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October 20, 2015 8:41 am

Updated: October 20, 2015 1:08 pm

5 things Canadian consumers should know about a Liberal majority

jamiesturgeon1.jpg?quality=60&strip=all& By Jamie Sturgeon Consumer Affairs Reporter Global News

A surprise majority will give the Liberal party a clear runway to implement its electoral promises, a platform aimed squarely at easing financial burdens on middle-income households while attempting to trigger higher economic growth through government spending. Something that should benefit all, in theory.

Here’s five things to know about how a Liberal majority will steer the economy and reshape the personal finances of households:

Picks and shovels

Laid off oil-and-gas workers could soon find work building bridges and other state-financed projects.

“By far the most important thrust of the Liberal platform … is the proposal to boost the budget deficit to up to $10 billion annually over the next three years,” BMO economists said Tuesday morning.

The Grits plan to spend billions on infrastructure projects over the next three years, doling out $5 billion next year and 2017, respectively, and another $6 billion in year three. Experts say more detail is needed on what projects the deficit spending will target, but the consensus is that it will spark growth through new jobs, spending and related spin-off effects.

“Several elements of the Liberal platform are moderately constructive to growth over time,” Scotiabank economists said.

Armed with a majority, it’s expected that infrastructure spending will kick in with the next budget early next year and start delivering a boost to growth through 2016. Growth could climb as much as half a percentage point next year, BMO predicts, to 2.5 per cent from the current estimate of 2.0 per cent.

Household borrowing

Ottawa’s economic jolt could even help drain momentum out of an increasingly worrisome borrowing boom among households, BMO suggested.

“A firmer underlying GDP growth rate, even if it does prove temporary, would at the margin reduce the chances of further Bank of Canada rate cuts, and indeed could even bring the first rate hike somewhat closer,” BMO said.

MORE: Cash crunch ‘inevitable’ for Canadian households deep in debt

Middle-income tax cut

For many, a tax break looms. For some, a hike awaits. Trudeau’s second biggest economic plank is a broad cut in the federal income tax rate for middle earners.

Those making between $45,000 and $89,000 annually will see their federal rate drop two percentage points to 20 per cent.

That cut will be funded by a higher rate for the country’s highest earners. Those earning north of $200,000 will see their federal tax rate move to 33 per cent from the current 29 per cent.

This would bring the effective tax rate, including provincial rates, to between 43 per cent and 58.75 per cent for high income earners, depending on the province. New Brunswick would have the highest taxes in the country, while Nova Scotia, Quebec and Ontario would have effective tax rates north of 50 per cent for the highest earners, TD said.

MORE: Here’s what Trudeau promised and what he’ll face as PM

Personal finance implications

The Liberal platform is promising a plethora of tweaks and changes in household finances aimed at shoring up the balance sheets of middle-income households across the age spectrum.

The Canada Pension Plan will see “enhancements,” but “specifics on how this revamp would work have not yet been released,” TD’s economists said.

Annual limits on Tax-Free Savings Accounts meanwhile, will remain at $5,500, the Conservative plan to increase limits to $10,000 being scrapped. Raising limits was largely panned by critics as benefitting higher earners and retirees.

One of Trudeau’s most ambitious – and costly – promises is a Canada Child Benefit that replaces the newly boosted Universal Child Care Benefit with one that’s means-tested against income. Families with young kids with combined income of below $150,000 will qualify for the new child benefit program. Families earning more than that will see their current benefit cheques halted when the new program kicks in.

Income splitting – another Conservative budgetary item labelled as largely benefiting higher earners– will be phased out for families, though pensioners will still be able to shift income from one spouse to the other to help lower tax bills.

Finally, eligibility for Old Age Security cheques will be rolled back to 65 from 67.

Dollar impact

For snowbirds, travellers or anyone else who has seen their foreign purchasing power slide sharply over the past two years, the election holds implications for the dollar too. But don’t get too excited.

