Federal Budget Delivers Fiscal Balance, Lower Personal and Small Business Taxes

As promised, yesterday’s federal budget – the first introduced by finance minister, Joe Oliver and the last before the upcoming federal election campaign – restored fiscal balance to the government’s books. In fact, it generated a modest surplus, contained a series of personal tax goodies, lowers taxes on small business and sets the stage for increased future spending on transit infrastructure.

For companies that qualify as small businesses, the budget pledged a 2 percentage point reduction in the small business corporate tax reduction by 2019, phased in through .5% increments each year over the next four years to bring the rate from the current 11% to 9%.

Canada’s largest cities stand to be big winners in the infrastructure sweepstakes with the creation of a new Public Transit Fund which will be introduced in the 2017-19 fiscal year with $250 million allocated, before moving to $500 million in 2018-2019 and then increasing to $1 billion a year thereafter.

According to the budget documents, the criteria for the transit funding will include improvements to the mobility of both goods and people. No doubt this relies on the assumption that enough people will actually get out of their cars and take transit for congestion to be alleviated – reasonable in theory but it remains to be seen whether it will actually have the desired impact.

There was no corresponding commitment, for example, to dedicating revenues generated from the federal excise tax on diesel fuel to a national highway trust fund. Another initiative outlined the budget, the Canada 150 Community Infrastructure Program, which will kick-in in 2017 may provide some support for roads, but details remain sparse at this time.

It is CTA’s long-standing position that excise taxes are an archaic and regressive form of taxing business inputs and should be rolled into the GST/HST. But so long as the excise tax remains CTA believes it should be used for highway infrastructure investment and to accelerate investment technologies required to meet federal fuel consumption/GHG reduction standards for heavy trucks.

There were no other budget measures specifically related to trucking although it might be argued that to the extent tax breaks for manufacturers generate growth in that sector, some truckers may benefit indirectly in terms of higher freight volumes.

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