The Hill: Farmers feel left out of the Tory tax cut

Wednesday, December 19, 2007

The GST cut will mean little to farm businesses.
Where is the investment in infrastructure, they ask?

by BARRY WILSON

The federal Conservative government is in a giving mood this holiday season, promising Canadians more than $60 billion in tax reductions over the next five years.

Taxpayers will notice it when they file income tax returns next spring for 2007.

Consumers will notice it beginning on Jan. 1 when the GST drops by one percentage point and, accordingly, sales tax on that $100 purchase will drop by $1. Federal revenues will take a hit of more than $5 billion each year.

When he made the tax announcements at the end of October, finance minister Jim Flaherty was positively beaming, bragging that the personal, corporate and sales tax cuts will reduce Canadian taxes to among the lowest in the industrialized world. Election-ready Conservatives figure that taxpayers will reward them by thinking more kindly of the party when they are asked to choose their next government.

Based on recent electoral history, the party almost certainly can count on the votes of most farmers and many of their rural neighbours. But it won't be because of the tax largesse. In fact, farmers are feeling decidedly left out of this latest round of Conservative surplus-management policy, despite the fact that the vast majority of rural seats in Parliament are represented in the Conservative caucus.

With many agricultural sectors reeling from crashing income through high input costs and falling prices (livestock), the effects of an above-par Canadian dollar (exporters) and a general decline in infrastructure, farmers who need to get their produce to market (roads throughout rural Canada, rail branch lines in Western Canada), are asking: where is the investment?

"A meltdown is happening in some key sectors and the government can't let that happen," Canadian Federation of Agriculture vice-president and former Ontario farm leader Ron Bonnett said after Flaherty's economic statement. "There needs to be a better balance between tax cuts and investment."

The GST cut will mean little to farm businesses that don't typically pay it on most input purchases.

The government can play the role of pre-Christmas tax-cutting Santa Claus because it is experiencing an embarrassment of riches. A surprisingly strong Canadian economy continues to churn out billions of dollars in unexpected tax revenues and the
projected federal surplus was zooming toward $20 billion.

Even with the tax cuts, the government says it will be able to put $10 billion against the national debt and still run a modest surplus. But Bonnett argues that the emphasis on tax cutting in the midst of revenue plenty misses the mark for agriculture. Tax cuts to producers losing money provide no relief.

Meanwhile, infrastructure is being allowed to run down and sharp deficit-fighting cuts a decade ago in farm supports have not been replaced.

"Farmers have made a hell of a lot of sacrifices since (former finance minister and prime minister Paul) Martin started making the cuts more than a decade ago," he said. "We've never really recovered in research, in infrastructure, in many of the underpinnings of the farm economy," Bonnett said.

Now, the CFA emphasis is on lobbying to get some agricultural spending and investment in the February pre-election budget that Flaherty has promised.

Rural Conservative MPs in Ontario and across the country can expect to hear that message often over the next two months. BF

Barry Wilson is a member of the Parliamentary Press Gallery specializing in agriculture.