I have now had time to read the draft legislation Bill C-67 which would implement what an official called a federal economic "dividend" a week or so ago.
Once it gets royal assent it will be known as the Unanticipated Surpluses Act (USA). I don't think there are any real surprises in the Bill other than the mnemonic, USA - is there hidden meaning here, likely not?
The draft legislation does establish a sort of order or ranking for using the extra federal cash:
- tax relief,
- program spending, and
- debt reduction.
In effect the order doesn't really matter once an unanticipated surplus has been established since each of the items will be apportioned 1/3 of it.
But nice to see that, at least in spirited, the Finance Department has put income taxes at the top of the list for relief because of their questionable fiscal forecasting.
Again, another speculation, is this a Freudian split by officials or just a bad joke.
Oh, forgot to mention, "unanticipated" is defined to mean anything over $3 billion.
The background information that accompanied the new legislation indicated that the tax relief would come in the form of an income tax credit.
In effect your basic personal tax credit and/or the credit you may use for a spouse or dependent person will be bumped up (the first 2 of the non-refundable tax credits on the personal income tax form).
But since no one knows whether there will actually be an unanticipated surplus in any year the people at the Canada Revenue Agency will do the arithmetic for you after you file your 2006 tax form. Most people file sometime after the end of February once they have all their T4s and T4As etc.
Since the major 1987 income tax reform, basic deductions have been actually non-refundable tax credits. Structuring the old deductions as credits was a significant improvement and meant they are now worth the same dollar amount to any taxpayer regardless of that individual's taxable income. Why are they worth the same? Because to find the actual value of those relatively large numbers that may appear on your income tax form you multiply them by 16% the lowest marginal tax rate or tax bracket.
Whatever, eh.
The fact that the portion of unanticipated surplus will be returned to taxpayers on such an equal basis also means, as I had speculated on earlier, maybe not a new program but a slight of hand to redistribute income. You do have at least to have actually paid income taxes in the previous year to get some of that unanticipated surplus.
I actually have no problem with government's dealing with the income distribution matters. I'm glad we in this country seem to handle this important aspect of public finance in a generally sensible way. I like living in a strong social democracy and have no problems with our sensible and generally humane income tax system.
I just like things upfront.
I think, though I'm reluctant to use the term because it is overused, accountability matters.
The USA meddles with too many of our basic Canadian principles to be taken seriously. It is a cynical piece of legislation proposed by, it seems, a party that has lost its way.
And, if you are actually holding your breath, waiting for a refund on your 2006 income taxes that you will actually get in 2007, you are as dumb as a bag of hammers.
If the unanticipated surplus is $3 billion in September 2006.
That means the actual surplus is $6 billion.
Then there is $1 billion to be allocated to income tax relief - 1/3 X ($6 billion - $3 billion) = $1 Billion.
Given the legislation requires you were taxable - i.e. really paid some money that the federal government found to be an unanticipated surplus - there are about 15.5 million of us that pay federal income taxes give or take some.
Hey, the rule-of-thumb seems to be:
for every $1 billion
$1,000,000,000 / 15,500,000
you get
= $64.52
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