-- CTF Calls Tax Relief a Shell Game for the Second Consecutive Year; Condemns Continuing Lack of Focus on Debt Reduction; and Criticizes Revenue Projections --

OTTAWA: The Canadian Taxpayers Federation (CTF) today reacted to the 1999 Federal Budget -- Finance Minister Paul Martin's sixth budget - which was tabled in the House of Commons.

Tax Relief: The budget eliminates the remaining 3% surtax on Canadians earning between $50,000 and $65,000 per year and increases in the basic personal exemption (BPE) by $675 for almost all taxpayers. The budget eliminates the remaining 3% surtax on Canadians earning between $50,000 and $65,000 per year and increases in the basic personal exemption (BPE) by $675 for almost all taxpayers.

"These meausures only kick in on July 1st. And Mr. Martin is still punishing middle class individuals with incomes over $65,000 by refusing to immediately eliminate the 5% federal surtax that these individuals pay," said CTF federal director, Walter Robinson. "Moreover, we must not forget that bracket creep continues to erode the incomes of Canadians by pushing them onto the tax rolls or into higher tax brackets. Today's tax cuts, while welcome, are merely the latest move in Paul Martin's elaborate shell game."

Robinson pointed to recent figures from KPMG and the C.D. Howe Institute which show that "bracket creep" now accounts for over $10 billion, or 14%, of the $75 billion in personal income taxes that the federal government rakes in each year.

"We need to put the BPE increase in perspective. With today's measures, the BPE will rise to $7,131 but if income tax brackets had been fully indexed to inflation, the BPE would be $8,071 per person," added Robinson. "Mr. Martin is wrong to claim that he has more than offset bracket creep since 1992. If '92 is used as the base year, the BPE should have risen by $820, not $675 as he has done. It's time he came clean with Canadians on how he's raised taxes in every budget, including this one, through bracket creep."



Bracket Creep - Martin's Deception & Contradictions

Dec. 1997 The Liberal dominated House of Commons Finance Committee estimates that 840,000 low-income Canadian families have been pulled onto the tax rolls due to partial indexation (bracket creep) in the tax system.

Sept. 24, 1998 A "secret" analysis prepared by the Finance department shows that 25% of the increase in government revenues since 1993 is due to bracket creep. The analysis also showed that bracket creep has been a "major factor in the increase of the tax burden of low- and modest-income Canadians."

Oct. 14, 1998 Paul Martin's Economic Statement claims that only 10 percent of the growth in the government's tax revenues is due to "the interaction between the tax system and rising incomes (bracket creep)."

Feb. 4, 1999 Paul Martin writes K. Lalonde in Manitoba and states that "partial indexation is a relatively minor factor in the rise in tax revenues since 1994."

"On the issue of bracket creep, it is clear that Mr. Martin is continuing his inconsistent statements and behaviour. This jeopardizes his credibility with Canadian taxpayers," stated Robinson.

"And even with today's measures our personal income tax burden is still the highest in the industrialized world and Ottawa is becoming more addicted to personal income taxes as they represent a higher proportion of the total tax take and our GDP," added Robinson. "Finally, StatsCan continues to show taxes as the largest family expenditure and correctly points out that the tax burden has outstripped inflation by 2-to-1 for most of this decade."

Debt Reduction

Three billion dollars will be put aside in the debt contingency reserve to be applied against the national debt which now stands at $579.7billion.

"Again Mr. Martin is doing the minimum that is required. This mortgage that hangs over our heads was rung up in the last 28 years but Mr. Martin's lack of a debt reduction plan means that 10 generations will pay off the debt over a period of 193 years" Robinson noted.

"This is immoral and his flimsy debt-to-GDP target approach is insufficient. Martin should set yearly debt targets, just as he did with the deficit, and make meeting those targets the law."

"Debt servicing charges continue to run in excess of $41 billion per year. That's 27 cents out of every tax dollar that Ottawa collects. Every day this year we will spend $112 million servicing our national debt. That's $112 million dollars that could be going to tax cuts or health care," noted Robinson.

The CTF has advocated a legislated schedule of debt reduction for four consecutive years in it pre-budget submissions to the House of Commons Finance Committee.


Revenue Forecasts

The Finance Minister suggested that prudence in revenue projections is necessary in light of continuing international turmoil in Southeast Asia and Latin America.

"While prudence is wise, we think Mr. Martin is like the little boy in the village crying wolf once too often," said Robinson. "Mr. Martin's recent record of forecasting revenues is beginning to look like an exercise in deliberate manipulation. In the last two years alone, he has underestimated revenues by $21.3 billion. He's already off by another $5.5 billion this year, and the books aren't even closed yet."

"The October Economic Statement shows that our exports to Southeast Asia represent a mere 2.5% of our GDP and that our high concentration of trade with the U.S. has largely insulated us from the 'Asian Flu'," said Robinson. "Martin's prudence more and more smacks of playing with the numbers to diminish Canadians expectations of substantive tax relief."


Corporate Welfare

The budget announced an extra $50 million in annual funding for Industry Canada's Technology Partnerships Canada Program (TPC).

"It was our research last spring in exposing billions in unpaid corporate welfare loans which ensured that Industry Minister John Manley didn't get the $100 million in extra funding that he was after," said a contented Robinson. "But an extra $50 million annually for corporate welfare is still offensive and unacceptable. This wasteful spending stands in the way of meaningful tax reductions."



Health Care

The federal government will infuse $11.5 billion in cash transfers to the provinces for healthcare and over the next five years.

"We are encouraged that the federal government is responding to Canadian anxiety over healthcare," said Robinson. "But we must move past the more money equals better health care paradigm. The funding pillars of our Medicare system are crumbling under the weight of their own unfunded liability to the tune of $1.2 trillion."

"We need to have a national debate on what type of Medicare system we must build to respond to unprecedented demographic, technological and utilization stresses. It seems that the government's short-term priority for healthcare is tomorrow's editorial coverage and its idea of long-term thinking is the next election. This focus is very shortsighted," stressed Robinson.

"We need to look at healthcare over a longer time frame and engage Canadians in a rational debate on what mix of public and private service delivery will meet our needs and what levels of government will deliver various services. The experience of other industrialized countries around the world has shown that such a mix is not only desirable, but necessary, if we are too maintain exceptional healthcare into the 21st century," concluded Robinson.