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14 Tax Memo 1 (1957)

handle is hein.journals/taxmmo14 and id is 1 raw text is: TAX MEMO No. 14 July, 1957 PROSPECTS FOR A FLEMING BUDGET With a fall budget apparently in the cards the Minister of Finance of the new Conservative Government, the Hon. Donald M. Fleming, will be receiving advice from all quarters as to the means of simultane- ously increasing expenditures and reducing taxes. This advice will be well-meant and no doubt Mr. Fleming would like to act on it all; we question however that much of it will be based on an appreciation of the financial limitations within which he must manoeuvre. We have been attempting to assess these ourselves as objectively as we can from available evidence and at this point offer the results of our arithmetic for general guidance. The spring budget forecast a surplus of about $150 million and this figure still seems to be reasonably acceptable at the present time. While that amount is a relatively small surplus by recent standards it presents some problems in a budget being intro- duced late in the fiscal year. To increase welfare payments and reduce taxes suffi- ciently to absorb $150 million in half a fiscal year requires giving double that amount for a full year; in a quarter of a fiscal year it ?means giving four times that amount for a full year. The arithmetic that becomes most pertinent therefore is not that of the surplus that can be sacrificed in this year's budget but rather the annual level of expenditure increase and revenue reduction that this sacrifice may involve for the future. In this light the annual costs of certain proposals become extremely important. We give a wide selection of alternatives in this memorandum, but the full year cost for some of the changes that have been most frequently mentioned are as follows: Increasing the personal exemptions to $1,500 $440 to $475 million. income tax and $3,000- Increasing the old age security and old age assistance payments to $50 per month-about $44 million; to $55 per month-about $100 million. Minimum adjustments in federal-provin- cial tax sharing arrangements-about $100 million. When it is also pointed out that some $100 million of the cost of Mr. Harris's spring budget was rolled over to 1958-59 and that on the near horizon there also looms a new outlay of $150 million a year or more for hospital insurance, the necessity for taking a long view becomes obvious. Certainly there will be room in future budgets for tax reductions-perhaps a lot of room. But for this year Mr. Fleming might be well advised to approach his fall budget as though he had in sight only the peak of an iceberg, the main mass of which is sub- merged below the line of the next fiscal year. Additional copies of this Memo may be obtained on request. CANADIAN TAX FOUNDATION CANADIAN TAX FOUNDATION

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