2007 Federal Budget highlights

The 2007 Budget, delivered by Conservative Finance Minister Jim Flaherty, outlined a wide array of rebates and spending to appeal to a broad range of Canadians. Some measures could be viewed as widely popular, such as a $2,000 Universal Child Care Benefit and positive changes to Registered Education Savings Plans (RESPs), such as increased annual RESP grants from $400 to $500, elimination of the annual contribution limit and raising of the lifetime contribution limit from $42,000 to $50,000.

Among the more debated issues were provincial equalization payments, as well as the sheer magnitude of spending, nearly $200 billion in 2007-2008, representing a 5.6% increase. The Federal Budget was devoid of any major headlines, such as the much-rumoured spousal income splitting or reduction of capital gains taxation, and was broadly seen as a budget to defend the current minority government's position against a non-confidence vote that would prompt a spring election.

Tax benefits for older Canadians include a two-year extension of the age at which Registered Retirement Savings Plans (RRSPs) must be converted to Registered Retirement Income Funds (RRIFs), from 69 to 71, in addition to pension-splitting measures to reduce the aggregate tax bill between spouses. Additional consideration is being afforded to older Canadians who choose to continue working part-time while simultaneously drawing upon pension income. Environmental issues motivated a "gas guzzler" levy against less fuel-efficient vehicles, with an up to $2,000 credit being paid to purchasers of efficient hybrid vehicles, and an additional $16 billion over the next seven years earmarked for infrastructure, roads, and public transit development.

It was definitely a "family budget", favouring spending over tax cuts, with big businesses conspicuously absent from the list of beneficiaries. Mr. Flaherty also committed to funding future tax cuts with interest savings realized as a result of the $9.2 billion assigned to debt reduction in the coming year. Companies involved in developing the Alberta oilsands face the elimination of existing tax credits in 2010, while the financial sector vocalized their disappointment over the lack of a broad cut in capital gains taxation. Elimination of the capital gains taxes owing on donations of publicly listed shares however, was extended to include private foundations, as well as an increase in lifetime capital gains exemption from $500,000 to $750,000 for farmers, fishers, and small-business owners.

While the budget has yet to be voted on, the Bloc has given their support to the Conservative budget, ensuring sufficient votes to ward off a non-confidence motion despite the rejection of the budget by both the NDP and Liberal parties. It remains to be seen if the Conservative government will exercise its right to call an election even if the budget passes.