Budget ’09: Personal Finance

A recession budget for working families


Personal Finance

A recession budget like this one wouldn’t be complete without a healthy dose of programs and promised aid for those who are hurting the most: working, middle class families.

Behind some of the budget’s biggest promises, like the $200 billion plan to help consumers in search of financing, is an effort to make it easier for families to start spending again, whether that means renovating or buying a house or buying a car.

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The government plans to spend $7.8 billion to try and restart the housing and construction industries, which have seen huge slowdowns and job losses in recent months. For homeowners, that means a temporary tax credit to renovate their homes (worth up to $1,350). The amount new home buyers will be allowed to withdrawal from their RRSPs to help finance a new home will go up to $25,000 from $20,000. They could also receive a tax rebate worth as much as $750.

Those living in hard hit communities across the country, particularly those manufacturing towns in Ontario’s rust belt, get special attention in this budget. The government plans to spend $1 billion over the next five years to help workers and communities in southern Ontario. Another $1 billion in the next two years will go towards helping communities across the country to “mitigate the short term impacts of restructuring.”

For those who have already had the misfortune of losing their jobs, there are plans to boost funding for training by over $1.5 billion over the next two years.

Employment insurance premium rates will also be frozen for the next two years—a stimulus worth the equivalent of $4.5 billion, according to the budget.

The budget also includes small tax breaks aimed at the lower and middle class. The lowest personal income tax brackets will be raised by 7.5 per cent, meaning that Canadians can make more money before being bumped into higher-taxed income brackets. (The upper limits for the first two tax brackets will go up to just under $41,000 and $81,000). For families with children, the cut-off level for child benefits to lower-income families will also be raised.

All told, a family making between $15,000 to $30,000 can expect to see tax relief averaging about $650.

While a welcome, helping hand for some, this isn’t exactly a windfall for most families. The tax incentives are modest and narrowly focused (too much so, say critics). This, however,  isn’t overly surprising in this stimulus-obsessed budget. Tax breaks typically  have less impact, at least on the short-term economy, than more direct cash injections. A one-time US$150 billion tax rebate in the U.S. last year, for instance, proved to have virtually no impact, as the money was largely saved or used to pay down debts. 

And the message in this budget to average Canadians is loud and clear: we need you to spend money to rescue the economy.


Budget ’09: Personal Finance

  1. ‘Though this isn’t surprising given the limited impact tax breaks seem to have on the short-term economy. A US$150 billion tax rebate in the U.S. last year, for instance, proved to have virtually no impact, as the money was largely saved or used to pay down debts.”

    The Americans sent out cheques as a one time deal and people paid off their debts with them, which is no bad thing. There is reason to believe that people will spend the money if it’s a permanent tax cut, I know there is no such as permanent Olaf, and not just a one off stunt. People factor their household budget differently if they get one cheque in the mail compared to tax cuts that will last a few years at least.

    • Nothing wrong with paying down debts, means you have more money to spend int he future. You make it sound like a loss to let people keep more of their money from the tax greed going on.

      Big reason our economies are bad is because govmint takes too much for consuption waste and no real value back to most of the people who pay for it.

      So greedy are we, there are tariffs and protectionism on basic FOOD and clothes, and everything else. So busy supporting govmint kids, young can’t afford family homes, families can’t afford kids, elderly taxed out in life get a pathetic return on investment called CPP.

      Fact is all this tax, tax as inflation, we lose jobs to it as we need uncompetitive wages to support the 41% of GDP that is govmint. That is an obscent tax-spend, 41%…..mafia and loan sharks never had it that good.

  2. “without a healthy dose of programs and promised aid for those who are hurting the most: working, middle class families.”

    I’ve gotta question this statement, even though it apparently is the underlying premise of the entire budget. How are working, middle class families the most hurt in this recession?

    And in spite of the fact that it helps me personally, I’m a little miffed at the raise in the lowest tax bracket. Hurray! I thought, just a few weeks ago. I can finally get out of the lowest tax-paying class! After working my entire life, the rung on the ladder had been reached. “Not so fast” says Harper. “We can’t have people like YOU moving up. Why, we might have to pay attention to you or something!” Back in the basement I fall.

    But not to worry about me. Although I might not be officially ‘middle-class’ I am one of the working families that expects to do just fine, thank you very much. Yet almost all the gifts help me! I don’t need the help!

    I hate to sound ungrateful, and its not like I don’t appreciate it, but I do worry about my children, you see. They are having a hard enough time of it without the certain knowledge that, not only does their generation have to care for all us aging boomers, but they have to do it starting from a near-record debt load.

    I guess I’ll have to absolve my guilt by seeing if I can swing a new car. I was perfectly okay with a used car, and I still think used is a more intelligent choice for me, but I promise to give serious consideration to a brand spanking new model.