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35 Tax Memo 1 (1964)

handle is hein.journals/taxmmo35 and id is 1 raw text is: TAX MEMO No.35 February, 1964 FEDERAL BUDGET OUTLOOK-1964 In its annual budget forecast the Founda- tion attempts to outline the contours of the fiscal landscape for the coming year. Revenue prospects are estimated by applying present tax rates to the anticipated national product, and no attempt is made to predict any tax changes which the budget might contain. Expenditure estimates include an assessment of trends in government spending on current programs but no assumptions about new programs are made unless they have been officially announced in the Speech from the Throne or elsewhere. The strong fourth quarter of 1963 and the very good first quarter which we are now en- joying appear to have pushed revenues for the current fiscal year up to or a little beyond the level anticipated by the Minister of Finance last June. Expenditures, on the other hand, do not seem to be running at quite the rate he anticipated, and as a result, the deficit for the year ending March 31 may be about $100 mil- lion less than the $653 million indicated after the dust of all the budget revisions had settled. For the 1964-65 year, a number of un- usual factors will contribute to one of the largest revenue increases in history - over $500 million. It is unlikely that all of these factors will recur again in the same year. Close to $170 million of the gain will come from the accelera- tion of the corporation income tax payment schedule. Over $150 million extra is expected from the sales tax - largely the result of ex- tending it last year to building materials and iachinery and doubling the rate on them to 8% on April 1 this year. Almost $150 million more is also anticipated from the personal in- come tax due to higher employment and labour income. And a gain of about $40 million is looked for in customs duties as imports are ex- pected to recover from the surcharge set-back and will likely rise with the increase in personal income. In addition all revenue sources will benefit from the continuing overall growth in the national product. Since the Main Estimates for the coming year had not been tabled at time of going to press, little is known about the general shape of government programs for 1964-65. How- ever, if the increase in expenditures is kept to a normal growth rate of about $250 million, the budgetary deficit could shrink to less than $300 million. If expenditures reach the upper level envisaged in this forecast, the deficit could run slightly over $400 million - still substantially below the level of the last three years. It is estimated that expenditures, even at the lower level, will break the $7 billion barrier in 1964-65. The Old Age Security fund, which is out- side the budgetary accounts, is expected to show a small surplus in the coming year despite the pension increase. This will be due to the extra 1 % tax on personal income for the pen- sion scheme and to the accelerated corporation tax collections. Indications are that the government's over- all cash needs may be lower than in the current fiscal year. A more detailed analysis follows. Additional copies of the Memo may be obtained at a price of 254. © 1964, Canadian Tam Foundation CANADIAN TAX FOUNDATION

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