage Professionals (CAAMP), representing Canada’s $900 billion mortgage industry, heartily welcomed the incentive-laden budget for homeowners.

CAAMP especially supported the temporary home renovation tax credit; the increased RRSP withdrawal limit from $20K to $25K; and the new first-time homebuyers’ credit for closing costs that will provide up to $750 in tax relief.

“The budget provides enhanced consumer confidence, especially as it affects housing — the largest investment for most Canadians,” said Jim Murphy, CAAMP’s president and CEO.

CAAMP also supports an increase in the insurance mortgage program to $125 billion, and the permanent income tax measures set forth in the budget, which will increase take-home pay, especially for lower and middle income Canadians.

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Budget misses opportunity to support family caregivers

The Canadian Caregiver Coalition (CCC) felt rather neglected in yesterday’s budget. “Based on the election promises and November Speech from the Throne, we thought the Government had recognized the need to act,” said CCC president, Nadine Henningsen.

Henningsen called this omission a big disappointment to the millions of caregivers trying to cope with the need to financially support their families, save for retirement, and provide care for loved ones with healthcare needs.

“With the current economic downturn, stock market instability and uncertain employment security, family caregivers across Canada were looking to the federal government for recognition of their challenges, ” Henningsen added.

According to a recent online poll conducted by CARP, 95.7 % of respondents indicated support for the government to initiate financial measures to support family caregivers.

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Construction industry responds favourably to federal budget

Canada’s construction industry felt encouraged by the infrastructure plans laid out by the government in the 2009 federal budget.

The Building & Construction Trades Department (BCTD) issued a statement saying it supports the bolstering of the Employment Insurance program through the Canadian Skills and Transition Strategy. Workers who lose their jobs will be better served by 50 weeks of EI versus the 45 weeks previously provided. The $500 million allocated to the EI program will assist Canadians in longer-term training programs, aimed specifically at construction trades.

BCTD was pleased by the government’s reaffirmation of support in this budget through monies directed at Canadians currently enrolled in Red Seal apprenticeships through the Apprenticeship Incentive Grant completion bonus. “This is an important step to ensure our training system is strong and continues to deliver top quality talent to job sites nationwide,” it stated in a press release.

The Capital Cost Allowance (CCA) for acquisition of major equipment was also seen as a step forward, especially as it will assist with job costing in construction and maintenance facilities.

BCTD would like to see more details regarding strategic planning over the next number of months for the economy in Canada, calling the current approach taken in the budget largely piecemeal and not part of a larger strategy for the economy and industry.

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Federal budget fails women, working people: PSAC

The 166,000-member Public Service Alliance of Canada (PSAC) called the 2009 federal budget an infringement on workers’ and women’s rights, threatening public services at a time when Canadians need them the most.

“This budget fails working people and threatens to undermine the public services that Canadians rely on during a financial crisis of this scale,” PSAC national president John Gordon said. “Cutting taxes will do little to create jobs or help unemployed Canadians. Working people expected more of this budget, and we expect more of our federal government.”

PSAC was unimpressed by the sweeping tax cuts and changes to the Employment Insurance program, which it says does nothing to ensure access to benefits for the 60% of unemployed people in Canada who currently do not qualify for EI — the majority of whom are women.

Other pet peeves included:

• The proposal to “modernize” the federal pay equity regime, which would remove women’s right to go to court to demand equal pay for work of equal value.

• Proposed legislation on public sector compensation, which will likely roll back previously negotiated wage increases.

• The continued emphasis on public-private partnerships for infrastructure projects, including the proposed sell-off of federal assets, which will cost the public significantly more money and prove to be much less accountable than publicly-financed ones.

(01/28/09)