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Manley's first budget should get back to basics ... like ABCDEFG

By Walter Robinson
web posted July 8, 2002

Finance Minister John Manley

While most federal Liberals will fight amongst themselves this summer, we trust that Finance Minister John Manley will stay focused, skip a few of his shifts at the Tim Horton's drive-thru and start to craft his first budget. In so doing he must stand firm in the onslaught of spending hordes (read: his boss and colleagues) and debunk the Martin "mystique".

Both the IMF and the OECD forecast Canada will top G7 growth in 2002 and 2003. This translates into higher government revenues and explains the puddles of saliva House of Commons employees wiped from the federal cabinet table late last month.

Speculation abounds that Parliament will prorogue on September 13th thus delaying the return of the House to October to coincide with the Queen's visit when she could read the Speech from the Throne. A speech to aid the PM's search for a legacy that all but assures a return of Trudeauesque spending.

This is something that Mr. Manley must resist with all his might. To aid in this struggle, Canadian taxpayers and the international financial community must publicly, repeatedly and vehemently tell Mr. Manley that such a back to the future approach will not be tolerated.

As for the Martin "mystique", Mr. Manley need not be spooked by his predecessor's record of some success. A new paper by respected academic Thomas Courchesne from the Institute for Research on Public Policy (IRPP) offers sorely needed perspective on the Chretien-Martin fiscal legacy.

While the federal Liberals have run five consecutive surplus budgets since 1997-98, prior to this period Ottawa ran 27 consecutive deficit budgets. Moreover, Canada's debt-to-GDP ratio, while falling, is still the second highest in the G7.

Courchesne also notes the foundation of many fiscal policy gains were laid by the former PC administration – despite its inability to rein in spending –including bracket creep (not ended until Budget 2000), tax policy overhaul, low-inflation targets and free-trade. Combine these structural changes with Paul Martin's good fortune of being Finance Minister during the largest U.S. boom in economic history and his successes seem less Herculean.

So what should John Manley do? Simple, he should get back to basics. This fall the CTF will lay out its Back to Basics: ABCDEFG Budget 2003 plan. Here's a sneak preview:

A – Abolish the capital tax. Taxing plant and equipment is punitive, stifles innovation and retards economic growth.

B – Basic standard of living. Change the basic personal exemption (BPE) to the basic standard of living credit (BSLC) and lay out a three-year plan to raise this amount to $10,000 en-route to $15,000 over six years.

C – Corporate Welfare: End it now. Wind up industrial subsidy programs and regional development initiatives and replace them with equivalent business tax reductions. It's time for government to stop picking winners and losers and let the market decide.

D – Debt Reduction: Devise a schedule and enshrine it in law.

E – End EI and CPP employer overpayments. As employees move between jobs, a whole new set of payroll taxes are paid by workers and employers. While workers can recoup this money at tax time, employers cannot and it costs them an estimated $750 million annually.

F – Forces. Start to repair the damage of 30 years of starving the Canadian armed forces.

G – Gas taxes for cities. Adopt theCTF's Municipal Roadway Trust formula to devote $2.2 billion in gas taxes each year for the next three years to roadways in Canada's cities.

Walter Robinson is the Federal Director of the Canadian Taxpayers Federation.

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