Tuesday, January 27, 2009

Preservation not inspiration

Update (8:40 p.m.): Some reaction:
Initial indications from inside what was described as "grumpy" caucus were that the government may have to work harder to earn the backing of the Liberals and survive a confidence vote.

"I think it could even be a flat no or there could be an amendment," said one senior Liberal. "But those are the only two options".

While I will endeavour to read the monstrosity this evening as well, since that's what all the cool civic minded types are doing these days...a few thoughts off the bat.

This is a budget designed to preserve a government, no doubt about that. The Conservatives haven't inspired us with any great thinking here, they're just seeking to get by, touching all the bases.  They're definitely a "B" grade bunch of thinkers.  A very careful mix designed to spend some and cut taxes some. And above all, offend no one, least of all the Ignatieff Liberals. No obvious inflammatory poison pills like the November update, yet lots to question.  Less obvious points to object to this time around yet certainly lots of room for opposition. That's what the opposition properly does in a minority parliament and the Conservatives should expect that.    

On the tax front, the personal income tax proposals sound very incremental on every item they touch yet will cost $20 billion over the next five years. Tonda MacCharles' report explains the personal tax changes pretty clearly. Of note, they're expanding the 15% and 22% income tax brackets. And they're expanding the lowest basic personal amount at which any tax at all will kick in.  

You have to marvel at the Conservatives' evolution here and timing, that they are seeking to bring in such income tax measures now when the gimmicky GST cuts have been their tax reduction priorities to date and have put the federal government in a hole.  The hole's gotten a lot bigger due to the economic challenges and it's now going to get $85 billion bigger with their plan.  Admittedly, these cuts are difficult to oppose because people earning at the lower rates deserve help.  But they propose it now while we're in a hole courtesy of excellent Conservative financial management.  

And in respect of the personal cuts, people are being told they can make more before they will be taxed more.  But are people worried about those margins at the moment or keeping their jobs?  Is it going to provide comfort to people and encourage them to spend?  Likely not.  And the amounts they'll benefit from as a result of these cuts are small:  
The budget introduces broad income tax cuts that will save the average taxpayer several hundred dollars a year - $247 in savings for a family making between $30,000 and $45,000; $473 in savings for a family earning between $60,000 and $80,000.
It's all a slight ideological nod, not overly offensive yet still something they should be criticized for as it still keeps us in the hole and is of questionable value at the moment.

The home renovation tax credit is a perfect example of more gimmicky retail politics from the Conservatives but whether people are inclined to spend a lot to get a little back (on limited choices) at the moment strains the imagination:
Examples include the temporary tax credit for home renovations exceeding $1,000 in cost, which expires on February 1, 2010. The 15 per cent credit – which is not refundable – will provide tax relief of up to $1,350 for Canadians if they spend the maximum $10,000 eligible for the break.
Others are noting the problems with the infrastructure plans, that funding is tied to the municipalities and provinces meeting the federal contribution.  That looks like an area ripe for amendment. 

The EI plans may also be challenged. The proposal is to expand the amount of weeks of eligibility and freeze EI payroll premiums.  But not to ease the front-end two week waiting time.

At a minimum, it's certainly looking like there is room to propose amendments to this budget. This is a minority parliament and if Mr. Harper is serious about a new tone and making it work, he should be quite open to them.