Experts say Ottawa’s stimulus agenda could boost the loonie as the economy gears up. But there is still reason for caution on the currency’s outlook:

The U.S. dollar will remain strong, keeping a lid on the value of the Canadian dollar; oil prices remain an “x” factor and could move lower still; while the fiscal stimulus is generally viewed negatively by foreign-exchange circles because it’s coming at the cost of deficits, as is the Liberals plan to tax more.

But so far, market reaction is muted.

“The C$ has barely moved,” Scotiabank economists said.

“The uncertainty stemming from a minority government has been avoided, and markets will begin to digest the new government once the budget is released,” Rahim Madhavji, president at Toronto-based Knightsbridge Foreign Exchange said.

“In the end, the markets seem to be ok with Trudeaumania and his fiscal plan (for now).”

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Guest tailwheel

Here is my. My prediction for your hard earned tax money. Trudeau is looking to spend it and guess where it is going to go. A tunnel for the Gardiner Expressway. they will tell you X billions of dollars. And when the cost overruns are complete, it will be a massive cost overrun just like Boston and Seattle.

3 billion became 22 billion.....

Your money(but just a prediction for now)

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This will be the most interesting "Promise" to follow in that he must fill the 20+ seats in the Senate to ensure his bills pass though and then of course will he make up with the current deposed former Liberal Senators?​

Electoral reform and Senate

Trudeau said he would introduce electoral reform legislation within 18 months of forming government. He said the legislation would be based on the recommendations of a special, all-party parliamentary committee. One of the committee’s biggest tasks would be to consider doing away with the first-past-the-post electoral system in time for the next federal election.

He also promised to bring a merit-based appointment process for the Senate, and end the partisan nature of the Upper Chamber.

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Is the media at fault, or are they being directed by the NDP to rally against those they consider wealthy? I have to ask why those that have worked hard to achieve something in their lives are being punished by taxation policy for doing so?

It’s easy to be envious, but when I went to school I was told to pay attention and work hard if I hoped to make a good life for myself. In the meantime, the idiots were quitting as early as Grade 10 because Ford was paying $4.00 an hour and working meant a guy could have a car and the ability to party unrestrained. Ironically, those same people now think it’s appropriate to use their vote as a tool to remove money from the pockets of others and become the beneficiaries of their hard work.

I don’t see how this form of social engineering could possibly be helpful to, or result in the betterment of the greater society.

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Obama called Trudeau to congratulate him on his win...Trudeau said he will in fact end Canadas role in the bombing mission, at some point. Imagine Obamas releif when Trudeau indicated that Canada will continue to fight Isis "in a responsible way". That will keep those extremist bastards at bay!!

http://www.cnn.com/2015/10/21/middleeast/syria-iraq-isis-fight/

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That is how the Tax system has always functioned. The lowest earners pay no tax on income. Then the tax brackets kick in where the marginal tax rate increases when certain income points are exceeded. The more you make the more tax you pay. however when you are in the highest of Tax brackets you also have the ability to "hide" some of that income in shelters to reduce the amount of tax you pay. This is something that the majority of the middle class try to do but many don't because they do not have enough left over after paying the bills.

All he is doing here is lowering one tax bracket and raising another.

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I wonder if there's ever been a study done that considers the impact current taxation policies may have on economic growth?

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Guest tailwheel

Apparently NOT my money...I don't earn >200,000 a year.

But I suspect that you sure want a piece from those who do. Nothing wrong with admitting that. It got Trudeau elected.

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If you are going to pick a single thing that got Trudeau elected, that thing is Harper.

I have voted conservative since the beginning of time and the only reason I did this time was because of the local candidate. Without that I would have joined the masses whose votes were cast against a secretive, sly, controlling, avoiding and intolerant leader of Conservatives.

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I don't think the 3-4 billion that the Feds hope to glean from those that make over 200k will come close to covering all the spending they have planned. Once they start spending they will need to start digging for cash, the cost of living is going up for all.

I would love to be told where someone making over 200k can shelter all their extra cash, HA. This is a fallacy, perhaps if you have millions lying around, but then the popular perspective is that anyone making over 200 has millions. I wonder if a family of five living in YVR or YYZ making 210k would agree?

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If you are going to pick a single thing that got Trudeau elected, that thing is Harper.

