The Trudeau government keeps blowing past its own program expense projections - "Since COVID-19, the federal government’s budgets have cumulatively upwardly revised program spending projections in a major way. Between budgets 2021 and 2024, program spending projections for the three fiscal years between 2022-23 and 2024-25 were consistently revised upwards by a cumulative amount of $142.8 billion... “There is a very significant, measurable, empirical shift from a smaller government under both the Conservatives and the [previous] Liberals…to today,” says Ian Lee, professor in the Sprott School of Business at Carleton University, referring to the previous government of prime minister Stephen Harper and the Liberal governments of prime minister Jean Chrétien and Paul Martin lasting from 1993 to 2006... he says the Trudeau government should take a page from the Chrétien government's playbook. During Canada's fiscal recovery in the 1990s, that government would project almost too conservatively. “It was almost the mirror image of what we’re seeing here,” said Gray. The result, he describes, was a perceived surplus and a more favourable trading environment for Canada."
Federal budget 2024: Freeland to present new spending plan - "Remarking on the expectation of some form of individual wealth tax, and or excess profit taxes in today's budget, former Bank of Canada governor David Dodge said the fiscal document is "likely to be the worst" in decades and "pointing us in the wrong direction," when it comes to economic growth... backed by his caucus and in front of a placard that read “fix the budget” — Conservative Leader Pierre Poilievre said in so many words that Canadians can’t afford what’s coming... Prime Minister Justin Trudeau was emphatic on Monday, while speaking to a business crowd about what's to come, that his government feels now is the time to make investments(opens in a new tab) in housing, job growth, and other affordability measures preoccupying the minds of many pinched millennials and Generation Z."
Left wingers see social spending as "investment". They don't understand the difference between capex and opex
Freeland to present 2024 federal budget, promising billions in new spending : r/canada - "Comparing Trudeau 1 and 2 vs every other PM ever, and no matter how spending-happy another PM may have been they all seem hyper-conservative compared to the Trudeau family. Hopefully, Canadians will remember this when Trudeau 3 takes their turn at the plate for draining the economy."
"I'm not sure what will be left of their father's 'post-nation' by the time one those toffs is crowned king or queen of the Liberals."
"The Trudeaus have been a plague on this country. It took us 50 years for Canada to recover from his father. I think we would be incredibly lucky to get off so easy after Justin."
Pierre Poilievre, "The Budget" on April 16th, 2024 - "Mr. Speaker, this is the ninth deficit budget since the Prime Minister said that budgets balance themselves. Everything he spends money on only gets worse. He promised that these deficits would make housing affordable. Then rent, mortgage payments and down payments for buying a home doubled. He said that food would become more affordable. Now it costs 30% more, and one in four children do not have access to a nutritious meal. After nine deficits, the government is rich and the people are poor... This is the ninth deficit after the Prime Minister promised the budget would balance itself, and what did he do with the money? Everything he has spent on has become more expensive. He has doubled the rent, doubled mortgage payments, doubled the needed down payment for a home and forced 3,500 homeless encampments. In Halifax alone, one in four kids cannot afford food, and now he is adding $40 billion of new debt and new spending, which is $2,400 of new inflation. That is why common-sense Conservatives will be voting against this pyromaniac firefighter who is pouring fuel instead of water on the inflationary fire he has set."
The Hub Reacts to the 2024 federal budget - "The deficit will sit at $39.8 billion this year, with a plan for it to drop to $20 billion by 2028. No path back to balance was projected. While the suspected wealth tax or excess profit tax did not appear, the government will seek to gain $19.3 billion in revenue over the next five years through an increase in the capital gains tax for corporations and Canada’s highest earners. The Liberals also promised to build 3.9 million homes by 2031... “This prime minister is not worth the cost,” said Conservative leader Pierre Poilievre...
