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Economic progress stalling for Canada and other G7 countries

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From the Fraser Institute

By Jake Fuss

For decades, Canada and other countries in the G7 have been known as the economic powerhouses of the world. They generally have had the biggest economies and the most prosperous countries. But in recent years, poor government policy across the G7 has contributed to slowing economic growth and near-stagnant living standards.

Simply put, the Group of Seven countries—Canada, France, Germany, Italy, Japan, the United Kingdom and the United States—have become complacent. Rather than build off past economic success by employing small governments that are limited and efficient, these countries have largely pursued policies that increase or maintain high taxes on families and businesses, increase regulation and grow government spending.

Canada is a prime example. As multiple levels of government have turned on the spending taps to expand programs or implement new ones, the size of total government has surged ever higher. Unsurprisingly, Canada’s general government spending as a share of GDP has risen from 39.3 per cent in 2007 to 42.2 per cent in 2022.

At the same time, federal and provincial governments have increased taxes on professionals, businessowners and entrepreneurs to the point where the country’s top combined marginal tax rate is now the fifth-highest among OECD countries. New regulations such as Bill C-69, which instituted a complex and burdensome assessment process for major infrastructure projects and Bill C-48, which prohibits producers from shipping oil or natural gas from British Columbia’s northern coast, have also made it difficult to conduct business.

The results of poor government policy in Canada and other G7 countries have not been pretty.

Productivity, which is typically defined as economic output per hour of work, is a crucial determinant of overall economic growth and living standards in a country. Over the most recent 10-year period of available data (2013 to 2022), productivity growth has been meagre at best. Annual productivity growth equaled 0.9 per cent for the G7 on average over this period, which means the average rate of growth during the two previous decades (1.6 per cent) has essentially been chopped in half. For some countries such as Canada, productivity has grown even slower than the paltry G7 average.

Since productivity has grown at a snail’s pace, citizens are now experiencing stalled improvement in living standards. Gross domestic product (GDP) per person, a common indicator of living standards, grew annually (inflation-adjusted) by an anemic 0.7 per cent in Canada from 2013 to 2022 and only slightly better across the G7 at 1.3 per cent. This should raise alarm bells for policymakers.

A skeptic might suggest this is merely a global phenomenon. But other countries have fared much better. Two European countries, Ireland and Estonia, have seen a far more significant improvement than G7 countries in both productivity and per-person GDP.

From 2013 to 2022, Estonia’s annual productivity has grown more than twice as fast (1.9 per cent) as the G7 countries (0.9 per cent). Productivity in Ireland has grown at a rapid annual pace of 5.9 per cent, more than six times faster than the G7.

A similar story occurs when examining improvements in living standards. Estonians enjoyed average per-person GDP growth of 2.8 per cent from 2013 to 2022—more than double the G7. Meanwhile, Ireland’s per-person GDP has surged by 7.9 per cent annually over the 10-year period. To put this in perspective, living standards for the Irish grew 10 times faster than for Canadians.

But this should come as no surprise. Governments in Ireland and Estonia are smaller than the G7 average and impose lower taxes on individuals and businesses. In 2019, general government spending as a percentage of GDP averaged 44.0 per cent for G7 countries. Spending for governments in both Estonia and Ireland were well below this benchmark.

Moreover, the business tax rate averaged 27.2 per cent for G7 countries in 2023 compared to lower rates in Ireland (12.5 per cent) and Estonia (20.0 per cent). For personal income taxes, Estonia’s top marginal tax rate (20.0 per cent) is significantly below the G7 average of 49.7 per cent. Ireland’s top marginal tax rate is below the G7 average as well.

Economic progress has largely stalled for Canada and other G7 countries. The status quo of government policy is simply untenable.

Business

Canada needs serious tax cuts in 2026

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By Franco Terrazzano

What Prime Minister Mark Carney gives with his left hand, he takes away with his right hand.

Canadians are already overtaxed and need serious tax cuts to make life more affordable and make our economy more competitive. But at best, the New Year will bring a mixed bag for Canadian taxpayers.

The federal government is cutting income taxes, but it’s hiking payroll taxes. The government cancelled the consumer carbon tax, but it’s hammering Canadian businesses with a higher industrial carbon tax.

The federal government cut the lowest income tax bracket from 15 to 14 per cent. That will save the average taxpayer $190 in 2026, according to the Parliamentary Budget Officer.

But the government is taking more money from Canadians’ paycheques with higher payroll taxes.

Workers earning $85,000 or more will pay $5,770 in federal payroll taxes in 2026. That’s a $262 payroll tax hike. Their employers will also be forced to pay $6,219.

So Canadians will save a couple hundred bucks from the income tax cut in the new year, but many Canadians will pay a couple hundred bucks more in payroll taxes.

It’s the same story with carbon taxes.

After massive backlash from ordinary Canadians, the federal government dropped its consumer carbon tax that cost average families hundreds of dollars every year and increased the price of gas by about 18 cents per litre.

But Carney’s first budget shows he wants higher carbon taxes on Canadian businesses. Carney still hasn’t provided Canadians a clear answer on how much his business carbon tax will cost. He did, however, provide a hint during a press conference he held after signing a memorandum of understanding with the Alberta government.

