NDP would hike corporate taxes to reach four surpluses
Published Wednesday, September 16, 2015 3:17PM EDT
Last Updated Wednesday, September 16, 2015 9:09PM EDT
The NDP is promising four years of budget surpluses if elected, and says it will still be able to pay for billions of dollars’ worth of election promises through a number of measures, including a corporate tax hike.
The New Democrats released their fiscal plan in Ottawa on Wednesday, containing spending and revenue projections for the next four fiscal years.
The plan includes more money for eight new categories including health care, indigenous communities and opportunities for young Canadians.
And, according to that plan, the new spending will be paid for through measures such as a corporate tax rate hike to 17 per cent from 15 per cent next fiscal year, as well as the elimination of the Conservative government’s income splitting plan and its near-doubling of the contribution limit to the tax-free savings account (TFSA).
The NDP says its plan would lead to a $4.1-billion surplus next fiscal year, based on projections from the 2015 federal budget, and predicts the federal surplus would continue to hover around $3 billion to $4 billion over the following three fiscal years.
However, those surplus numbers are out of date, as the amount of money the NDP has to work with is probably about $1.1 billion lower, based on calculations from the parliamentary budget officer.
Here is an outline of the seven sources of revenue under the plan, and their projected value for the first year:
- A two-percentage-point increase on the corporate income-tax rate ($3.7 billion)
- Tax integrity measures ($500 million)
- End fossil-fuel subsidies ($240 million)
- Close stock-option loopholes ($500 million)
- Repeal income splitting and reverse the near-doubling of the annual contribution limit to the TFSA ($2.2 billion)
- Reallocate unspent P3 Canada funds ($281 million, starting in 2017-18)
- Other revenue measures ($64.8 million)
The plan also outlined the eight sources of new spending, but was light on details about what would receive funding under each. The eight categories and their projected value for the first year are:
- Jobs and infrastructure ($3 billion)
- Health and seniors care ($355 million)
- Helping families get ahead ($694 million)
- Opportunities for young Canadians ($140 million)
- Safe and secure Canada ($184.5 million)
- Help where it’s needed most ($572 million)
- Stronger communities, stronger democracy ($157.7 million)
- Support for indigenous communities ($604 million)
Speaking at the NDP press conference in Ottawa Wednesday, star candidate and former Saskatchewan finance minister Andrew Thomson touted the party’s plan as a “prudent and responsible approach to balancing the budget.”
“The NDP’s fiscal plan that we have announced today is balanced and it is progressive,” said Thomson. “We will not hit the snooze button, as Stephen Harper has, on the economy. And we will not hit the panic button, like Justin Trudeau has, on spending.”
But Conservative candidate Jason Kenney slammed the NDP pitch as a job-killing plan.
“They’re starting out with a platform that will kill at least 300,000 jobs,” said Kenney.
Liberal candidate John McCallum, a former bank economist, called the NDP plan a “mirage” that would lead to the loss of 150,000 jobs. He said many of the NDP’s key election promises, such as a national daycare plan and public transit spending, are back-loaded to later years.
There were also questions about what will be included in the NDP’s health transfers to the provinces, which the party has committed increase by six per cent annually. Party officials tried to explain how much of those transfers would be tied to election pledges and how much would be left to the provinces to spend as they wish.
“We have committed to continue the six per cent escalator but I do want to be clear that some of that six per cent will include announcements on healthcare that our leader Tom Muclair has already made this week,” said NDP candidate Peggy Nash.
More detail needed: economist
Speaking to CTV’s Power Play, Vice President and Economic Analysis at the C.D. Howe Institute Craig Alexander said the NDP has to provide “a lot more detail” in order to fully explain how the numbers will work out.
“The NDP clearly wanted to target some additional spending measures. They come with some big price tags. And the reality is, from the fiscal point of view, there’s just no money in the kitty,” he said.
Alexander highlighted the fact that while the government balanced the books in 2014, there probably won’t be much, if any, additional money to work with this fiscal year. He predicts the 2015 budget will either be close to balanced, or go into a small deficit.
Alexander took issue with the NDP’s largest source of projected revenue – hiking the corporate tax rate. He said the measure would affect multinational corporate interest in Canada and hit existing companies hard, potentially hurting job creation in the long term.
“If all of the sudden (corporations’) profits are going to be weaker, they’re going to have to do something so they still hit those targets,” he said. “So ultimately it will scale back investment, it will impact jobs.”
But Alexander’s biggest concern was the NDP’s plan to hike the corporate tax rate while cutting the small business tax rate from 11 to 9 per cent -- something he says creates a “distortion in the Canadian tax system.”
“The problem is that when you have really low small business tax rates relative to larger businesses, it actually incents small businesses not to grow.”