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22 Tax Memo 1 (1960)

handle is hein.journals/taxmmo22 and id is 1 raw text is: TAX No. 22 MEMO February, 1960 FEDERAL BUDGET OUTLOOK -1960 More than the usual curiosity about prospects for tax increases or reductions surrounds this year's federal budget, which is expected to be brought down shortly before Easter. The big question is whether the swelling wave of economic growth, com- bined with last year's tax increases, will have carried the Minister of Finance to the safe shore of a balanced budget or whether it still leaves him in the deep waters of annual deficits. A supplementary question is what sort of an economic climate the budget will create for the coming fiscal year. With the federal government currently spending nearly one- fifth of the gross national product, its budget is now far more than a mere revenue and expenditure statement, providing as it does an important part of the framework within which the economy will operate for the next twelve months. In the following pages the Foundation makes its usual prognostication of federal revenues and expenditures in the current and coming fiscal years, in an effort to pro- vide a realistic anticipation of events. The Foundation has no inside information on proposed tax changes and must therefore base its forecasts on the assumption that the tax picture will remain unchanged. For the current fiscal year ending March 31, 1960, our estimate of budgetary revenues at $5.3 billion and budgetary expenditures at slightly under $5.7 billion will result in a deficit a little below the $.4 billion level predicted by the Minister of Finance in his budget speech last April. For the fiscal year 1960-61 revenues are expected to advance by some $550 million and expenditures by less than $200 million over our estimates for 1959-60. The Minister, therefore, has a good chance of at least breaking even in the coming year. These projections are based on a continuation of the 1959 rate of economic growth with gross national product rising by 6 to 7%. They include a normal allowance for additional expenditures not covered by the 1960-61 Main Estimates alreadytabled in Parliament. Corporation income tax collections are expected to increase by $230 million. Personal, income tax receipts will go up by $166 million and taxes on spending by $117 million, while other suurees of revenue will show moderate gains. Expenditure increases include $63 million for defence (after allow- ing for the amounts charged to the non- budgetary special accounts), $23 million for payments to the provinces and $16 million for family allowances. Indications are that the government will require less cash for its non-budgetary trans- actions than in the previous year, as direct housing loans will likely be down and other loans, investments and advances to crown corporations are also expected to be reduced. In addition, the Old Age Security Fund will have a surplus for the first time since it was instituted. In the following pages a more detailed analysis is presented. Additional copies of this Memo may be obtained at a price of 150. TAX FOUNDATION CANADIAN

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