“It means more than a six times increase in the industrial price on carbon,” Carney said.

Carney previously said that by “changing the carbon tax … We are making the large companies pay for everybody.”

Carney’s problem is that Canadians aren’t buying what he’s selling on carbon taxes.

Just 12 per cent of Canadians believe Carney that businesses will pay most of the cost of his carbon tax, according to a Leger poll. Nearly 70 per cent of Canadians say businesses will pass most or some of the cost to consumers.

Canadians understand that it doesn’t matter what type of lipstick politicians put on their carbon tax pig, all carbon taxes make life more expensive.

Carney is also continuing his predecessor’s tradition of automatically increasing booze taxes.

Ottawa will once again hike taxes on beer, wine and spirits in 2026 through its undemocratic alcohol tax escalator.

First passed in the 2017 federal budget, the alcohol escalator tax automatically increases federal taxes on beer, wine and spirits every year without a vote in Parliament.

Federal alcohol taxes are expected to increase by two per cent on April 1, and cost taxpayers $41 million in 2026. Since being imposed, the alcohol escalator tax has cost taxpayers about $1.6 billion, according to industry estimates.

Canadians are overtaxed and need the federal government to seriously lighten the load.

The biggest expense for the average Canadian family isn’t the home they live in, the food they eat or the clothes they buy. It’s the taxes they pay to all levels of government. More than 40 per cent of the average family’s budget goes to paying taxes, according to the Fraser Institute.

Politicians are taking too much money from Canadians. And their high taxes are driving away investment and jobs.

Canada ranks a dismal 27th out of 38 industrialized countries on individual tax competitiveness, according to the Tax Foundation. Canada ranks 22nd on business tax competitiveness. Canada is behind the United States on both measures.

A little bit of tax relief here and there isn’t going to cut it. Carney’s New Year’s resolution needs to be to embark on a massive tax cutting campaign.

 

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DOOR TO DOOR: Feds descend on Minneapolis day cares tied to massive fraud

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MXM logo MxM News

Federal agents are now going “DOOR TO DOOR” in Minneapolis, launching what the Department of Homeland Security itself describes as an on-the-ground sweep of businesses and day-care centers tied to Minnesota’s exploding fraud scandal — a case that has already burned through at least $1 billion in taxpayer money and is rapidly closing in on Democrat Gov. Tim Walz and his administration.

ICE agents, working under the umbrella of the Department of Homeland Security, fanned out across the city this week, showing up unannounced at locations suspected of billing state and federal programs for services that never existed. One day-care worker told reporters Monday that masked agents arrived at her facility, demanded paperwork, and questioned staff about operations and enrollment.

“DHS is on the ground in Minneapolis, going DOOR TO DOOR at suspected fraud sites,” the agency posted on X. “The American people deserve answers on how their taxpayer money is being used and ARRESTS when abuse is found.”

Authorities say the confirmed fraud already totals roughly $300 million tied to fake food programs, $220 million linked to bogus autism services, and more than $300 million charged for housing assistance that never reached the people it was meant to help. Investigators from the FBI, Justice Department, and Department of Labor have now expanded their probes after a viral investigation exposed taxpayer-funded day cares that received more than $1 million each while allegedly serving few — or zero — children.

One of the most glaring examples, the Minneapolis-based Quality “Learing” Center — infamous for its misspelled sign — suddenly appeared busy Monday as national media arrived. Locals told reporters the center is typically empty and often looks permanently closed, despite receiving about $1.9 million in public funds. State inspection records show the facility has racked up 95 violations since 2019. Employees allegedly cursed at reporters while children were bused in during posted afternoon hours.

DHS officials say the “DOOR TO DOOR” operation is deliberate. In videos released online, agents are seen questioning nearby business owners about whether adjacent buildings ever had foot traffic, whether they appeared open, and whether operators used subcontractors or outside partners to pad billing. DHS Secretary Kristi Noem posted footage of agents pressing workers about business relationships and transportation services used by suspected fraud sites.

“This is a large-scale investigation,” DHS Assistant Secretary Tricia McLaughlin told the New York Post, confirming that Homeland Security Investigations and ICE are targeting fraudulent day-care and health-care centers as well as related financial schemes.

FBI Director Kash Patel warned that what investigators have uncovered so far is “just the tip of a very large iceberg.” He pointed to the bureau’s dismantling of a $250 million COVID-era food-aid scam tied to the Feeding Our Future network, a case that resulted in 78 indictments and 57 convictions. Patel has also made clear that denaturalization and deportation remain on the table for convicted fraudsters where the law allows.

Dozens of arrests have already been made across the broader scheme, many involving Somali immigrants, though federal officials stress the investigation targets criminal behavior — not communities. Some local residents say the scandal is hurting law-abiding families. One Somali Uber driver told reporters he works 16-hour days and is furious that “some people are taking advantage of the system,” making the entire community look bad.

Now, with federal agents going “DOOR TO DOOR” across Minneapolis, the era of polite indifference appears to be over. The message from Washington is blunt: the money trail is being followed, the paperwork is being checked, and the days of treating taxpayer-funded programs like an open vault are coming to an end.

 

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