Yesterday’s federal budget showed again—as if it were needed—that this government is not serious about public finances. It was late, given that the 2024/25 fiscal year started more than two weeks ago. It buried the numbers on revenue, expenses, deficit, and debt that ought to be upfront under 350-plus pages of spin. And while the numbers themselves look serious—relentlessly rising taxes and spending, chronic deficits, and interest eating ever more revenue—we have no reason to believe them. Why would we? The government’s first projections for the current budget year of 2024/25 were in its 2019 fall economic statement. That statement showed federal spending of $421 billion in 2024/25. The government presented no budget at all in 2020—more evidence of unseriousness—and its 2020 fall statement removed some pension costs from the presentation—yet more evidence. But if we add those pension costs back, the 2020 statement showed spending in 2024/25 at $429 billion. That was a small sign of bigger things to come. The 2021 fall statement projected 2024/25 spending at $465 billion. The 2022 fall statement said $505 billion. The 2023 fall statement said $522 billion. Yesterday’s budget shows 2024/25 spending at $538 billion—an eye-popping 28 percent more than what the government projected in 2019. Are other projections in the 2024 budget any more believable? The main defence against further rises in the ratio of federal debt to GDP is additional revenue from higher capital gains taxes, the digital services tax and a global minimum tax. But, the digital services tax may never be implemented, and the legislation for the capital gains tax increases and the global minimum tax is not even written. Notwithstanding rhetoric about fairness for all generations, the likely outcome is bigger deficits and an even heavier debt load on the young. Canadians need many things from future federal governments, and treating public finance as though it matters heads the list. Tax hikes, rising debt and interest charges—these threats to our already stagnating living standards would not exist if the government did not now plan to spend $117 billion more than it projected in 2019. We need governments that take budgets seriously...
A proposed increase to the capital-gains inclusion rate from 50 percent to 67 percent. For individuals, this new inclusion rate applies to all capital gains over $250,000 per year. For corporations it applies to all capital gains. The government notes that this increase will only be relevant for fewer than 1 percent of taxpaying individuals. The bigger concern is that for corporations this higher inclusion rate amounts to an increase in the effective corporate tax rate, and thus an additional disincentive for Canadian businesses to invest—at a time when Canada’s low investment rate is already a primary cause of our low productivity levels and growth rates. Overall, though, the bigger negative for this budget is at the macro level in how the various measures all add up. The federal government is showing itself to be both lazy and imprudent in budget 2024. The laziness is reflected in the government’s unwillingness to cut spending on low-priority items as it introduces new spending programs. The obvious result is the need for larger budget deficits or higher taxes, or both. The government states that it is continuing to find and redeploy $15.8 billion worth of spending over five years. But in an overall budget of $500 billion per year, $3 billion annually is a drop in the bucket. Instead of doing the more difficult work of seriously reviewing the many existing programs and cutting the ineffective ones, the government took the easier route of simply expanding its total spending and having ongoing budget deficits...
Budget 2024 continued a long tradition for the current federal government: increasing spending above and beyond its own previous plans. We have seen this ratcheting-up in each and every budget, year after year, both before the COVID-19 pandemic and now long after... But regardless of whether one agrees or disagrees with any particular spending decision, the ability to focus on and deliver on what the government itself commits to is clearly in short supply. That should be concerning for more than just the fiscal consequences. It may mean that the quality of public services is undermined as the government shifts its focus to rolling out one new program after the next. And, perhaps most unfortunately, it risks undermining public confidence in the government’s own projections. After all, they’re almost guaranteed to be tossed within a matter of months...
Instead of making it easier for landowners to decide they’d like to sell their land to developers for development, they’re going to increase the inclusion rate–the portion of capital gains on which tax is paid–from 50 percent to 66 percent. This of course makes it more expensive for landowners to sell their land. We can expect this to have a material negative effect on land transactions and a concomitant reduction in new housing development. Given that housing in Canada is very expensive and that it’s very expensive because there’s not enough of it, this policy change will help make a bad situation much worse...
