A big yawn is the reaction most Liberal MPs will give a recent economic report highlighting how the prosperity of Canadians has barely improved over the past 15 years. A study by the Toronto Dominion Bank found that between 1989 and 2004 Canada's per capita gross domestic product (which measures the nation's economic output) grew by 25.5 per cent; whereas the after-tax income per Canadian worker increased by an abysmal 3.6 per cent. The reason for this lopsided increase: Ever higher taxes, government policies that have not improved the economic well-being of citizens, and costly programs that waste tax dollars.

But what might wake government MPs up from their slumber is the report's co-author, TD's chief economist Don Drummond, who until now has been supportive of Liberal budgets in general, and Paul Martin in particular. Yet given how government spending has risen since the budget was balanced in 1998 and that Mr. Martin is unwilling to act fiscally responsible as prime minister, Mr. Drummond's advocacy for a lighter tax burden and smarter spending is not surprising. He worked at the Finance Department when Ottawa was trying to spend less and eliminate the deficit.

Ottawa once again has a spending problem. When the last budget was tabled in March 2004, Finance Minister Ralph Goodale said program spending would increase by 3.1 per cent this year. Yet when the books were updated in November - only eight months later - Mr. Goodale revealed spending will, in fact, grow by 6.5 per cent - more than a two-fold increase.

The prime minister and finance minister tell Canadians tax relief is not a priority, and continue to hang their government's hat on a five-year tax reduction program that was launched in the February 2000 budget - when Jean Chrétien was in charge. But just how big was that tax cut

When then-Finance Minister Martin announced the tax relief package in 2000, he and government MPs distorted the true size of the plan as a $100-billion tax cut. But in fact, $20.7-billion of this amount included the ending of bracket creep, which did not lower taxes but indexed tax brackets with inflation.

In addition, a $28-billion hike in Canadian Pension Plan premiums was not included. So while personal income taxes decreased they were partially offset by increasing CPP taxes over the same period. Finally, almost $6-billion in Canada Child Tax Benefit payments were incorrectly identified as tax relief, instead of being properly classified as government expenditure. The real five-year tax cut, fully implemented at the end of 2004, amounts to $46-billion. While this is an impressive figure and welcome news to taxpayers, it is a far cry from the $100-billion as advertised by the government.

Only a foolhardy politician would say the job of ensuring tax rates remain competitive or improving living standards of Canadians is done. But this is what Messrs. Martin and Goodale are saying when tax reform is an ongoing process, much like fixing health care or improving the readiness of Canada's Armed Forces.

The time for a new round of tax cuts - phase 2, if you like - has arrived and Ottawa's $9-billion surplus makes it easy to do. Indeed, a principle of taxation is that the tax code should generate revenues necessary to cover the cost of essential government programs and services, no more, no less. The high level of over-taxation has the federal government swimming in cash. Indeed, the surplus exists because Ottawa continues to over-tax Canadians and will do so again this year, next year and in the years ahead.

Broadly-based tax relief would leave more money in the pockets of taxpayers and improve the fortunes of families. It should be a budget priority for the government. If Mr. Martin and his colleagues decide to spend the entire surplus, Canadians will know the Liberals are asleep at the economic switch.