Fraser Institute
Canadians should decide what to do with their money—not politicians and bureaucrats
From the Fraser Institute
By Jake Fuss and Grady Munro
Since taking office in 2015, the Trudeau government has expanded the federal government’s role in making decisions for individuals and families, rather than letting Canadians decide on their own. And with its latest federal budget, which it tabled last week, it once again decided that politicians and bureaucrats should determine what people want and need, rather than the people themselves.
Indeed, during its tenure the Trudeau government has introduced a slew of new programs (e.g. national dental care, $10-a-day day care), which have contributed to an expected $227.4 billion increase in annual federal program spending (total spending minus debt interest costs) from 2014/15 to 2024/25. And according to the budget, due to new programs such as national pharmacare, annual program spending will increase by another $58.4 billion by 2028/29.
In many cases the impetus for these new programs has been to increase people’s access to certain goods and services (most of which were already provided privately). But the Trudeau government has consistently ignored the fact that there are always two ways for the government to help provide a good or service—tax and spend to directly provide it, or lower taxes and leave more money in people’s pockets so they can make their own decisions—and instead simply opted for more government.
Consequently, Canadians now pay higher taxes. In 2014/15 (the year before Prime Minister Trudeau was elected), total federal revenues represented 14.0 per cent of the economy (as measured by GDP) compared to 16.6 per cent in 2024/25—meaning taxes have grown faster than the economy.
More specifically, the total tax bill (including income taxes, sales taxes, property taxes and more) of the average Canadian family has increased from 44.7 per cent of its income in 2015 to 46.1 per cent in 2023. That means the average family must work five extra days to pay off the additional tax burden.
And families are feeling the burden. According to polling data, 74 per cent of Canadians believe the average family is overtaxed. And while the Trudeau government did introduce tax changes in 2016 for middle-income families, research shows that 86 per cent of these families ended up paying higher taxes as a result. Why? Because while the government reduced the second-lowest federal personal income tax rate from 22.0 to 20.5 per cent, it simultaneously eliminated several tax credits, which effectively raised taxes on families that previously claimed these credits.
Finally, many Canadians don’t believe their tax dollars are being put to good use. When polled, only 16 per cent of Canadians said they receive good or great value for their tax dollars while 44 per cent said they receive poor or very poor value.
Simply put, the Trudeau government has consistently empowered politicians and bureaucrats to decide how Canadians should use their hard-earned money, rather than allowing individuals and families to make those decisions. With its 2024 budget, once again the Trudeau government has demonstrated its belief that it knows best.
Authors:
From the Fraser Institute
By Jake Fuss and Grady Munro
Per-person federal spending is expected to equal $11,901 this year. To put this into perspective, this is significantly more than Ottawa spent during the global financial crisis in 2008 or either world war.
The Trudeau government tabled its 2024 budget earlier this month and the contents of the fiscal plan laid bare the alarming state of federal finances. Both spending and debt per person are at or near record highs and prospects for the future don’t appear any brighter.
In the budget, the Trudeau government outlined plans for federal finances over the next five years. Annual program spending (total spending minus debt interest costs) will reach a projected $483. billion in 2024/25, $498.7 billion in 2025/26, and continue growing in the years following. By 2028/29 the government plans to spend $542.0 billion on programs—an 18.4 per cent increase from current levels.
This is not a new or surprising development for federal finances. Since taking office in 2015, the Trudeau government has shown a proclivity to spend at nearly every turn. Prime Minister Trudeau has already recorded the five highest levels of federal program spending per person (adjusted for inflation) in Canadian history from 2018 to 2022. Projections for spending in the 2024 budget assert the prime minister is now on track to have the eight highest years of per-person spending on record by the end of the 2025/26 fiscal year.
Per-person federal spending is expected to equal $11,901 this year. To put this into perspective, this is significantly more than Ottawa spent during the global financial crisis in 2008 or either world war. It’s also about 28.0 per cent higher than the full final year of Stephen Harper’s time as prime minister, meaning the size of the federal government has expanded by more than one quarter in a decade.
The government has chosen to borrow substantial sums of money to fund a lot of this marked growth in spending. Federal debt under the Trudeau government has risen before, during and after COVID regardless of whether the economy is performing relatively well or comparatively poor. Between 2015 and 2024, Ottawa is expected to run 10 consecutive deficits, with total gross debt set to reach $2.1 trillion within the next 12 months.
The scale of recent debt accumulation is eye-popping even after accounting for a growing population and the relatively high inflation of the past two years. By the end of the current fiscal year, each Canadian will be burdened with $12,769 more in total federal debt (adjusted for inflation) than they were in 2014/15.
You can attribute some of this increase in borrowing to the effects of COVID, but debt had already grown by $2,954 per person from 2014 to 2019—before the pandemic. Moreover, budget estimates show gross debt per person (adjusted for inflation) is expected to rise by more than $2,500 by 2028/29.
