Canada needs middle-class tax cuts, minister says

Sun Jan 25, 2009 10:00pm EST
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By Frank McGurty

TORONTO (Reuters) - Canada needs broad-based tax cuts targeted at the middle class to stimulate the economy, a Conservative government minister said on Sunday, defending one of the strategies expected to be included Tuesday's budget.

"The middle class is the single biggest group that drives our country," Human Resources Minister Diane Finley said in an interview on CTV's "Question Period." "We have to make sure they continue spending to keep the economy moving."

Finley's defense of tax cuts was the latest foray in the minority government's offensive to build support for its budget, a month after opposition parties nearly forced its ouster.

On Sunday, the Liberals, the main parliamentary opposition whose support on the budget the government depends, said such tax cuts were likely to prove ineffective at a time when the sagging economy needs a quick shot of adrenaline.

The budget to be introduced this week will usher in the country's first fiscal deficit in a decade. A government official leaked to reporters on Thursday that deficits over the next two fiscal years would total C$64 billion ($52 million).

Prime Minister Stephen Harper signaled on Saturday for the first time that the budget will contain permanent tax cuts, not just short-term reductions to lift the sagging economy.

The Liberals said on Sunday that broad-based tax cuts could lead to permanent deficits and were likely to be ineffective in encouraging consumers to spend more in a climate of extreme uncertainty.

"Broad-based, permanent tax cuts translate into large permanent deficits, which will saddle our children and our grandchildren with big debt," John McCallum, the Liberal finance critic, told CTV.   Continued...

<p>Minister Diane Finley waits to testify before the Commons finance committee on Parliament Hill in Ottawa April 28, 2008. REUTERS/Chris Wattie</p>