Canada arguably has very little fiscal room to buffer a recession or exogenous shock...
Budget 2024 is a remarkable document in that it continues an upward ride in federal spending that is divorced from the country’s long-term economic productivity fundamentals... missing here are the dynamic effects of an increase in capital gains and corporate taxes on economic activity. After all, higher tax rates alone will not be enough to raise revenues, if new wealth is not created. While expenditure forecasts are likely to be revised upwards, expect to see the revenue projections scaled back as the year unfolds. After all, how can Canada expect to see federal revenues rise faster than expenditures in an environment of declining productivity and rising taxes? There really are no words to describe the ride we have embarked on."
EDITORIAL: No free lunches — even for unicorns - "Like the other costly programs Prime Minister Justin Trudeau is foisting on the provinces, the latest national school food program is long on promises, short on details — and very big on costs. The program announced last week will cost $1 billion over five years and will, according to Trudeau, deliver meals to 400,000 children per year by the 2024-25 school year. And it’s doing so, apparently, by bypassing provincial governments. Trudeau and the Liberals are chasing unicorns. Magically, they expect us to believe that by September, the federal government — which has no mechanism by which it can deliver local programs — will set up kitchens, food storage and refrigeration and employ the staff in schools that don’t already have these programs. It’s starting to look as if the government sees itself as mommy and daddy to the nation’s children. Its $10-a-day daycare, an unnecessary Pharmacare plan, a costly dental plan and now his pledge to feed all students across the country — whether they need it or not — all send the message that the government considers itself better than parents when it comes to raising kids. Do you really want to put the people who brought you the $60-million ArriveCAN boondoggle in charge of feeding your children? If so, the lion’s share of the cash will go to cozy insiders and your kids will get the slops. This government doesn’t have a good track record of getting value for your tax dollars."
Obviously, if you think this is a bad idea, you're a heartless monster
Poll suggests half of Canadians have negative opinion of latest Liberal budget - "Just shy of half the respondents to Leger’s latest survey said they had a negative opinion of the federal budget, which was presented last Tuesday. Only 21 per cent said they had a positive opinion... Almost half the respondents, 47 per cent, said they want to see the government cut back on spending and programs to get the budget balanced as quickly as possible."
Chrystia Freeland vows to find the real killer of middle class dreams - "Finance Minister Chrystia Freeland is now justifying tax increases by quoting from a U.S. Supreme Court decision almost a hundred years ago. “Taxes are what we pay for civilized society,” wrote Oliver Wendell Holmes in a 1927 decision. Federal U.S. tax in 1927 was in the low single digits, according to the Tax Foundation, an American organization that focuses on tax policy, as opposed to Canada today where the rate is anywhere from 15-33 per cent. Perhaps the increase is because we are having to pay more for that civilization. Another explanation is that governments, particularly this Liberal one, have forgotten what fiscal prudence entails... But if Freeland is going to lecture Canadians with a 1927 quote from Wendall Holmes, she might want to see if there are any other lessons she can learn as finance minister from the U.S. budget of the same year. In his 1927 Budget Message, President Calvin Coolidge began by remarking on the large number of tax reductions that had taken place over the previous six years. Tax cuts. Imagine. The Liberals have claimed to cut taxes for the middle-class but as the Fraser Institute has noted, it’s all smoke and mirrors. Eliminating a variety of tax credits, as the Liberals have done in recent years, offsets any gains in a lowering of personal income tax rates. “Despite claims to the contrary, Ottawa has increased personal income taxes on the overwhelming majority of middle-class Canadian families,” the Fraser Institute noted in a report in 2022. The U.S. 1927 budget went on, “Our housing problems are being cared far.” A far cry from today where even Justin Trudeau and Freeland admit that the dream of affording a home is out of reach for too many people — even after, or because of, eight years of Liberal politics. In 1927, Coolidge also enthused about the balanced budget. “To jeopardize our balanced budget,” said Coolidge, “is unthinkable.” Before being elected the Liberals promised a balanced budget by 2019/20. It never happened, of course. Instead, it was one deficit after another, after another, with no end in sight. For Coolidge, a balanced budget was a necessity... “We have provided for adequate national defence,” proclaimed Coolidge... When the finance minister tells you that after eight years of Liberal policy, the deck is stacked against young people and a middle-class life beyond them, you might want to believe her because it is her government that put it out of reach. And now Freeland is pontificating about increased taxes paying for our civilization — the one where young people can’t afford a home."
