Jack Mintz on Budget 2007

In yesterday’s Financial Post, Jack Mintz repeated the notions that the Budget featured “no broad tax relief” and big spending.

He wrote, “Certainly, the idea of making the tax structure more efficient, fair and simple takes a back seat to the rash of special politically driven measures.” However, the tax measures that Mintz specifically endorses – the Child Tax Credit, the WITB, and the RRSP extension – will cost $2.1 billion in 2007-08. By contrast, the measures that he identifies as “politically driven” – the transit-pass credit, increased capital-gains exemption, Olympic tax exemptions, meal-expense deduction for truckers, and convention/tour incentives – will cost a grand total of $0.1 billion during that year. In dollar terms, the “politically driven measures” clearly took “a back seat” to the measures supported by Mintz.

He then writes, “It is ironic that this government, which professed its desire to quit using subsidies for various industries, has decided the winners are Central Canada’s manufacturing . . . Meanwhile, Alberta’s prosperous oil and gas industry takes a hit as oilsands lose their coveted accelerated cost deduction for investment.”

The facts are as follows: Budget 2007 provides manufacturing, which has lost 250,000 jobs since 2002 and clearly needs help, with a 50% Capital Cost Allowance for 2007 and 2008. For the oil sands, which clearly do not need help, it continues the 100% Capital Cost Allowance for 2007, 2008, 2009 and 2010. It is difficult to see how manufacturers are “the winners” in relation to the oil sands.

One might expect Mintz, a strong advocate of tax neutrality, to call for a faster phase-out of this oil-sands subsidy rather than describing the painfully slow phase-out in Budget 2007 as a “tax hit”.

UPDATE (May 16): I missed it at the time, but the Financial Post printed the following letter from me on March 31:

Not so neutral
Saturday, March 31, 2007
Page: FP15
Section: FP Comment
Byline: Erin Weir

Re: Mess in the Making, Jack Mintz, March 21

Jack Mintz writes that the federal government “has decided the winners are Central Canada’s manufacturing … Meanwhile, Alberta’s prosperous oil and gas industry takes a hit as oilsands lose their coveted accelerated cost deduction for investment.”

The budget provides manufacturing, which has lost 250,000 jobs since 2002 and needs investment, with a 50% Capital Cost Allowance (CCA) through 2008. For the oilsands, which do not need government assistance, the budget continues the 100% CCA through 2010.

Manufacturers are not “the winners” in relation to the oilsands. One might expect Mr. Mintz, an advocate of tax neutrality, to call for a faster elimination of this oilsands subsidy rather than describing the budget’s sluggish phaseout as a “tax hit.”

Erin Weir, economist, Canadian Labour Congress, Ottawa