Finance Minister Jim Flaherty is rightly sticking to a plan to cut corporate taxes in January, despite threats from opposition parties to bring down the minority Conservative government.
Flaherty’s resolve is getting support in the Montreal business and economic community, where lower corporate taxes are seen as a key to reigniting private investment.
[…]The mobility of capital has been accelerating since the 1990s and corporate taxes can be a big factor in the decision-making process for foreign and local investors.
The tax cut scheduled for Jan. 1 would lower the federal corporate rate to 16.5 per cent from 18. A further reduction to 15 per cent is set for 2012, which would put Canada at the top of the class among G7 economies.
[…]The opposition parties would rather see the money go to deficit reduction or to social programs that would help Canadians get through the difficult economy.
Flaherty, on the other hand, wants Canada to have the lowest corporate tax rate of any major industrialized nation. His goal is to see the combined federal and provincial rate fall to 25 per cent from the current 28 per cent.
“This is important. This is a competitive advantage for our country,” Flaherty said in a speech last month. In 2007, when the Conservatives first announced the plan, the federal business tax rate was a little over 22 per cent.
He sees a low rate as way to “brand Canada” in the global marketplace. It’s “an incredible advantage at a time when other countries are in the position where they will have very little choice but to increase their taxes of all kinds.”
Our corporate tax rate is the highest in the world at 35%. And the Democrats like it to be the highest – because they like to tax “the rich”. That’s why our companies are shipping jobs overseas, where tax rates are lower. And why the Canadian unemployment rate is far lower than ours.
But wait! There’s more!
According to the Vancouver Sun, he has even more conservative plans.
Finance Minister Jim Flaherty is looking at a variety of ways to encourage Canadian households to trim their record-high debt levels, including a tightening of the rules on the lines of credit that people can take out against their homes.
[…]Bank of Canada governor Mark Carney recently warned the debt binge has made consumers more vulnerable to unexpected shocks, and advised them to be more prudent.Echoing the message of thrift, Flaherty said the government continues to closely monitor the housing market, and is prepared to intervene again if necessary.
“We continue to watch carefully. If we need to tighten that market up more, we will,” the finance minister said. “A lot of this demand is because of very low interest rates, so it’s not surprising that some people are taking advantage of that. We want to encourage thrift. We want to encourage people in the residential mortgage world to not buy more house than they can afford.”
Since the height of the U.S. subprime mortgage crisis in 2008, the Finance Department has twice raised the standards by which homebuyers qualify for government-backed mortgages. For example, the government has raised the minimum down payment required to qualify for such mortgages, and limited the amount of cash that homeowners can free up by refinancing their mortgages.
Flaherty said any tweaks would likely be along the same lines of what the government has already done. But he said he’s concerned by the popularity of so-called home-equity lines of credit, which allow people to borrow money from their mortgage lender using their home as collateral. All of Canada’s biggest banks offer such loans, often with flexible repayment terms.
“There’s one other area that concerns me, and that is the home-equity loan market, which has grown significantly,” said Flaherty, who added that the government hasn’t decided if it will take further action on mortgage rules.
The market for home-equity loans, which critics have likened to using one’s home as an ATM, exploded in the run-up to the U.S. housing-market collapse. Eventually, lenders curtailed their offerings of such loans, but not before the market’s value mushroomed to $1.1 trillion U.S..
The Conservative Party of Canada is all about creating incentives for citizens to save their money.
Look at these amazing tax-free savings accounts that the Conservatives invented.
TFSAs, TPSPs and RLSPs all resemble the Roth IRAs in the United States, although Roth IRAs are more focused on retirement and have more constraints and penalties imposed on early withdrawals.
Canada’s new TFSA is flexible enough for consumption and retirement. Having paid income tax to earn a certain sum in the first place, any net proceeds placed in the TFSA will be totally tax free from that point on.
So interest income will compound tax-free, while capital gains or dividends generated by stocks are also tax-free. When withdrawn from the plan, the full nest egg is available tax-free. Plus, the withdrawal frees up a comparable amount of new contribution room. As the budget puts it, there is “full flexibility to withdraw and recontribute.”
The TFSA is designed to help Canadians save for serial short-term consumption goals like automobiles, vacations or home renovations. But it can also be used to save up for a down payment on a home or for education.
[…]Unlike RRSPs, which must be collapsed after age 71, there is no age limit for contributing to a TFSA. Unused contribution room is carried forward indefinitely.
[…]High-income investors can use the TFSA to shelter highly taxed interest income or foreign dividends, which are otherwise taxed at the top marginal tax rate.
Conservatives want people to have jobs, earn money, and save money. Liberals want people to not have jobs, borrow money, and then depend on government bailouts and handouts.
One last quick thing about James Flaherty. He is a social conservative and a vocal opponent of abortion.