Canada’s Federal Budget 2015 Explained: My Main Takeaways

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If you are based in Canada like me, then you know the main economic news this week was the release of Joe Oliver’s federal budget: a five-hundred-page document detailing Stephen Harper’s Conservative party’s 2015 Economic action plan. Whether you are a student, a professional, a retiree or unemployed, everybody is affected by the budget. As usual, I like going through financial analyses in order to share with you the key points in a more digestible language. Summarizing every point of the budget would be way too long and probably a bit boring for you. So I will focus on the main takeaways that I believe will impact my readers the most.

First, it’s important to know that the next federal elections are in October 2015. So a balanced budget right now is good news for the party in power.

THE GOOD

  1. The good news is the federal budget is experiencing a surplus of $1.4 billion.
    • Revenues: 290.3 Billion mainly from income taxes, excise taxes and duties.
    • Expenses: 288.9 Billion mainly from direct program expenses, pension, social security and debt servicing.
  2. The annual contribution limit for tax-free savings accounts rises to $10,000 from $5,500, effective immediately. So I advise you to take that in consideration in your own budget to reduce your tax burden.
  3. Tax rates for small businesses (less than 500,000 in revenue) will fall from 11% to 9% by 2019.
  4. The economy is expected to grow at 2% per year. This is still a minor growth compared to emerging markets, but at least we are not falling under zero with the fall of oil prices earlier this year.

THE BAD

  1. This surplus is the consequence of a prolonged period of spending cuts in social security and other important programs over the last years (instead of an actual growth in revenues). Plus money had to be withdrawn from the contingency fund by selling the government’s General Motors shares. This fund is normally supposed to serve as a cushion during economic downturn and not for accounting purposes.
  2. National defense spending will double from 1.5% to 3% per year. This being a good or bad thing is really a matter of personal political affiliation. However it’s important to know that every dollar going into more security and military reduces spending that could be made to directly help citizens (e.g. social security, health care, or infrastructure).
  3. The opposition argues that the budget does not do much for the low and middle classes and favours instead short-term electoral ambitions over sustainable growth. Plus cuts on the annual contingency fund are supposed to continue over the next 3 years.

Several other changes and adjustments were made on social security programs, as well as some tax cuts for seniors and the disable. In general, whether you are in favor of this budget or not will depend on the demographic segment you belong to. You can download the complete 2015 economic action plan by clicking here.

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