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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Budget ‘09: The Overview
Budget ‘09: Bailout
Budget ‘09: Stimulus
Budget ‘09: Economic Outlook

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.