The Federal Conservative party promised tens of billions of dollars in new programs in the coming 4-5 years, plus talked about cutting GST and capital gains on reinvestment.  Reports from Ottawa now suggest that the tax promises will likely be delayed in the short term, if not for a long while.

Senior economists are quoted in several newspapers as saying that the capital gains tax plan is too complicated to impliment quickly. Like other tax programs, time is needed to plan, particularly given that the Tories expect that—at best—it will cost the government more than $150 million per year.  Other experts suggest the cost to be more in the realm of a couple of billion dollars per year.

Hence the Conservatives are motivated to drop their promise and go slow, in the hope of getting their policy right the first time out. This could include such limited rules as placement of a lifetime ceiling on capital gains exemptions.

A budget is likely from the new Finance Minister, Jim Flaherty, sometime in April.  Many expect there to be a slim budget surplus in the order of $1 - 2 billion in 2006, with growing surpluses in subsequent years.

Weighing heavily against tax-reducing policy is the commitment by Prime Minister Stephen Harper to remedy the perceived fiscal imbalance with the provinces. He talked about giving other levels of government greater control over their fiscal policy, the tax revenue base and so overall financial destiny. While the federal government runs surpluses, the provincial and local governments are running deficits and taking on increasing levels of debt.

Also as a carry-over from the Paul Martin Liberal government, with Mr. Emerson who is a living carry-over from one government to the next, the new Conservative team faces what many call a productivity gap and poor performance by the Canadian economy relative to other countries.

It’s not clear what answers proposed tax policy will provide to such fundamental and enduring questions as growth or productivity.  But Canadians know that income trusts are not the culprit towards which a single (and foolish) remedy can be easily targeted to get results.

The Conservatives will not be implementing their promised policies, one per day while in government, in the same way they delivered policy promises one per day during their campaign. There is work to be done by smart Canadians, regardless of the political stripes on Sussex Drive.