The Wrap Up – Budget 2017

Yesterday at 4 pm, Federal Minister of Finance Bill Morneau delivered his budget in the House of Commons. The budget was titled “Building a Strong Middle Class.” He has previously stated:

“Canadians are talented, skilled and creative people. Our plan will give them the tools and support they need to make their mark in the economy of tomorrow, while ensuring that the success we create together is shared by the middle class, and those working hard to join it.” ¹

Overall the stated themes of the budget were:

• skills and innovation
• infrastructure
• tax fairness
• a strong Canada

The budget was described as a “wait-and-see” budget by CBC news² generated by a significant amount of political uncertainty and lack of information regarding corporate and personal tax cuts and government spending from the United States.

There is a fear that Canada could experience a brain-drain of highly educated and talented leaders if they are attracted to the US by greater job opportunities, higher pay, and lower taxes. Budget 2017 did little to address the concerns of highly capable Canadians, but it did not increase the income tax burden for them either.

Some other highlights from the budget include:

1. Overall budget deficits will remain much higher than during the Liberal’s successful political campaign. The annual budget deficit will likely be around $18 billion in 2021/22.
2. Unemployment insurance premiums are being raised by their maximum amount to $1.68 for every $100 of insurable earnings.
3. Taxes on tobacco and alcohol will be adjusted every April 1^st, and be linked to the Consumer Price Index. This will begin in 2018, after a 2017 increase has been mandated within the budget.
4. Public Transit Tax Credit will be eliminated on July 1^st .
5. The Canada Savings Bond program will be eliminated.
6. An additional $3.4 billion will be spent to improve living conditions for First Nations peoples over the next five years.
7. Over $500 million will be spent over the next 5 years to prevent tax evasion.
8. A national housing strategy will cost over $11 billion over the next 11 years.
9. $7 billion will be spent in the next decade to assist Canadian families by increasing the number of daycare spots, lengthening parental leave, and allowing maternal leave to begin 12 weeks before the expected due date. The tax treatment of fertility procedures was also made more favourable.
10. Female entrepreneurs will receive additional funding.
11. Nearly $3 billion will be spent before 2023 to work with the provinces and territories to improve support to unemployed Canadians through better training.
12. $400 million spent over 3 years to fund a venture capital initiative through the Business Development Bank to increase access to capital for entrepreneurs.
13. Spending of three departments will be reviewed to eliminate waste and inefficiencies (to be named later).
14. Uber and other ride sharing services will be subject to GST.
15. Also announced, but not articulated, is the government’s intention to review tax and compensation arrangements for small business corporations regarding income splitting with dividends and capital gains, holding passive (non-operating) investments, and converting salary or dividends to capital gains.

We were most interested in the last point above regarding changing tax laws, however there were no specifics provided. Leaving the capital gains tax unchanged may spur a bit of a rally, however the overall theme from yesterday was that not much was changing. After the considerable changes implemented in the 2016 budget, this budget offered very little.

There does appear to be some change on the horizon as it’s 5 degrees above 0 in Winnipeg today. As always, spring brings the promise of new growth and sunny days ahead. We will continue to hope for the same from our economy.

Enjoy the sunshine.

Kevin

 

More information can be found by visiting this government website:

http://www.budget.gc.ca/2017/docs/bb/brief-bref-en.html or by reviewing the budget document ³ http://www.budget.gc.ca/2017/docs/plan/budget-2017-en.pdf

 

 

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Sources:

¹ https://www.canada.ca/en/department-finance/news/2017/03/budget_2017_is_setformarch22.html

² http://www.cbc.ca/news/politics/liberal-trudeau-morneau-budget-2017-1.4034793