To this end, the Minister proposes to reduce the taxation of savings through a registered Tax-Free Savings Account to which Canadians can contribute as much as $5,000 a year, beginning in 2009. (Details of the Budget are discussed later in this report.)

While the Minister announced no new tax credits or changes to personal tax rates, the Budget proposes some minor tax relief in the form of adjustments to Registered Education Savings Plans, Medical Expense Credits and Registered Disability Savings Plans. The Minister also proposed a 10-year extension of the age limit on RESPs, to 31 years from 21, and a 10-year extension of contribution years, as well.

For Canadian businesses, the Budget offers several measures to support the manufacturing sector, in which real output has declined by 3.4% in the last two years, and to encourage innovation among small and mid-sized businesses. The Budget proposes to extend accelerated capital cost allowance treatment for investment in machinery and equipment for three years, for example, a measure intended to provide Canada's manufacturing and processing sector with about $1 billion in tax relief. It also includes improvements to the scientific research and experimental development tax incentive program.

The Budget also proposes to create a new Crown corporation in 2009 that will implement a new EI premium rate-setting mechanism. Another proposed Crown corporation, PPP Canada Inc., will work with the private and public sectors to support public-private partnerships. The Budget also proposes to make permanent the federal Gas Tax Fund, which will contribute $2 billion in 2009/10 to supporting long-term municipal infrastructure improvements. And it provides $500 mil-lion in support of capital investments for enhancing public transit.

Responding to the Budget in a press release, CICA President and CEO Kevin Dancey, FCA, said the government had renewed its commitment “to reduce debt while targeting program spending, job creation and encouraging savings by Canadians.

“This is a prudent, steady-as-she-goes Budget,” Dancey continued. “Coming at a time when the Canadian dollar is strong and the U.S. economy is struggling, the federal Budget represents a solid commitment by the government to a framework that will ensure the long-term international competitiveness and prosperity of Canadians.”

The CICA attributed a solid B+ rating to the Budget. “It falls short of an A grade based mainly on our concerns about growth in program spending,” Dancey said.

Although it forecast a lower increase in its last Budget, the government's program spending rose in the current year by 6.8%. The growth rate for 2008/09 is 3.4%, but that rate is expected to increase to almost 5% the following year.

“This is a concern that needs to be addressed,” Dancey said, “as program spending continues to remain above the rate of inflation adjusted for population growth.”

The Budget proposes to reduce the debt by $10.2 billion this year, with further reductions of $2.3 billion for 2008/09 and $1.3 billion for 2009/10. “But the potential exists for federal finances to slip into deficit should the economy weaken,” said Dancey.

Despite these reservations, the CICA gave full marks to the government for its continuing efforts to reduce the federal debt, despite global economic uncertainty, and to apply interest savings to personal income-tax reductions.