I have voted conservative since the beginning of time and the only reason I did this time was because of the local candidate. Without that I would have joined the masses whose votes were cast against a secretive, sly, controlling, avoiding and intolerant leader of Conservatives.

...and how exactly do you know that about Harper? Is it because the left wing dominated media who were against him from the time he became leader or do you actually have some experience dealing with him or ose around him? I ask because you are not the only one who shares that opinion. It's become accepted wisdom over the last 10 years and I'm curious where it comes from.

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I don't think the 3-4 billion that the Feds hope to glean from those that make over 200k will come close to covering all the spending they have planned. Once they start spending they will need to start digging for cash, the cost of living is going up for all.

I would love to be told where someone making over 200k can shelter all their extra cash, HA. This is a fallacy, perhaps if you have millions lying around, but then the popular perspective is that anyone making over 200 has millions. I wonder if a family of five living in YVR or YYZ making 210k would agree?

I would love to see how much our new PM paid last year in income tax and of course how much of his wealth is tied up in non taxable funds.

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DEFCON, re, "I wonder if there's ever been a study done that considers the impact current taxation policies may have on economic growth?"

The studies, of which there are indeed many, seem to point to the conclusion that taxes have only a weak effect on growth and that growth is subject to other factors.

Here are some of the studies, picked at random from the Google list. Very loosely, they seem to have a range of views from traditional Keynesian to Friedman.

http://www.brookings.edu/research/papers/2014/09/09-effects-income-tax-changes-economic-growth-gale-samwick
Paper | September 9, 2014
Effects of Income Tax Changes on Economic Growth
By: William G. Gale and Andrew A. Samwick

http://www.researchgate.net/profile/Asa_Johansson4/publication/5205330_Taxation_and_Economic_Growth/links/0c960533da74279e0d000000.pdf
Taxation and Economic Growth
ARTICLE · JANUARY 2008
DOI: 10.1787/241216205486 · Source: RePEc
See discussions, stats, and author profiles for this publication at: http://www.researchgate.net/publication/5205330

http://taxfoundation.org/article/what-evidence-taxes-and-growth
What Is the Evidence on Taxes and Growth?
December 18, 2012
By William McBride
(PDF) Special Report No. 207: What Is the Evidence on Taxes and Growth?
Introduction
"The idea that taxes affect economic growth has become politically contentious and the subject of much debate in the press and among advocacy groups. That is in part because there are competing theories about what drives economic growth. Some subscribe to Keynesian, demand-side factors, others Neo-classical, supply-side factors, while yet others subscribe to some mixture of the two or something entirely unique. The facts, historical and geographical variation in key parameters for example, should shed light on the debate. However, the economy is sufficiently complex that virtually any theory can find some support in the data."

http://www.heritage.org/research/lecture/why-taxes-affect-economic-growth
Lecture #624 on Taxes, The Heritage Foundation
September 10, 1998
Why Taxes Affect Economic Growth
By William W. Beach

http://www.ifs.org.uk/fs/articles/0105a.pdf
Fiscal Studies (2000) vol. 21, no. 1, pp. 141–168
© Institute for Fiscal Studies, 2000
Taxation and Economic Growth
GARETH D. MYLES*
Abstract
"The development of endogenous growth theory has opened an avenue through which the effects of taxation on economic growth can be explored. Explicit modelling of the individual decisions that contribute to growth allows the analysis of tax incidence and the prediction of growth effects. This paper reviews the theoretical and empirical evidence to assess whether a consensus arises as to how taxation affects the rate of economic growth. It is shown that the theoretical models isolate a number of channels through which taxation can affect growth and that these effects may be very substantial. Although empirical tests of the growth effect face unresolved difficulties, the empirical evidence points very strongly to the conclusion that the tax effect is very weak."
JEL classification: E62, H20.

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Homerun, re "the left wing media", if the print media in Canada is examined you will find that there is no support for your generalization. The Wiki articles, (https://en.wikipedia.org/wiki/National_Post , and, https://en.wikipedia.org/wiki/Postmedia_Network) can be consulted but other sources and simply reading the former Conrad Black's Southam's/Canwest's, (now Postmedia's), papers, of which there are still dozens in Canada including major papers in every Canadian city, makes it difficult to agree with the characterization.

