Tories slash debt; Liberals would have slashed taxes …

Prime Minister Stephen Harper announced today that his government is using the giant-sized fiscal surplus to pay down the national debt. In turn, Canada will not need as much money from taxpayers to pay the interest on the debt that's being retired. And, as his Finance Minister promised last fall, the Prime Minister says he will lower taxes by the amount that is now not needed to pay that interest.

But, for those who say taxes are too high — there's no gettin' around the fact that taxes would have been much lower – much, much, much lower — under the previous Liberal government.
The Martin government, in its last days, promised that if there was a giant-sized surplus at the end of each fiscal year, it would divvy it up into three pieces and apportion it this way:

• Set aside $3-billion in a 'contingency fund' reserve.
• Use one-third of the remainder to pay down the national debt.
• Use one-third to lower personal income taxes
• Use one-third for new program spending.

Update: Now mind you, Dan Miles, who is Finance Minister Jim Flaherty's Director of Communications, called to say I'm being unfair when I say the Liberal tax plan would have been “much, much, much lower” than the Conservative plan. He says the “tax back guarantee” — the government's guarantee that interest saved from debt reduction will go to income tax cuts — is just one part of his government's plan to cut taxes and that, if one looks at the “global” picture since the Tories took office 19 months ago, their package of $41-billion worth of tax cuts of all kinds compares more than favourably to what the Liberals have done or were planning to do.

OK, fair enough but, on the issue of surpluses, I still think that policy differences between Liberals and Conservatives are significant enough. Here, again, is what the Tories are doing:

• All of it will be used to pay down the national debt
• The interest savings will be used to lower personal income taxes.
• There is no new money for program spending.

.
The federal surplus at March 31, 2007 stood at $14.7-billion.

The resulting tax cut from the Conservatives will be about $725-million.

The resulting tax cut from a $14.7-billion surplus with the Liberals in power would have been nearly $4-billion or more than six times as much as the Conservatives are offering.

There would have been another $4-billion for increased program spending — things like more equipment for the military or more daycare spaces.

And the public debt would still have been sliced by $4-billion.

I'm not yet sure what's motivated the Conservatives to be so aggressive on the debt. On the campaign trail and at the 2005 Conservative policy convention, I heard a great deal about the need to lower taxes but I heard next to nothing about the urgent need to lower the debt. When I speak to Conservative MPs about what their constituents are telling them about national priorities, I hear that lowering taxes is a constant refrain but no MP has ever said they're worried about being voted out because they didn't lower the debt enough.

Moreover, you could make a good case that the debt is not a problem but taxation is.

Our national debt, as a ratio of our gross national product, is already among the lowest in the world. We are the only G8 country without a budget deficit, which means we are the only one of our international peers not adding to the debt every year. So we are already in a good position vis-a-vis the debt.

And yet, there is no shortage of groups in Canada who say that, compared to our international peers, our taxation levels are too high.
Today, the government is doing something about the debt — which doesn't appear to be much of a problem — and in doing so, will use up all the money it could have spent cutting taxes — which, to some, does appear to be a problem.