As with spending, the Trudeau government is on track to record the six highest years of federal debt per-person (adjusted for inflation) in Canadian history between 2020/21 and the end of its term next autumn. Why should Canadians care about this record debt?
Simply put, rising debt leads to higher interest payments that current and future generations of taxpayers must pay—leaving less money for important priorities such as health care and social services. Moreover, all this spending and debt hasn’t helped improve living standards for Canadians. Canada’s GDP per person—a broad measure of incomes—was lower at the end of 2023 than it was nearly a decade ago in 2014.
The Trudeau government’s track record with federal finances is one for the history books. Ottawa’s spending continues to be at near-record levels and Canadians have never been burdened with more debt. Those aren’t the type of records we should strive to achieve.
Authors:
From the Fraser Institute
Political developments in the U.S. over the past few years have substantially increased the risk of any investment that relies on unrestricted access to the U.S. market
Last week, the Trudeau government and the Ford government announced a new multi-billion dollar taxpayer-funded subsidy for Honda to expand its Alliston, Ontario plant to manufacture electric vehicles (EV) and host a large EV battery plant. Eventually, the direct and indirect subsidies could total $10 billion from the two governments.
The Honda announcement follows earlier deals with Northvolt, Stellantis and Volkswagen to build and operate EV battery and auto assembly plants in Ontario. According to the Parliamentary Budget Officer, these three deals may total $50.7 billion after accounting for the cost of government borrowing to finance the subsidies and foregone corporate tax revenue from tax abatements tied to production.
Clearly, if future taxpayers across the country (not just in Ontario) are to avoid a huge additional tax burden or suffer reductions in government services, a lot needs to go right for Canada’s EV industry.
In particular, there must emerge sufficient market demand for EVs so these “investments” in the EV auto sector will be fully paid for by future tax revenues from corporate and personal income taxes levied on companies and workers in the EV sector. During their joint announcement of the Honda deal, both Prime Minister Trudeau and Premier Ford ignored this elephant in the room while claiming that the Honda deal will mean 240,000 vehicles a year manufactured at the site and 4,200 jobs preserved, while adding another 1,000 jobs.
By way of perspective, in 2023 around 185,000 EV vehicles were sold in Canada—about 11 per cent of all new cars sold in Canada that year. This is considerably less than the target capacity of the Honda complex and the total expected production capacity of Canada’s EV sector once all the various announced subsidized production facilities are in operation. In contrast, 1.2 million EVs were sold in the United States.
The demand for EVs in Canada will likely grow over time, especially given the increased incentive the federal government now has to ensure, through legislation or regulation, that Canadians retire their gas-powered vehicles and replace them with EVs. However, the long-run financial health of Canada’s EV sector requires continued access to the much larger U.S. market. Indeed, Honda’s CEO said his company chose Canada as the site for their first EV assembly plant in part because of Canada’s access to the U.S. market.
But political developments in the U.S. over the past few years have substantially increased the risk of any investment that relies on unrestricted access to the U.S. market. The trade protectionist bent of Donald Trump, the Republican nominee in the upcoming presidential election, is well known and he reportedly plans to impose a broad 10 per cent tariff on all manufactured imports to the U.S. if elected.
While the Canada-U.S.-Mexico Free Trade Agreement ostensibly gives Canadian-based EV producers tariff-free access to the U.S. market, Trump could terminate the treaty or at least insist on major changes in specific Canadian trade policies that he criticized during his first term, including supply management programs for dairy products. The trade agreement is up for trilateral review in 2025, which would allow a new Trump administration to demand political concessions such as increased Canadian spending on defence, in addition to trade concessions.
Nor would the re-election of President Joe Biden immunize Canada from protectionist risks. Biden has been a full-throated supporter of unionized U.S. auto workers and has staked his administration’s legacy on the successful electrification of the U.S. transportation sector through domestic production. Given his government’s financial commitment to growing a domestic EV sector, Biden might well impose trade restrictions on Canada if Canadian exports start to displace domestic production in the U.S.
In short, Canadian politicians, most notably Justin Trudeau and Doug Ford, have staked the future of Canada’s heavily subsidized domestic EV sector on the vagaries of the U.S. political process, which is increasingly embracing “America First” industrial policies. This may turn out to be a very costly gamble for Canadian taxpayers.
Author:
-
Business1 day agoUN plastics plans are unscientific and unrealistic
-
Brownstone Institute1 day agoThe Teams Are Set for World War III
-
Education1 day agoSupport a young reader through the Tim Hortons Smile Cookie campaign
-
Alberta16 hours agoAlberta threatens to fight Trudeau government restrictions on Canada’s plastics industry
-
John Stossel2 hours agoWhy Biden’s Just Wrong: NO ONE “Knows How to Make Government Work.”
-
Opinion1 day agoThe Climate-Alarmist Movement Has A Big PR Problem On Its Hands
-
Automotive15 hours agoCanadian interest in electric vehicles falls for second year in a row: survey
-
Business5 hours agoWEF panelist suggests COVID response accustomed people to the idea of CBDCs