OTTAWA — Farm leaders say they are anxiously awaiting the Feb. 22 federal budget to see if farmers’ capital gains tax exemption escapes the Liberal axe.
Finance minister Paul Martin has said his first budget will not raise taxes but it will expand the tax base by closing loopholes.
For many farmers, that has raised the spectre of losing their once-in-a-lifetime $500,000 capital gains tax exemption.
“I think the biggest thing we’ll be watching is the capital gains exemption,” Jim Caldwell of the Canadian Cattlemen’s Association said last week. “Farmers need that.”
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The lobby to keep the exemption has been extensive.
When Canadian Federation of Agriculture president Jack Wilkinson met Martin early this month, he said it is an important tool for farmers considering retirement.
“Farms are operated as small businesses and capital invested in farms can be their lifetime savings,” Wilkinson said later. “The money available through capital gains exemptions represents money saved and acts as their RRSP.”
Within the Liberal caucus, there also has been pressure on Martin to spare the tax break.
On Feb. 11, veteran Ontario Liberal MP Don Boudria rose in the House of Commons to tell his own government to keep its hands off the farm capital gains tax break.
He said farmers in his riding fear a loss of the exemption and have been spending thousands of dollars to incorporate in order to minimize their risk.
Boudria told Martin to reassure farmers that their benefit is safe.
For his part, the finance minister spent last week trying to lower expectations about how much he will be able to do about the deficit in his first budget.
$45 billion deficit
He has said the deficit in the year ending March 31 will be close to $45 billion. In the budget year beginning April 1, he said, it will be difficult to get the deficit much below $40 billion.
The Liberals have promised that within three years, they will pare the deficit down to around $20 billion. This time, it is expected that Martin will end some tax breaks and announce cuts in some departmental spending.
Farm lobbyists say they expect the almost $1 billion in safety net spending will survive, although Agriculture Canada may face a further cut in operating funds.
For Caldwell and the cattle industry, what Martin does with the deficit is almost as important as what he does with farm program spending.
For the cattle industry that exports up to 44 percent of production, low interest rates and a low value for the dollar are very important.
