If you prefer to sneak a peak at your Christmas presents early; the recent mini-budget will be to your liking. After baby steps for years, the federal government finally offered Canadians tax cuts that will be visible come January. Three tax brackets will have their rates cut, the highest rate will kick in at $100,000 as opposed to $60,000, and the deficit surtax is history.

There is a one-time fuel tax rebate cheque for low and middle-income families and the capital gains inclusion rates are down. In addition, child tax benefits have increased. All in all, a good product for Federal Finance Minister Paul Martin to sell in an election. To be fair to the other side of the aisle, Martin did raises taxes significantly during the first Liberal government and added a Canada Pension plan tax hike of $48 billion. And the Alliance deserves credit for pushing the Liberals in this direction.

In terms of BC, taxpayers here should know that automatic provincial tax relief will not occur. Provincial tax rates used to "piggyback" on top of federal ones. Previously, if federal rates went up so too did provincial taxes. Now that federal tax rates are headed south, provincial taxes will not automatically be cut. Why Because the provincial government purposely cut that link earlier this year. As a result, provincial tax reductions are now the sole prerogative of Victoria, the exact opposite of what occurred for years in the other direction.

What it means is this: Had British Columbia remained linked with Ottawa's tax system, the latest federal moves would have also chopped provincial personal income taxes by $252 million this year, not just the $193 million the provincial Finance Minister announced this past March. The tax cut loss to taxpayers is thus $59 million.*

Next year, BC predicted that its 2000 and 2001 personal tax cuts would be worth $358 million. That is dwarfed by what provincial taxpayers would have received had provincial taxes remained linked with Ottawa: $618 million - a $260 million difference. The gap grows larger with time: The federal tax cuts announced this year would have been worth (in foregone provincial taxes) $737 million in 2003, $867 million in 2004, and $1.06 billion in 2005. Any guesses on why BC's NDP government scrambled to cut the link with Ottawa

What does this mean for individuals Looking at just next year, a two-income family of four earning $60,000 will get a federal tax break of $1,532 due to federal reductions announced in 2000. Even after the provincial tax cut is figured in, that family would have had an additional $321 provincial tax cut under the old system. A single parent earning $40,000 with one child, (after the already announced provincial tax cut) would have been $153 better off under the old system.

There were good reasons for provincial governments to de-link from federal tax calculations before this year; bracket creep taxes meant automatic federal and provincial tax hikes. For that very reason, only Alberta planned to cut the link and precisely because of such automatic tax hikes.

But after Ottawa killed bracket creep and it became clear that federal taxes were headed down, many provinces (including BC) scrambled to cut the link to avoid automatic provincial tax cuts. Taxpayers won an important federal battle on taxes recently; but their own provincial government prevented the tax relief from being deeper, including for low-income taxpayers.