Harper proposes new type of RRSP tax relief

By BRIAN LAGHI
From Friday's Globe and Mail

(Ottawa)  Conservative Leader Stephen Harper will propose an option for
Canadians to get a tax break on their retirement earnings when he delivers
a pre-election campaign speech today apparently designed to woo aging baby
boomers.

The new method would differ from the current Registered Retirement Savings
Plans, under which Canadians get tax relief when they put money in, but are
taxed when they take it out at retirement. Under the idea to be proposed by
Mr. Harper, individuals could invest money that they've already paid tax
on, but the money would grow tax-free inside the shelter and remain tax
free upon withdrawal. Such a system is used in the United States and has
been pushed in the past by the Canadian Alliance.

Sources would not say how much the idea would cost. The scheme would be
beneficial for those who have contributed maximum amounts to their regular
RRSPs. However, some critics say it favours wealthier people who have
already exceeded their contribution limits.

Mr. Harper is due to unveil the plan in a speech at the C.D. Howe Institute
in Toronto as he rolls out an election platform increasingly predicated on
strong government finances. The Conservative Leader said yesterday in an
interview that his party believes the federal surplus over the next five
years will hit $90-billion, allowing the Conservatives to fund a series of
ideas that include tax cuts, more money for the military and health care.

Mr. Harper said the federal government has been badly underestimating the
surplus for years. We think we're dealing with about $20-billion in
surpluses over the next two years, and probably up to $90-billion over
five, he said.

We'll lay out in our platform how much flexibility we have, where we made
specific allocations and where we have room to negotiate with the
provinces. There's a lot. There's a lot there.

Mr. Harper said Liberal governments have had enormous unbudgeted surpluses
for several years. He said the cash was either wasted or thrown willy-nilly
at programs such as health care in one-time payments. "We just kind of
dribbled away all those advantages", he said. "Obviously, tax
reduction fell off the agenda completely. But we still have some
considerable flexibility. We think."

Mr. Harper said his party's figures are based on federal numbers. Sources
said the party has shopped the projections around to bank economists to
ensure their viability. Sources said that the $90-billion figure includes
inflation and population growth. The Tories would also reallocate spending
within the budget, although they have not been specific yet as to how.

The Conservative numbers will almost certainly come under great scrutiny as
the election campaign gets under way. Economists have agreed that Ottawa
will have a significant surplus over the long haul, but even the most
optimistic put the figure at no more than around $56-billion. The Finance
Department has estimated the five-year surplus starting in 2004-05 to come
in at around $26-billion.

The Conservatives policy book calls for another $2-billion per year in
spending on the military and broad-based tax cuts for individuals and
business. The party would also get rid of the surplus in the Employment
Insurance account by lowering premiums. It has also pledged to increase
funding to the health-care system.

Mr. Harper said that, just because the government has been running a
surplus, this doesn't mean it has been prudent.


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