Last Wednesday, our Federal Minister of Finance Paul Martin released a mini-budget that will grant Canadians $7.7 Billion in tax reductions provided they vote the Liberal government back in for another term. This financial carrot and a $1.5 Billion giveaway to Toronto for waterfront development heralded Prime Minister Jean Chrétien's Sunday announcement that there will be a federal election on November 27.
Housing did not get direct mention in the mini-budget. However, by loosening the tax grab on taxpayer incomes and profits, this budget may liberate more dollars for people to spending on homes, cottages and all the related goodies.
The mini-budget proposes that, effective October 18, 2000, owners of properties not eligible for full exemption under the principal residence definition of the federal Income Tax Act would only have to pay income tax on 50% of the profit or capital gain.
In the February 2000 federal budget, Martin lowered the capital gains inclusion rate from 3/4 to 2/3. Now, only 50 % of any profit (less allowable expenses) will be added to taxable income for the year the property is sold and the taxpayer will pay tax on this amount at their marginal rate. The capital gains cut was not aimed at cottage owners and real estate investors. It was included to stimulate the lagging stock market and "stem the brain drain," but property owners will gladly accept the benefit.
Effective January 1, 2001, taxpayers will keep even more of their profit and more of their income as well when income tax rates are lowered.
The tax rate for those earning less than $30,000 will drop from 17% to 16%. Canadians with incomes from $30,000 to $60,000 will find their tax rate drops 2% to 22%. Those earning between $60,000 and $100,000, will pay 26% in a newly-created tax bracket while those earning over $100,000 will still pay tax at a 29%. However, wealthy Canadians will benefit from the removal of the 5% deficit elimination surtax.
Martin's budget seemed to ignore protests from the transportation industry over rising fuel costs. While truckers were left out in the cold, the Liberals offered low and modest income earners a one-time home heating fuel rebate of up to $125 per person or up to $250 for a family.
The mini-budget announced about $35 billion in new tax cuts over five years, which on top of the $58 billion promised in last February's budget, has the Liberals offering $100 billion in tax cuts if Canadians vote them in again.
Do you see unmet housing needs in your neighborhood? This may be a good time to button-hole your local federal Liberal and see if your community can get a piece of election largess.