It had been widely speculated in the media that the Conservative government's second budget would be election-ready. From that perspective, they did not disappoint. “We made a choice. We chose to support hard working families,” Finance Minister Jim Flaherty told the House of Commons on Monday.
Tax benefits were proposed for seniors, families and low-income earners, with two-thirds of the budget earmarked to address the so-called fiscal imbalance (the share of federal monies the provinces feel entitled to).
But what's left for Canadian businesses?
“Small businesses and entrepreneurs are the motors of our modern economy,” said Flaherty. “The last thing they need is excessive government red tape and needless regulation to slow them down.”
For Erin Weir, economist at the Canadian Labour Congress, there was a lot that businesses should be happy with from this budget. “Certainly if you're talking about business operating in the oil sands, I think they got a major reprieve in the sense that the tax expenditures for that sector are going to continue for almost another decade.”
Proposals for businesses included:
•Increasing the lifetime capital gains exemption for farmers, fishers and small business owners from $500,000 to $750,000
•Manufacturing businesses can write off 50% of capital investments in machinery and equipment acquired on or after March 19, 2007 and before 2009
•$1.1 billion to build a knowledge economy
•$1.1 billion to support Canada's farmers
Roger Martin, Dean of the Joseph L. Rotman School of Management at the University of Toronto, was also pleased with some of the initiatives in the 2007 budget.
“I'm encouraged for one pretty simple, straightforward reason and that is that I care deeply ? if not obsessively ? about the balance between Canada's consumption of current prosperity versus its investment in future prosperity. And there has been a very unfortunate tilt over the past 15 years toward consumption of current prosperity at the cost of investing in future prosperity. This is the first federal budget in that period that is a dramatic change in the balance between those two things ? a change in the right direction.”
Myron Knodel, manager, tax and estate planning with Investors Group, wasn't overly impressed with the tax benefits for businesses. “As far as broad-based changes for business in general, there really wasn't anything in that regard.”
According to Knodel, while there were a few pleasant surprises, including the introduction of a universal child tax credit and an increase from 69 to 71 in the age limit for converting an RRSP, there was also a big disappointment.
“I think there was a lot of thought there would be some type of concession or preferential treatment for capital gains given the hit that investors took in that October 31st income trust announcement. I thought something was going to come in the budget in that regard and that was absent.”
But as far as Weir is concerned, “The Canadian Labour Congress is of the view that a capital gains reduction would have been quite inequitable and wouldn't have done much to promote tangible investment in the Canadian economy.”
Regardless whether this budget was designed to appeal to a wide segment of the population, one thing Roger Martin has learned is that you're never going to make everybody happy.
Weir agrees. “On the one hand it does have something for everyone but a lot of it is quite small and seems to be lacking an overall sense of priority or an overall vision that would inspire people.”
The Liberals and NDP weren't impressed, but the real test will be the next federal election, when the voters who were carefully considered in the building of this budget head to the polls.