Finance Minister Jim Flaherty would have preferred to read his Economic Statement in the House of Commons but was prevented from doing so because he could not receive the unanimous support of all MPs to do so. And so, the Parliamentary Press Gallery was more than pleased to make the National Press Theatre available to him yesterday afternoon in order to deliver the statement. I got three questions in the q-and-a that followed and here they are:
Akin: Your party said during the election campaign you would never tax income trusts. And you did. And you justified it by saying, well, things have changed. Similarly, why not tell Canadians, “we promised to cut the GST but things have changed'. That, we've got nothing but advice to say put it all into income tax cuts. No economist worth his salt would say the GST cut is a good idea. They say, more income tax cuts. More corporate tax cuts. Why not put it all into those two “good” tax cuts, instead of a GST cut.
Hon. Jim Flaherty: Well, you're assuming that there's such a thing as a bad tax cut. I've never met one. I'm in favour of tax cuts. We think Canadians pay too much tax. The GST is a tax paid by all Canadians. Even Canadians who don't pay income tax have to pay the GST when they buy things. We promised to reduce the GST by two points. Because of the strong economy we're able to do it earlier than we had planned. So, we're going ahead and we're going to have this permanent year after year tax reduction for all Canadians.
It's part of a larger reduction of taxes here, about $45 billion of the tax reductions are for individuals and families, about $15 billion for businesses. So about 75% of the tax reductions in the Economic Statement will benefit individuals and families in Canada.
Akin:Just to follow up on that GST question. Some economists still say that with our economy performing so well that this broad measure of tax cuts could be inflationary. When the Bank of Canada gets worried about inflation, they tend to raise interest rates. So some Canadians might say, well, it's a GST tax cut or my mortgage rate is going to go up and that's going to cost me thousands and thousands of dollars a year. Did you think about that at all?
Flaherty: Oh, we think about many things, I can assure you, when we do tax work. This is a balanced package. There are substantial business tax reductions. But after all, that's where Canadians work, at businesses. And we want to make sure that there's confidence in Canadian businesses, that Canada's a very attractive place in which to invest and that businesses doing business in Canada, Canadian businesses want to reinvest in Canada.
And that's why we went out five years to a very low corporate rate of 15% because of the business planning cycle to give them time to do that. The individual tax cuts will mean money in Canadians' pockets as soon as they file their income tax returns for 2007.
So as soon as we get into the new year and people get their T4's and so on they can go ahead and get more money than they would have had, assuming our notice of Ways and Means Motion passes in the House of Commons.
Akin: To get back to spending. Because if my math is right you kept spending program expenses much higher than GDP over the next three years. You're going to jump 4.6% next year, 4.5% the year after that … 3.7%. Conservatives are supposed to be all about cutting spending and you're outpacing GDP growth in your spending.
Flaherty: On average. On average, we will contain spending to within the rate of growth of the economy, which we estimate at about 4.1% over the cycle. It's a lot of work and we're working at it. We're going to look at every government program. But we will accomplish it. We know how to control spending.