A government with no priorities, no anchors, and when it comes to growth, no clue - The Globe and Mail - "“The Canadian economy,” boasts the Trudeau government’s latest budget, “is doing better than expected.” Who expected it to do how much worse is left unsaid. But as the budget notes defiantly: “Our economy is growing.” Why, in fourth-quarter 2023, real GDP grew by – wait for it – “1 per cent on an annualized basis.” Barely moving, but … better than expected! It remains unclear whether the government is unaware of how badly Canada’s economy has actually been performing, or whether it does not care, or whether it just does not know what to do about it. Possibly, it is a little of all three. But faced with what is now generally conceded to be a growth crisis – an economy that, in per capita terms, has been shrinking for several quarters, stagnating for several years, and losing ground to other developed economies for several decades – the government has produced yet another budget with no serious proposals to address it. Certainly, there is plenty in the budget’s 430 pages addressed to everything else. As with its previous budgets or fall economic statements, the government has seized the opportunity afforded by the passage of a few months to add tens of billions annually to spending, even as it continues to pretend that spending is under control. The trick, as I’ve tried to show on previous occasions, is to issue a series of multiyear projections in which spending always slopes ever so gently up, hoping no one will notice when the whole curve is periodically, and violently, wrenched skyward. The chart accompanying this column shows the results. Spending over the next several years is now projected to average $16-billion annually more than the track laid out in Budget 2023, and nearly $40-billion a year more than in Budget 2022... Assume that these projections are of any greater worth than all previous. How was this accomplished? Not, as we can see, because of some new commitment to fiscal discipline. Rather, it was by the simple expedient of raising taxes... Without this windfall, I calculate the deficit in the current fiscal year would be nearly $47-billion, versus the $40-billion forecast, leaving the debt-to-GDP ratio slightly higher, not lower, than last year’s 42.1 per cent. It’s not the end of the world either way, of course. But it is hardly the sort of thing a government would do if it were actually interested in encouraging investment, productivity or growth. (Or fairness, for that matter: The reason capital gains are not taxed at the full rate is in recognition of the tax already paid on the same income at the corporate level, a fact the budget somehow neglects to mention.) Indeed, there is not a single measure in the budget aimed at boosting investment generally – as opposed to the usual slew of measures aimed at diverting investment into the government’s favoured sectors: artificial intelligence, “clean” technologies and so on. Whatever their individual merits or demerits (we seem no closer to becoming a world power in AI, for all the money the government is throwing at it, than we are in electric-vehicle batteries), the notion that you can put a $3-trillion economy on a measurably higher growth track – let alone the kind of radical acceleration needed, in the face of Canada’s accumulating fiscal challenges – with a handful of tax credits, subsidies and state-directed investment funds is simply comical. A similar sense of inadequacy pervades the document. There are some useful-sounding measures to increase the supply of housing (and some not-so-useful measures to increase the demand) but nothing like on the scale required. Defence spending will get a boost, but nowhere near as much, or as soon, as the gathering world security crisis demands. If you have a hundred priorities, it is said, you have none. Having spread itself so thin, budget after budget, on less urgent matters, the government finds itself without the capacity to act on the two or three things that really demand its attention. Assuming it even had any intention of doing so."
