When Finance Minister Jim Flaherty delivers the Conservative government's first budget on Tuesday will he give tax relief with one hand by cutting the GST only to take it away with the other by raising income taxes If so, Mr. Flaherty's budget work will receive a failing grade from taxpayers.

Cutting the GST remains the centerpiece of the new government's tax agenda. The Conservative Party campaigned to cut the GST by one point this year and another point by 2010. Less significant are an assortment of targeted tax relief measures - unveiled over the course of the winter election campaign - that will benefit some, but not all taxpayers. The vast majority of Canadians will welcome a lower GST, as will those fortunate to benefit from the various tax credits on offer.

The other piece of the government's tax plan is less pleasant. Without much fanfare, the Conservatives have said they will repeal income tax breaks announced by the Liberal government last November to fund a lower GST. Should this happen, taxpayers will see Ottawa's lowest tax bracket rate, which is currently set at 15 per cent, increase by one point to 16 per cent. In addition, the basic personal exemption - the level of income taxpayers can earn tax-free - might drop by as much as $700.

Should the Conservative government do the unthinkable and increase taxes on Tuesday, Mr. Flaherty will likely insist that "on average taxpayers are better off." Because the budget is expected to provide a $1,200 per child daycare allowance to families with children under the age of six, he might well be correct. But it is also true that millions of taxpayers without young children will pay more tax in 2006.

The one-point GST cut will return $4.5-billion to Canada's 27 million consumers every year. The lower income taxes measures currently in place are worth the same amount. Only 15.5 million Canadians pay income tax, which means the vast majority of income taxpayers will lose. The average taxpayer, earning $36,000 or more a year, will pay an additional $359 in income tax.

The net impact of cancelling income tax cuts and lowering the GST on Ottawa's cash flow is neutral, but the same is not true for individual taxpayers. Virtually every Canadian with an annual income between $10,000 and $85,000 and who does not qualify for the childcare payment will be better off financially with the Liberal income-tax breaks than with a one point GST cut and promised targeted measures. Even two-earner families with a combined income of $100,000 can expect to pay more tax overall.

It is not clear why the Conservatives are playing this shell game. Particularly since it risks reinforcing the perception among the middle class that the federal government is unwilling to give working Canadians an honest break. Taxpayers are not likely to be duped into applauding a one point GST cut that is offset by a one point income tax hike.

There is no reason for any tax to be increased on budget day. Ottawa is currently running multi-year and multi-billion dollars surpluses. A surplus is a fancy word for over-taxation. It is estimated the federal government will collect $12-billion more in taxes this year than it will spend. That money should be returned to Canadians. A lower GST combined with lower income taxes will go a long way towards accomplishing this goal. Taxpayers hope Mr. Flaherty shows a bit of common sense on budget day.