Alliance drops single-rate tax
Replaces signature policy with two-rate plan: 17% and 25%

Sheldon Alberts National Post

WATERLOO, Ont. - The Canadian Alliance yesterday said it was dropping its controversial plan to introduce a single 17% tax rate for all Canadians within the first mandate of a new government, but promised to still deliver $66-billion more in tax cuts than the governing Liberals.

The dramatic policy shift, contained in the Alliance's election platform, comes on the heels of Liberal charges that the "17% solution" gives the biggest tax cut to the wealthiest people.

Stockwell Day, the Alliance leader, announced a new plan to instead implement two rates of personal tax -- at 17% and 25% -- during a rally last night that was marred when he was struck by a carton of chocolate milk hurled by a protester.

Canadian Alliance officials claimed prudent economics -- and not politics -- forced the party to reconsider its ambitious single-rate proposal. Jason Kenney, Alliance finance critic, said the signature policy could not be implemented in the first term of a government because of party promises to spend billions on health care and debt reduction.

"We didn't want to risk any sort of deficit position," said Mr. Kenney. "We want this to be a prudent plan, which makes sufficient room for health care and debt reduction and, so, frankly, the numbers dictated that we move at this pace."

The Alliance made the 17% single-rate tax its central policy during its founding convention last January.

The plan would have seen the party create a single marginal tax rate of 17%, eliminating the existing 24% rate for middle-income earners and 29% rate for high-income Canadians.

But the new election platform instead proposes lowering only the middle tax rate to 17% by the fifth year of an Alliance government.

The Alliance would drop the top tax rate to 25% from 29%. The high-income rate would only kick in for Canadians earning $100,000 a year or more, up from the current threshold of $60,000.

Mr. Kenney said the Alliance remains "completely committed" to a single-rate tax, but it would likely not be possible until the sixth or seventh year of an Alliance government.

Mr. Day, who did not meet with reporters, told a crowd of 2,000 supporters the tax plan will knock 1.4 million low-income Canadians off the tax rolls.

Despite the policy compromise, the Alliance is still promoting its tax-cut package as the most aggressive of any being promised in the lead-up to a federal campaign, expected this November.

Mr. Day tailored his message to a crowd of party supporters and students from local business colleges and universities, saying his tax cuts would help slow the brain drain of skilled workers to the United States.

"The federal government will not change the policies driving people out of the country ... It is time to change the federal government," said the former Alberta treasurer.

"I have been a minister of finance. I have managed billions of dollars. These things can be done."

The federal Liberals' last budget promised a total of $58-billion in tax relief over five years. The Alliance plan calls for an additional $66-billion in tax cuts over a five-year term.

The party's personal tax-cut promises include:

- Immediately raising the personal and spousal tax exemption from $7,231 and $6,141 to $7,600 each, and to $10,000 over five years;

- Introducing a universal $3,000 tax deduction for all families with dependent children younger than 16;

- Reducing Employment Insurance premiums paid by employees from $2.25 per $100 in income to $2.00;

- Increasing the maximum RRSP contribution limit to $16,500 from $13,500 and eliminating foreign content restrictions.

The Alliance is also promising to stop charging GST on existing gasoline taxes, a cut that would cost $1.5-billion and was factored into the party's decision to slow the pace of its single-rate tax promise.

Officials said 97% of Canadian taxpayers would pay the 17% rate under the party's plan. Only 3% of the richest Canadians would pay the 25% rate, they said.

An average family of four would save $1,604 extra a year once its plan is fully implemented, the party says.

In a bid to soften the old Reform party image as slash-and-burn conservatives, the Alliance is vowing to immediately restore health care funding to $18.7-billion -- $400-million more than the provinces would get in the first year of the health deal recently struck with Ottawa.

The Alliance vows to amend the Canada Health Act to entrench a stable, five-year funding plan that would see regular increases in health transfers.

The party platform also includes a promise to double the size of mandatory annual debt payments to $6-billion a year from $3-billion. It would introduce legislation requiring the government to spend 75% of all "unprojected" surpluses toward debt paydown.