How a Trudeau-Mulcair Alliance Could Supplant Harper in Canada

  • Liberals and NDP could find common ground on taxes, transit
  • Incumbent Conservative seeks 4th term in Oct. 19 election

The most likely outcome of Canada’s Oct. 19 election is a minority parliament, a result that may foster an alliance between Justin Trudeau’s Liberals and Tom Mulcair’s New Democrats, the two main rivals to Prime Minister Stephen Harper’s Conservative Party.

Whether such an alliance can last, and stave off a quick return to the polls, depends on the two opposition parties finding common ground. Although the Liberals and NDP differ on many key issues, here are the major files on which they agree, and which could be among the first efforts of a joint government.

Democratic Reform

The Liberals and NDP are committed to changing how elections are run in Canada by ending “first-past-the-post,” a system that allows candidates to win a seat without a majority of votes. While they vary on what to replace it with, they agree change is necessary: Canada’s electoral rules consistently hand commanding majorities to parties who receive much less than a majority of the popular vote.

Small Business Taxes

Both parties favor a cut to the tax rate paid by small enterprises, to 9 percent from 11 percent. To be fair, so do the Conservatives. Such a reduction could be a first step for a joint Liberal-NDP government, if they can compromise on how quickly to move, and on whether to tighten rules to prevent high earners using the deduction as a way to split income, as Trudeau hopes to do.

Tax Increases on Oil

The two parties have campaigned on ending “fossil fuel subsidies” in a bid to bolster environmental credibility. They haven’t, however, specified the target subsidies, with one exception: The Canada Exploration Expenses deduction allows companies to write off exploration costs. The Liberals and NDP favor reining that in, to varying extents. The industry warns such a move could harm Canada’s conventional oil sector, given the recent collapse in commodity prices.

Stock options and start-ups

The NDP and Liberals would tax stock option benefits at a higher rate. Here again, the parties haven’t specified what they would do. Currently, 50 percent of options are considered taxable, with some exceptions. Prominent executives in Canada’s tech and startup sector say stock options are a crucial tool for a new, cash-poor venture to attract talent. Mulcair has pledged to change rules only for employees with more than C$100,000 ($77,000) in annual stock option benefits.

Transit and Infrastructure

The parties pledge new transit spending -- the NDP says C$1.7 billion over the next four years, the Liberals C$5.65 billion over the same period -- on top of what Harper’s government has already budgeted. They also aim their programs at cities and cast it as a form of stimulus or economic investment. The Liberals’ higher total was a key driver of their projected deficit. The NDP favors a balanced budget.

Income Splitting, TFSA and Old Age Security

The Family Tax Cut allows income splitting in single-income, two-parent households with children, where earnings can be shifted to a spouse to lower the total tax burden. Harper also hiked annual contribution limits on tax-free savings accounts, from C$5,500 annually to C$10,000. The NDP and Liberals would roll back both measures, along with change made by Harper to some old age benefits.

Canada’s Budget Watchdog

The parties are committed to beefing up the role of Canada’s Parliamentary Budget Officer. Harper created the watchdog role in 2006, his first year in office, only to later clash with the PBO over access to information on government spending. The NDP would make the watchdog a full officer of Parliament, while the Liberals pledge to make it “answerable only, and directly, to Parliament” and extend its powers to reviewing election pledges.

Payroll Taxes

The Conservatives plan to decrease the rate on employment insurance -- a mandatory payroll deduction for Canadian workers -- to C$1.49 per C$100 of insurable earnings in 2017, from C$1.88 currently. The NDP favors keeping the rate at C$1.88, while the Liberals would cut the rate to C$1.65. Splitting the difference would still leave it higher than the Conservatives’ proposed rate.

Public Broadcasting

Annual taxpayer funding for the Canadian Broadcasting Corp. stands at C$1.04 billion for 2015-2016, down 5.4 percent from 2006 when Harper took office. The NDP and Liberals propose to boost funding beginning in 2017-2018 -- an additional C$150 million annually from the Liberals, compared to an extra C$115 million annually from the NDP.

Aboriginal Women

A review by Canada’s national police force last year found 1,181 aboriginal women missing or murdered since 1980, with 225 of those cases unsolved. Mulcair has pledged to call a national inquiry in his first 100 days as prime minister, while Trudeau has pledged to launch one “immediately.” Harper has repeatedly rejected calls for an inquiry, saying there have been enough studies and government should instead focus on what it can do to protect aboriginal women.

Finally, Stephen Harper

The one thing New Democrats and Liberals unequivocally agree on? Removing Harper from office after nine years. Harper won his 2011 majority with just under 40 percent of the national vote, and is projected to finish below that figure in this campaign. He narrowly avoided being pushed aside by a coalition in 2008. This time around both rival parties have ruled out, if given the choice, allowing him to continue as Prime Minister.

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