Goodale budget delivers billions in new spending and tax cuts

Last Updated: Friday, February 25, 2005 | 11:31 AM ET

CBC News

Finance Minister Ralph Goodale delivered a broad-ranging and balanced budget Wednesday, including almost $13 billion for the military, $5 billion for a national child-care program and another $5 billion for the country's cities.

The budget also accounts for billions of dollars promised to the provinces and territories in two agreements signed in the fall: the $41.3-billion health care deal, and the $33.4-billion agreement on equalization payments.

With all the money going to those two programs this year and next, the government is still predicting surpluses for those years, but it says those surpluses will be modest.

Ralph Goodale and Paul Martin make their way to present the federal budget.

And given an ambitious social agenda, Goodale has turned to a five-year framework, something Paul Martin avoided when he was finance minister, because there is so much uncertainty in forecasting so far ahead, said TD Bank economist Don Drummond.

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While the five-year approach provides an amount of certainty to Canadians, Drummond said it "ups the risk quotient" politically if the government isn't able to deliver.

Ralph Goodale presents the federal budget.

Political scientist Antonia Maioni sees the budget as moving ahead on Liberal promises – the budget is sub-titled "Delivering on Commitments" – and reaches out to the constituencies of the opposition parties.

"It's not an arrogant budget. It's a minority government budget," she said.

Goodale threw out a few surprises aimed at taking the wind out of opposition criticisms.

Chief among them, a number of tax measures for both personal and corporate income.

Businesses in Canada received notice that their taxes would be cut, although not for another three years. The finance minister pledged to reduce the general corporate tax rate from the current 21 per cent to 20.5 per cent in 2008, 20 per cent in 2009 and 19 per cent by 2010.

Goodale's plan also calls for the basic personal exemption on income to rise to $10,000 by 2009. The deduction level for 2004 is $8,012.

"When fully implemented, this measure will remove from the tax rolls more than 860,000 of Canada's lowest-income taxpayers," Goodale said in his budget address.

Goodale also delivered on a promise to bolster Canada's military with 5,000 regular troops and 3,000 reservists. In all, the budget outlines $12.8 billion for the military over five years, including $2.76 billion for equipment such as helicopters, trucks and utility aircraft.

And a week after the Kyoto Protocol came into effect, Goodale promised $5 billion over five years, $3 billion of which is new, and $1 billion is directed at projects to reduce greenhouse gas emissions.

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The Liberals present the 2005 budget as a balanced one, but built into it is something they call an underlying surplus – made up of a $3-billion contingency fund and $1 billion for "economic prudence."

If the $3 billion contingency reserve remains unspent, it automatically goes toward paying down the national debt, which stands at just over $501 billion.

TYPICAL TAX SAVINGS	2006	2007	2008	2009
Single income earner	$16	$32	$96	$192*
Family: One income earner, one dependent spouse	$29.60	$59.20	$177.60	$355.20*
Family: Two income earners	$32	$64	$192	$384*
*at least