The Globe and Mail I would call center to slightly left. Many small publications (rabble.ca, for example & The Tyee here in BC) are certainly left-wing but they make no bones about it, and they have a dedicated though small reading public & circulation.

Any serious study (which should precede serious accusations) should use a standard approach of examining column-inches to see the actual editorial balance. Few have time for such projects I recognize, so we rely upon the notion that a right-wing organization like founder, Conrad Black's Southam > Canwest > Postmedia are not going to be left-wing oriented. He wouldn't permit it! (In fact as an author he is well worth reading - his bio of Nixon was received very well; I haven't read his history of Canada yet).

Regarding television, I can't speak for Global as I don't watch it but I do concur with the view that both the CTV & the CBC appear center to left, and both appeared to me to be against Mr. Harper; CTV particularly relished the Duffy and Wallin difficulties and tried to make the connection to Harper stick. But I have never been a supporter of either television network, because I am not a supporter of television, period. I think both need to be watched with a healthy dose of critical thinking to maintain what I would loosely call, "mental hygiene". Television is far too invasive, the effects on thinking too invisible and not sufficiently understood; another thread.

Mr. Harper did this to himself, period and not just recently, and to the Conservative Party.

For a defence of that view, I have spent considerable time here outlining why I think this is so, and others who's commentary I take seriously roughly concur. For books on the subject, you can reference, "The Longer I'm Prime Minister", "Stephen Harper and the Future of Canada", "Stephen Harper", (biography, Ibbitson), "Party of One", "The Armageddon Factor", "The War on Science", "The Arrogant Autocrat: Stephen Harper's Takeover of Canada", "Harperism: How Stephen Harper and his think tank colleagues have transformed Canada".

It is interesting to observe that many of these titles are a critique of a Prime Minister, not unusual as it is an industry unto itself, but at a level and style of which we have not seen previously.

We will see where Mr Trudeau takes our country, but back from the edges of a number of policy and cultural issues long-discussed here, would be, for me, a darn good start.

How the economy fares is perhaps discussed by the papers I reference above on taxation and growth, the concensus of which appears to indicate that levels of taxation are neither favourable nor unfavourable to economic growth per se, but such growth depends on the nature and implementation of levels of taxation.

Certainly, a two-percent shift up the income levels isn't going to bring the house down... ;-)

As for the rest of our new government's plans, I see that many here already have assessed and concluded that Mr Trudeau has failed and is a disaster. Two days in: what remarkable, courageous prescience.

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But I suspect that you sure want a piece from those who do. Nothing wrong with admitting that. It got Trudeau elected.

I 'm not taking it from anyone. I'm just not giving 2% to the government. The rest of the paperwork is on their end.

Again there is not change from the current taxation scheme. Make more pay more. Same as today

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...and how exactly do you know that about Harper? Is it because the left wing dominated media who were against him from the time he became leader or do you actually have some experience dealing with him or ose around him? I ask because you are not the only one who shares that opinion. It's become accepted wisdom over the last 10 years and I'm curious where it comes from.

Don has done an excellent job of providing evidence supporting the negative view of Harper so I won't go into anything further except to say that I have no personal experience dealing with him. I can only go by the evidence I have.

By the same token, although I have only met him once or twice, through the same media I have come to the conclusion that Cmdr. Chris Hadfield is a top-notch guy. I am also of the opinion that Barak Obama is thoughtful and that Donald Trump is pompous. I would suggest that those that know those people more than I would hold the same opinions.

So, it is possible to draw opinions about people through their persona as reported by the media.

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Interesting material Don...thanks.

I'm not sure what to believe; taxation can and does have a very large impact on my ability to advance economically, so why not in the case of society as a whole?

I can appreciate the fact that schemes to redistribute my tax contributions don't recognize the consequence of the grab to the individual, but only consider what they see as the benefit to the larger body.

