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Harper Proposes Personal Income Tax Cuts

by Mike Godfrey,, Washington

02 October 2007

Canadian Prime Minister, Stephen Harper, has announced this week that major reductions in federal debt will enable personal income tax cuts to be put in place.

The proposal, which will follow one of the largest reductions in the federal debt in Canadian history, will see effective interest savings used to reduce personal income taxes as required by law under the Government’s Tax Back Guarantee.

Commenting on the situation, the Prime Minister explained that: “Less debt means interest savings. And under the Tax Back Guarantee our Government legislated in Budget 2007, every time we reduce the debt, the interest savings will go back in the pockets of hardworking Canadians – where it belongs.”

The announcement has coincided with the release of the Government’s 2006–07 Annual Financial Report, which confirmed the $14.2b reduction in the federal debt. Canada’s federal debt (as measured against the economy) has fallen to its lowest level in 25 years. It stood at $467.3b at the end of 2006–07, down $95.6b from its peak of $562.9b in 1996–97. Canada is currently on track to eliminate total government net debt by 2021.

The reduction in the federal debt in 2006–07 means tax payers are expected to benefit from personal income tax cuts of approximately $725m per year ongoing, under the Tax Back Guarantee that passed into law earlier this year.

Jim Flaherty, Finance Minister, praised the initiative, commenting: “The Tax Back Guarantee is giving Canadians a direct stake and a direct benefit in how we manage government finances on their behalf."

Mr Flaherty went on to state that Canadians should be proud of the country’s strong economic performance over the past year. He argued that governments across Canada, federal, provincial and territorial, have benefited from the solid economic growth and thanks to sound financial management are in surplus.

Concluding, the Prime Minister stated that: “We have to keep our spending prudent, keep reducing the debt and keep lowering taxes, that’s why we are moving forward with today’s good news for taxpayers, which is even better news for the taxpayers of tomorrow, our children and grandchildren.”

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