On head-scratchers

CanWest reports that a change in federal government hasn't changed the habit of underestimating federal surpluses. But the explanation from the Finance Department for part of the reason can only be described as curious:

The federal government's surplus this year will be fatter than forecast in the May budget, the Finance Department said in a fiscal update Tuesday.

The department credited lower-than-projected spending on government programs for its expectation that the surplus will be "somewhat" higher in the fiscal year ending March 31, 2007, than the $3.6 billion it forecast in its May budget, noting that revenues are expected to be in line with the budget projections...

(B)ased on the results of the first three months of the current fiscal year which began April 1, it now expects that corporate tax revenues will be weaker than forecast in the budget but that personal income revenues will be greater.

"The strong growth in personal income tax receipts seen last year is continuing so far this year, reflecting strong growth in employment and wages and salaries combined with the progressivity of the personal income tax system," it said.

Now, I'm normally among the first to applaud any recognition as to the value of progressivity, especially coming from a Con-controlled department. But it's hard to see what the update intends to say by highlighting the concept in this context.

At worst, it could be argued that the Cons are trying to emphasize current "progressivity" within the tax system as both an effort to paint the Libs as left-wing, and as a justification for a swing toward more regressive taxation. Though if that were the intention, it's odd to see the concept listed alongside such positive elements as growth in employment and wages which Canadians presumably won't want to see reversed.

At best, the explanation could be seen as a statement of the glaringly obvious: that under a progressive system, a boost in jobs and wages will result in increased receipts. But then, it's hard to see how the progressivity element is relevant enough to be worth mentioning. After all, the same would presumably be true in all but the most absurd of tax systems.

Mind you, the current system might well not be that far away from such absurdity in any event, given that stronger-than-expected economic growth didn't manage to push receipts above expectations. Instead, the increased surplus is based on unprojected spending cuts - which leads to questions both as to how corporate tax receipts have managed to go down, and as to where the Cons have been cutting funding beyond the environmental programs and other matters which were discussed around budget time. And these questions in turn give rise to one last theory: that the Cons are simply repeating as many buzzwords as possible in order to avoid answering the real questions raised by the update.