But how do you measure the impact on the total when the top paying people as described in Wolfhunter's beer model give up and quit playing? The Soviet economic model proved how simple it was to destroy human ambition, so isn't it reasonable to expect that a policy that taxes, or removes ones wealth and 'gives' it to another just because he's there will ultimately produce a similar result?

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DEFCON, perhaps the notion that taxation and some level of control/fairness etc., is a "zero-sum" process may be one explanation?...dunno, just pondering the question. It doesn't seem to lend itself to the zero-sum concept.

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I see that the Liberals will revisiti the change from door to door delivery but am somewhat confused: We moved into our new home 28 hears ago and guess what ..... no home delivery, just a cluster box, this was quite a surprise but what was .... was. Is door to door delivery mostly a eastern perk?? and if so why the hell should I pay for it? If you want door delivery then you should pay for it unless it will be extended to all and paid out of the projected deficit!

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Guest tailwheel

As for the rest of our new government's plans, I see that many here already have assessed and concluded that Mr Trudeau has failed and is a disaster. Two days in: what remarkable, courageous prescience.

It is only his policies that are failed and a disaster. One only need look at the province where the premier he campaigned with is from....Ontario. Massive deficits and debts, two downgrades by the bond agencies, uncontrolled spending, higher taxes, huge electricity bills, and manufacturers in energy intensive industries that have no intention of moving there because of the costs.

I read something today about how the wonderful liberal policy implementers just paid 1 million dollars in taxpayers money to a teachers union to cover their negotiating costs.

But...some people need to learn the hard way. Congratulations Canada.

Let me guess, it will be different on a federal level. When the people on the east coast, public service unions, natives and similar are cheering an election outcome, you as a taxpayer might want to wonder why.

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I see that the Liberals will revisiti the change from door to door delivery but am somewhat confused: We moved into our new home 28 hears ago and guess what ..... no home delivery, just a cluster box, this was quite a surprise but what was .... was. Is door to door delivery mostly a eastern perk?? and if so why the hell should I pay for it? If you want door delivery then you should pay for it unless it will be extended to all and paid out of the projected deficit!

Have to agree somewhat. I too was a "victim" of the Super Mailbox in Bedford in the 1980's. A design that has remained relatively unchanged in 30 years. A design, that in eastern Canada saw soaked mail, frozen locks and ugly placements. Then again out west but minus the meteorological "perks". Now, in a condo building, similar boxes but without the parcel option and most significantly, in a building full of seniors (myself excluded of course, being a spritely 63) without a drop box for outgoing mail - all features of the Super Mailbox.

Home delivery of the mail is almost synonymously comparable to home delivery of milk & eggs.

Isn't progress wun'erful? :(

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Here is a case where reversing a decision that has already been implemented is a really dumb idea. Superboxes have already gone up and mail delivery door to door halted. Reversing the situation now would only add an expense to undo it. I have had a superbox for over 15 years and I have never had an issue. Besides for all the actual mail I get door to door isn't worth it. If they reverse it and go back then is should be scaled to twice a week delivery becasue why should I as a taxpayer pay for someone to deliver a stack of junk mail I will just toss in the blue bin anyway.

This country needs to accept progress and change and mail is certainly something that has changed in the last 25 years.

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I agree that Supermailboxes are just fine... as a matter of fact, I like the fact that mail doesn't pile up by the door when I'm away. In addition, the parcel delivery feature is very handy in this era of on-line purchases. I think that people have been convinced that losing door-to-door delivery is some massive inconvenience. I guess, if one is completely immobile, it would be, but if you can go for a walk (or get out at all) that means you can collect your mail. And don't people have neighbours?

I believe that Canada Post does not currently receive any government subsidies. So, this is not a taxpayer issue. The government may be there as a backstop, but CP made a $200 million profit in 2014.

Fortunately, the Liberals only said that the supermailbox decision would be "reviewed", not "rolled back".

In a "user pay" system, the people who get the service should pay.... if you want home delivery, you should pay a fee. Why do I have to pay more for a stamp to subsidize home delivery when I only have supermailbox service. If people who object to switching are offered the the choice of supermailbox service or paying $20 per month for home delivery, I know what their position would be.

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