Goodale pledges $30 billion in tax cuts

The federal government today announced a series of tax reductions that Finance Minister Ralph Goodale says will bring $30 billion in personal income tax relief for Canadians over the next five years. The cuts were announced in Goodale’s fall economic and fiscal update, with the government facing a possible election campaign.

Ottawa is increasing the basic personal taxation amount to $8,648 from $8,148, a $500 rise, retroactive to January 1, 2005.

In addition, the government is cutting the lowest personal income tax rate to 15% from 16%, also effective January 1, 2005, with subsequent reductions of one percentage point to each of the two middle tax rates promised by 2010.

“For a typical two-earner family of four with a combined income of $60,000, these two measures — increasing the basic personal amount and reducing the bottom rate — would result in a tax saving of 20% immediately, rising to an annual saving of 33% by 2010,” the minister said in his speech.

Goodale also pledged to raise the top tax rate in Canada, which currently kicks in at an annual income of $116,000 to $200,000 within five years. “This will help to retain and attract highly-skilled workers and spur economic growth,” he said.

On the corporate side, Goodale said the federal capital tax would be eliminated in 2006, two years earlier than planned, and that the government would go ahead with plans to reduce the general corporate income tax rate to 19% by 2010.

In announcing the cuts, Goodale noted that the government was in a better fiscal position that it expected when the last budget was tabled in February, thanks to a strong economy and healthy job creation. Ottawa now expects a surplus of $8.2 billion for 2005-06, rising to $9.2 billion the next fiscal year and to $9.5 billion in 2007-08.

Still, any tax changes require legislation and given the government’s precarious minority situation, may not be as “immediate” as Goodale suggests.

The minister said he was “encouraged” by the many submissions he has received so far on the government’s consultation paper on income trusts. “We will examine this matter with great care and will respond promptly to the consultation process with a result that fosters saving, investment and overall economic efficiency.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com