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1 Tax Memo 1 (1954)

handle is hein.journals/taxmmo1 and id is 1 raw text is: TAX MEMO No. 1 February, 1954 THE FEDERAL BUDGET OUTLOOK The recent presentation to Parliament of the Federal government spending pro- gramme for 1954-55 (Main Estimates, Feb. 5) has confirmed earlier evidence of a tightening budget position. Detailed study of both revenue and expenditure expecta- tions by the Foundation staff indicates an approaching position of approximate bal- ance, with minor deficits a possibility. The day of big surpluses is gone, and with it, at least for the meantime, has gone the hope of any substantial tax relief. It now looks as though even the year ending March 31, 1954 (the current year), will barely show a favourable balance; it could show a deficit. Our present estimate of revenues is $4,405 million and of expendi- ture $4,429 million, and on this basis, there would be a deficit of $24 million. Controllable items will probably be adjusted to avoid this result, but it will be close. For the new year which commences April 1st our revenue forecast is $4,505 million, while expenditures, as indicated by the Estimates, are forecast at $4,525 million; on this basis the result would be a $20 million deficit. These projections assume only a moderate increase in gross national product-less than in recent years. A feature of defence financing which will relieve the budget in the future is the Defence Equipment Replacement Account. This fund may amount to as much as $300 million to be drawn down for Canadian defence outlays without further budgetary appropriations. About $100 million of the fund will be so used in the new year. On the other hand, any attempt to reduce the growing deficit in the Old Age Security Fund by earmarking a greater share of existing tax sources for this purpose will be an offsetting factor. This deficit will be about $150 million at March 31, 1954, and will increase by a further $60 million in the next year on the present basis. Any remaining doubt as to the possibility of major tax revisions is effectively dissi- pated by estimates of the revenue loss from an assortment of popular changes. Only very minor adjustments appear to be feasible. The above outline presents in summary form the principal conclusions of the detailed examination of the federal budget outlook made in the following pages. This is the first of a series of releases which will deal with subjects of timely interest as they arise. TAX FOUNDATION CANADIAN

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