The feds will spend more on interest payments this year than they collect in GST.
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Higher taxes and higher spending, that’s the only real message to take from Tuesday’s budget. Sure, Finance Minister Chrystia Freeland spoke about how the Trudeau government is making it so you can build a laneway house and that they will protect abortion, but tax and spend is the real message.
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The government tried to sell this budget as one that offered “fairness for every generation,” taking a particular aim at Gen Z and Millennials. They portrayed it as a document aimed at levelling the playing field for young people priced out of the housing market.
What this budget will really do is slow investment and job creation due to new taxes while piling up billions in new debt and debt charges — simply a tax on future generations for government spending today.
Deficits over the next five years are projected to be $25 billion higher than they were projected to be in last year’s budget.
Program spending by the government is now projected be $480.5 billion for the coming year, up $30 billion or 7% from the $450.3 billion they say they spent last year. On top of that, the government projects that they will spend $54.1 billion this year on interest charges on the debt.
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That means that 10.5% of every tax dollar that the Trudeau Liberals spend is going to just pay interest on an ever-growing debt.
The money we are now spending to pay the interest on our $1.25 trillion national debt could pay for the $6.6 billion we spend on the national childcare program eight times over. The debt interest payments are more than the government will send to the provinces for health care — $52.1 billion — and amount they expect to collect in GST this year.
“For the first time in a generation, we’re spending more on debt interest than on health care. That’s money for bankers and bondholders rather than doctors and nurses,” Conservative Leader Pierre Poilievre said.
Poilievre noted that the $40 billion added to the deficit amounts to $2,400 in new debt for every family in Canada.
Government spending increasing by 7% will only add to the inflationary pressures in this country. Statistics Canada announced Tuesday morning that inflation had increased to 2.9%, with rents up by 8.5% compared to a year ago, and gas up 4.5% before Trudeau’s carbon tax kicked in.
The spending increases from the federal government will make it harder for the Bank of Canada to lower interest rates in coming months.
To pay for all this spending, the budget calls for capital gains tax to increase. Right now, capital gains tax only applies to 50% of the gain, but under this change, it will apply on 66% of capital gains above $250,000 for an individual and on the entire realized gains for corporations.
The government believes this will generate $6.5 billion in new revenue this year and $20 billion over four years.
The government is unlikely to meet those revenue targets, but this tax increase will have a negative impact on the economy as investment moves elsewhere, meaning fewer jobs for the younger Canadians the Liberals say they are trying to help.
Freeland's 2024 budget to be 'worst since 1982': Former BoC governor David Dodge https://t.co/isi7p9WOth pic.twitter.com/Dye8VPXlTS
“I am confident that the measure we are putting forward today will not have a negative impact on business certainty or investment,” Freeland said during an Ottawa news conference.
That’s not what analysts are saying.
“Every dollar the government expects to subtract from the pockets of investors with this tax hike is a dollar of potential investment lost,” said Renaud Brossard, vice president at the Montreal Economic Institute.
That’s the real issue with this budget, Canada already has a productivity problem. We are poorer than our American neighbours while working the same hours due to this productivity gap.
Increasing the capital gains tax won’t attract new investment, it will chase away investment and jobs.
This budget wasn’t written to improve Canada’s economy, it was written to keep the NDP inside the coalition tent with the Liberals.
A budget written in orange ink that you get to pay for.
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