Armon Shokravi on X - "Bad day for Entrepreneurship in Canada 🇨🇦👎. Capital gains tax rate is increasing from a 50% inclusion to 66%. This increases the net capital gains tax rate from 27% to 36%... Compared to the US which has a 20% capital gains tax rate (+ major incentives like QSBS) In my conversations with Canadian entrepreneurs, it's clear: They're feeling less motivated to build businesses here when moving just a bit south could mean saving a lot more."
Changes to capital-gains tax may prompt doctors to quit, CMA warns - The Globe and Mail - "The first $250,000 of capital gains will continue to be taxed under an inclusion rate of 50 per cent for individuals. But for corporations, the new 67-per-cent rate will kick in on the first dollar of capital gains. This is important for physicians because most operate their practices as small businesses through medical professional corporations, which leaves them more sensitive to changes in capital-gains rules than a salaried worker might be. The CMA estimated in 2017 that 66 per cent of physicians practised through corporations."
Michael Warner on X - "~60K/307K corporations affected by capital gains changes are medical professional corps typically owned by individual MDs as their primary means of saving for retirement. Irrespective of where you side on the issue it's misleading to say that only 40,000 individuals are affected. To be clear, the 250K threshold is not available to physicians and other professionals who rely on corps for retirement. The higher tax rate applies to the first and every subsequent dollar of CG earned."
Ann Rolle 🍎🍏 on X - "End result: Canada loses more doctors. We can’t afford another hit on our healthcare system."
Damn conservative governments underfunding healthcare!
Why raising capital gains taxes makes sense—yes, really - "If profits are paid out as dividends, then a complicated formula leaves about 45 cents on the dollar in after-tax income for the individual. (Notice, this is very similar to the 47 cents on each dollar in wages paid to a high-income individual!) But if the firm buys back some shares, then, as we saw above, 54 cents on the dollar in after-tax income is received by the individual. That creates a bias towards paying out corporate value through capital gains rather than dividends. The trick to achieving equal treatment is to set the inclusion rate so roughly the same amount will be left for an individual after all taxes have been paid. It turns out, that’s roughly two-thirds"
We all benefit from lower capital gains taxes—even if you’re not rich - "Most observers, rightly so, have framed the measure as a tax on the so-called “ultra-wealthy”. In fact, the Liberal Party’s official X account used those exact words. It has since precipitated a predictable debate about tax fairness, redistribution, and so on... This line of thinking draws on the famous tax policy idea that “a dollar is a dollar is a dollar.” Why should one dollar be taxed differently than another? What the proponents of this policy thinking seem to overlook is how important capital is to the productivity of an economy, and as importantly—in the context of this budget in particular—to the creation of housing... To increase taxes on capital is to invariably decrease these spillover effects and the benefits derived from secondary recipients and the economy and society as a whole. This is particularly true when we consider the housing crisis the country is currently facing. The crisis itself is in large part a result of insufficient capital. The secondary losers are the average Canadian family who currently can’t afford a home. Ahead of this budget, the Trudeau government received significant praise for its bold Canada Housing Plan for recognizing the problem. Yet missing from that plan was something that seemed like an unintentional omission: any mention of the fact that housing only gets built when risk-taking individuals put their own capital at risk as the equity required to finance any new development. It’s as if the government had failed to understand that housing—like any other product or service in the economy—does not get produced without capital. This budget confirmed that lack of understanding. Previous housing strategies—including the most recent Conservative election platforms from the 2019 and 2021 elections—have recognized that capital is so critical to housing creation that they proposed policies to significantly reduce, and almost eliminate, capital gains taxes on real estate transactions (so long as the proceeds are reinvested into real estate). The intent of this policy would have been to promote the sale of land for development and to promote the reinvestment of any proceeds back into the creation of new housing. Instead, in this budget the government has chosen quite the opposite... Let’s not be surprised when less of that capital is made available. Research on the deleterious effects of taxes on capital is well established. It’s intuitive after all. It’s the same principle that underpins the Trudeau government’s carbon tax policy. If you tax something, all things being equal, you will get less of it."
