I got the first half wrong but the result will probably be the same. In an earlier post I indicated that, as the Conservatives moved more right of center, those of a progressive bent might vote Liberal. Wrong. Those of a more progressive bent may well vote NDP. Several of the national newspapers are now calling for a Layton-Ignatieff coalition. They will, the conventional wisdom says, have a larger percentage of the national vote than will the Conservatives. The Conservatives may get the larger number of seats. They will try to form a government. That government will most likely be defeated on the budget or some other pretext of confidence and the Governor General will call the party with the next number of seats—now projected to be the NDP—to form a government. Because no political party wants Parliament to go through the travails of more minority rule, the Liberals will be invited to join the government by way of coalition. That’s what happened in Britain.
The battle will be fought in Quebec and Ontario. In Quebec the NDP will take seats away from the Parti Quebecois. The separatist card is not playing well in that province and the voters want more of a direct say in national politics. Those voters that can’t vote Conservative will vote NDP. Jack Layton plays well in Quebec and is known as “le bon Jack”—everyone’s politician. One radio commentator compared him to Rene Levesque—not in politics but in stature.
Ontario is another matter. The Liberals borrowed so much from the NDP platform that they are ideologically indistinguishable from the NDP. The difference in in the leader. Ignatieff has been painted (probably too well painted) by the Conservative as an elitist and political interloper. While Ignatieff seems to connect well with voters one on one he does not have the charisma that Trudeau or Chretien had. If one is going to vote progressive then why not vote for a party whose leader stands out as being feisty and principled. The platforms between the Liberals and the NDP seem to occupy the same political ground. The leader has made the difference.
So, what will Canada have bought if we elect a NDP-Liberal coalition. The first, most obvious step will be to keep corporate income tax rates about the same. Automatic proscribed reductions will be recanted. No apparent harm there. Canadian corporate tax rates are not overly uncompetitive worldwide. Also, the reduction in the corporate income tax rate has meant a similar reduction in the dividend tax credit making dividend income less attractive after tax.
The NDP and Liberals seem to be more attentive to the arts. Therefore, expect that the proposed changes in flow-through shares will also be recanted. Flow-through shares are a mechanism that reduces the after tax impact on charitable gifts.
The tax legislation will be awash with tax credits for a whole range of social programs that are being touted by both Liberal and NDP parties.
Both parties are delightfully vague on how they are going to pay for these programs and yet reduce the deficit to manageable levels by 2014. Corporate taxes will pay for some of that but it does not account for the large number of social programs promised. The Conservatives have promised a significant reduction in the size of government. This means that some programs will have to go. Both Liberal and NDP platforms do not point to reduction in the size of government. But reducing the deficit still remains an open question.
I will go out on a limb but I predict that there will be increases in the HST and a reduction in income tax for middle or lower income earners under a NDP-Liberal coalition. The Liberals have long favoured consumption tax over income tax (see previous post) and the NDP will be attracted to reductions in income tax for middle or lower income earners. More provinces will be encouraged to enter into a harmonized HST regime (Quebec for one) so that the collection of tax can be simplified.
Stay tuned. The best is yet to come.
Bernie.
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