Many of the measures in Tuesday's budget came as no surprise — they had been laid out in a series of government announcements in preceding days. But a few provisions may raise eyebrows.
For instance, if the budget passes in the House of Commons, first-time homebuyers would be allowed to withdraw up to $25,000 from their Registered Retirement Savings Plans to put towards a down payment. That's up from $20,000. The withdrawal would be tax free if repaid within 15 years.
Another surprise: a search of the 360-page budget document does not turn up a single mention of the word "military." But it is full of "action." That word turns up 300 times. "Tax" (1,031 times) is another popular word, as is "spending" (133 times). The combination of "tax," and "relief" or "reduction" comes up a total of 184 times.
Among the budget's key provisions are:
The return of the deficit: As expected, the federal government anticipates it would run a deficit of $33.7 billion in the fiscal year beginning April 1. The government also acknowledges that for the current fiscal year, the books would be in the red to the tune of $1.1 billion. Deficits are expected to total $84.9 billion through 2012-13. A surplus of $700 million is expected the following year.
Personal tax reductions: $20 billion in personal income tax reductions, including an increase in the basic personal exemption to $10,320 from $9,600. As well, you would stay in the lowest tax bracket (15 per cent) if you made $40,726 this year. It used to take $37,885 to trigger a jump into the next (22 per cent) tax bracket. The upper limit of that bracket would be increased by 7.5 per cent to $81,452. A single person earning $40,000 would save $115 from measures announced in this budget. A one-income family with two children earning $40,000 would save $148.
Business tax changes: There would be a 100 per cent capital cost allowance (CCA) rate for computers bought for your business between Jan. 27, 2009, and Feb. 1, 2011. Tariffs on a range of machinery and equipment would be eliminated, saving an estimated $440 million over five years, and the temporary 50 per cent straight-line accelerated CCA rate would be extended to investment in manufacturing or processing machinery and equipment over the next two years. As of Jan. 1, the first $500,000 of small business income will be eligible for the reduced federal tax rate of 11 per cent. That's up from $400,000.
Seniors: The Age Credit amount would increase by $1,000, resulting in tax savings of $150 a year for eligible low- and middle-income seniors. If the value of your RRSP or RRIF declines after you die but before your estate is distributed to your beneficiaries, the amount of post-death decreases in value of the RRSP or RRIF would be carried back and deducted against the year-of-death RRSP/RRIF income inclusion. The government previously only looked at whether your RRSP or RRIF increased in value. There were no provisions to deal with a decrease in value, which would lead to less tax payable.
Employment insurance: EI premiums would be frozen for two years. For the next two years, EI benefits would be allowed five more weeks to a maximum of 50 weeks. However, there would be no changes to rules governing who is eligible for benefits. Those rules vary across the country. There would be a $1-billion fund for training programs administered through EI. You wouldn't necessarily have to be on EI to qualify.
More training: The budget would provide $500 million over two years for a Strategic Training and Transition Fund for people who do not qualify for EI training, including the self-employed. There would be $60 million to retrain older workers, $100 million over three years for the Aboriginal Skills and Employment Partnership, and $75 million for a two-year Aboriginal Skills and Training Strategic Investment Fund.
Housing: The budget includes $7.8 billion for housing construction and renovation. First-time buyers would be eligible for $750 in tax relief after closing a deal. If you already own a house, you could qualify for a tax credit of up to $1,350 for eligible home renovations and alterations. Previously announced measures include $1 billion for renovations and energy retrofits for social housing, $400 million to build housing for low-income seniors, $75 million to build social housing for persons with disabilities, $200 million to support social housing in the North and $2 billion in low-cost loans to municipalities to improve housing-related infrastructure, such as sewers, water lines and neighbourhood regeneration projects.
Infrastructure: Much of the spending in infrastructure has already been announced. The government says it would provide $12 billion in infrastructure funding over the next two years, including:
- $4 billion for an Infrastructure Stimulus Fund that would help provinces, territories and municipalities in their infrastructure projects. The federal government would pay half the cost of a project if construction begins this year or next.
- $515 million over two years for "ready to go" First Nations projects in three priority areas: schools, water and critical community services.
- $1 billion over five years for a Green Infrastructure Fund to support projects such as sustainable energy.
- $407 million for Via Rail Canada to improve services, especially in the Montreal-Ottawa-Toronto corridor.
Science and technology: The Canada Space Agency would get $110 million over three years to support the development of advanced robotics and other space technologies. The budget calls for $87 million to maintain or upgrade key Arctic research facilities. There would also be $225 million over three years to develop and implement a strategy on extending broadband coverage to underserved communities. Waterloo's Institute for Quantum Computing would receive $50 million to build a new research facility.
The environment: While details are scarce, the government says it would set up a new Clean Energy Fund to support clean energy research development and demonstration projects, including carbon capture and storage. It doesn't say how much money would be in the fund. It would also set aside $10 million to improve the way it reports on key environmental indicators such as clean air, clean water and greenhouse gas emissions.
Nuclear energy: The budget would give $351 million to Atomic Energy of Canada Limited to "maintain safe and reliable operations" at its Chalk River, Ont., facility and help in the development of the Advanced Candu Reactor.
Arts, culture and sport: The budget would set aside $60 million to support infrastructure-related costs for local and community cultural and heritage institutions such as local theatres, small museums and libraries. There would also be $30 million for Canadian magazines and community newspapers. The Canadian Television Fund would receive $200 million over the next two years to develop Canadian programming. The budget increases funding for Special Olympics Canada to $1.5 million.
Total stimulus: The government would provide a total of just under $40 billion in economic stimulus over the next two years — or 1.5 per cent of GDP in 2009/10 and 1.1 per cent in 2010/11. It is relying on the economy to begin improving by 2010, so its revenues increase and deficits decrease.