In Canada, new budget package pleases business, but riles the opposition

Canada's Progressive Conservative government has presented a budget that the opposition says favors business and the rich. The middle class faces higher income taxes. Everyone will pay more for everything from gasoline to pet food.

Investors, from farmers to stock market players, will not pay tax on the first half a million dollars of capital gain. This is expected to boost investment by getting Canadians, who are big savers in banks and term deposits, to put some of that money into business enterprises.

Like conservative policies in Britain and the United States, Ottawa hopes that enterprise and initiative will help Canada's sluggish economy with its problems of a huge deficit and high unemployment.

But there's a hitch. Instead of a tax cut, which President Reagan gave high-income earners, the Conservatives have hit Canadians whose income exceeds $40,000 ($28,800 US) with higher taxes. For the next 18 months, they are to pay a 10 percent temporary surtax to begin to reduce Canada's deficit. Corporations will be subject to the surtax for one year.

Canada's budget deficit for the year ended March 31 was $35.8 billion, which on a per capita basis is bigger than the US deficit. This budget is designed to reduce the Canadian deficit to $33.8 billion this year.

Michael Wilson, the minister of finance, hopes the effort to stimulate investment will create jobs. Canada's unemployment rate is 11 percent. Small business is happy with incentives that will, among other things, allow retirement programs -- similar to Individual Retirement Accounts in the US -- to be invested in firms. ``It's absolutely a blockbuster of an initiative for small business,'' says John Bulloch, president of the Canadian Federation of Independent Business.

Other budget measures included a 2-cents-per-liter increase in the price of gasoline (or 9 cents a gallon); the imposition of federal sales tax on soft drinks, pet foods, and beauty aids; and the elimination of 15,000 federal civil service jobs by 1990, mostly through attrition.

One middle-class tax break that allowed people to put money aside tax-free in an IRA-style account to save for a house or furnishings has been abolished. On the other hand, the maximum donation allowed to a tax-free retirement plan has been raised from $5,500 to $7,500.

There had been criticism of the Conservative government that 8 months into its mandate it had done little but talk, that Prime Minister Brian Mulroney was more interested in popularity than policy. The budget has changed some of that, giving the government a pro-business, pro-free-enterprise face.