Controversial tax relief will benefit potential Tory base: business professor

WATCH:  Sprott School of Business professor Ian Lee talks about the prime minister’s  new tax breaks for Canadians.

OTTAWA — In announcing new tax credits last week, Prime Minister Stephen Harper “stole” the premise of his critics while managing still to target Conservative voters, said Sprott School of Business professor Ian Lee.

“He took four years of criticism by the opposition parties and think tanks and social NGOs … [who] have been saying they want social programs to be more progressive, focusing more on lower-income Canadians, people of modest means,” Lee said in an interview on The West Block with Tom Clark.

“And he did it with a vengeance.”

During the 2011 federal election campaign, Harper pledged several tax breaks, contingent on a balanced budget. Last week, however, the prime minister said that even though the budget wasn’t yet out of deficit, he was introducing the controversial income splitting scheme as well as increasing the universal child care benefit.

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Lee speculated the nation’s books are actually balanced, and the prime minister only “fudged” that fact because he wanted Finance Minister Joe Oliver to have the spotlight when he provides Canada’s economic update later this month.

WATCH: In this week’s West Block primer, Tom Clark lays out the good, the bad, and the ugly of Canada’s economy.

Even if Ottawa isn’t already posting a surplus, the 2014 budget projected one by the end of the year.

“The program doesn’t take effect until January … and the monies won’t even be paid out until next July,” Lee said. “And by then we’re going to be well into a massive balance.”

READ MORE: Harper unveils controversial tax relief for Canadian families

Income splitting, dubbed the “Family Tax Cut,” will allow an eligible taxpayer to transfer up to $50,000 of income to his or her spouse for tax purposes in order to collect a non-refundable tax credit of up to $2,000 per year.

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The boost to the universal child care benefit announced last week will see $160 a month for kids under six, up from $100, plus a new monthly benefit of $60 for children aged six through 17, effective in 2015.

The two measures together will cost $3.1 billion in 2014-15 and $4.5 billion in 2015-16.

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During his announcement, Harper repeatedly hammered home the message that the entire suite of measures —he described it as an expanded version of the government’s original income-splitting promise — would benefit all Canadian families with children.

Critics, however, have said income splitting will benefit only a small fraction of Canadians, namely nuclear families with one working, high-earning parent.

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READ MORE: Federal government’s family tax cuts won’t be cheap, say experts

Opponents to the universal child credit, meanwhile, say Canadians shouldn’t subsidize the children of the country’s wealthy population.

But Lee argued since that credit is a taxable benefit, more upper middle class and wealthy people will see any benefits of the credit clawed back.

Therefore, the tax break actually benefits the middle class and lower middle class, he said.

“Which, by the way, just by sheer coincidence, is the potential base of the Conservative party,” he added.

With files from The Canadian Press

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