The federal government's recent announcement that its budgetary surplus was $9.1-billion last year - nearly five times the projection made by Finance Minister Ralph Goodale - has boosted demands for tax relief.

Until now, Paul Martin's government has remained steadfast in its opposition to reducing the taxes paid by Canadian families. His government's Throne Speeches were criticized for neglecting to make tax relief a priority and focusing instead on higher spending. On the campaign trail, Mr. Martin told Canadians they could either have more government spending - which he advocated - or they could have lower taxes, but not both.

But since the true size of the surplus was revealed, Mr. Goodale has started singing a new tune: "I will be very much looking for ways in which we can further reduce the tax burden on Canadians, particularly lower and middle-income Canadians." This is a welcome - if overdue - turnabout for the Liberal government.

Government spending restraint is not the cause of today's big surplus announcement - program spending has grown by 5 per cent a year since 2000 - rather, it is a structural over-taxation that has Ottawa swimming in cash. It exists because Ottawa continues to over-tax Canadians and will do so again this year, next year and in the years ahead.

A new opportunity to provide Canadians with broad-based tax relief has arrived: It is time to dramatically raise both the basic personal exemption (BPE) - which is the amount an individual earns before paying federal income taxes - and the spousal exemption, which stand at $8,012 and $6,784 respectively, to $15,000 over the next five years.

Canada's BPE is one of the lowest in the industrial world. As a result of this stinginess, Ottawa taxes people even at the bottom of the income scale. Why should the BPE be set at $15,000 It is approximately the amount earned in a year by a minimum wage worker. It is worth asking why government taxes people struggling to make ends meet or just entering the workforce, particularly when much of the tax paid by these workers is recycled back to them in the form of GST credits and other income-based benefit schemes. It would be far better if people were permitted to keep more of their hard earned money to provide for themselves and their families, free of meddling bureaucrats.

By setting both the BPE and spousal exemption at $15,000, individuals earning $15,000 or less and families with incomes below $30,000 will no longer pay any federal income tax. All other taxpayers will save $1,100 a year; and the tax bill of a dual-income family will fall by $2,200 and that of single-income families by $2,400.

Raising the BPE and spousal exemption to $9,000 next year means the federal government will forego approximately $4.4-billion in revenues. Setting the exemptions at $10,000, in 2006, will save workers $8.4-billion in taxes and remove 500,000 Canadians from the tax rolls. An increase to $11,500 will leave another $14.4-billion in the pockets of workers in 2007, and a jump to $13,000 will save taxpayers $20-billion in 2008. Reaching the $15,000 BPE target in 2009 represents a $28.2-billion tax cut if the spousal exemption is similarly increased. Such a change will remove 1.8-million Canadians from the tax rolls and, of course, benefit the remaining 13.8-million taxpayers.

Over 82 per cent of Canada's 22.3-million tax filers earn $50,000 or less and 97 per cent make less than $100,000. It is worth repeating that raising the BPE is a tax cut for all Canadians, albeit one that provides the greatest benefits to low- and middle-income earners. And spread over five years, it is relatively effortless for Ottawa to allocate the rising surplus and government savings to raise the two exemptions.

Raising the BPE combines smart fiscal policy with good social policy. Indeed, most Canadians will agree that providing tax relief for all Canadians with an emphasis on freeing low-income individuals from paying federal tax is very compelling policy.