PM looks to sweeten tax plan

STEVEN CHASE

Globe and Mail Update

Ottawa — The federal government is looking at ways to beef up its tax-cut package for the spring budget to bolster Conservative claims that their plan will leave Canadians better off than measures enacted by the former Liberal government.

Options being considered include cutting tax rates for the two middle-income-tax brackets.

In 2006, Canadians will pay income tax at a rate of 15 per cent on the first $36,378 of taxable income, 22 per cent on additional earnings up to $72,756 and 26 per cent on anything above that, up to $118,285. After that, the top rate of 29 per cent applies.

The changes being considered would mean trimming the 22-per-cent and 26-per-cent tax rates.

The Tories had pledged to repeal Liberal income-tax breaks to fund a promise to cut the goods and services tax by one percentage point this year, but the government remains concerned it will stand accused of hiking taxes.

“On the income-tax side there is a problem because if the Liberal-initiated income taxes are repealed and only the GST is cut, then what [Prime Minister] Stephen Harper has been saying about Canadians being better off is not true and that circle must be squared before budget day,” a source familiar with deliberations said.

“The government is not going to table a budget that leaves any taxpayers worse off than they currently would be. So while the Liberal measures might be withdrawn, something else will be put in.”