Another budget in red ink
A deficit is still on the horizon. Finance Minister Chrystia Freeland expects it to reach $40 billion this year and gradually decline to $14 billion in five years. No return to balanced budgets is expected. Government spending, which exceeds $490 billion in 2023-2024, will continue to increase year on year. The deficit this year is expected to be 1.4% of real gross domestic product (GDP), adjusted for inflation, and the federal debt 43.5% of GDP. Despite the economic uncertainty, Ottawa expects these two indicators, which measure the health of public finances, to improve.
A boost for groceries
The government will continue to double the GST tax credit as New Democrats demanded. This $2.5 billion measure is billed as “a new grocery rebate,” although it’s not entirely new. It aims to give some respite to people whose incomes are low or modest while the inflation rate of the grocery bill remains above 10%. Eligible people will therefore be able to receive a single amount of up to $467 for couples with two children, up to $234 for single people and $225 on average for seniors.
Boost clean electricity production
The government expects electricity demand to double by 2050. The budget provides $6.3 billion over four years starting in 2024-2025 to fund a 15% refundable tax credit for clean electricity production . This incentive, which is inspired by theInflation Reduction Act adopted by the Biden administration in the United States, aims to stimulate the production of electricity without greenhouse gas emissions. Crown corporations, such as Hydro-Québec, will be entitled to it as much as the private sector. The aim is to send a clear and predictable signal to the market, argued a senior government official.
Dental care: implementation continues
The federal dental care program turns out to be more expensive than expected. The government plans 13 billion over five years, almost double what it budgeted last year for its implementation. It will be accessible to everyone under 18, seniors and people with disabilities at the end of 2023. All people with a family income of less than $90,000 annually will have access in 2025. This is the one of the key measures of the agreement reached between the Liberals and the New Democrats to allow the minority government of Justin Trudeau to remain in power until 2025. No money is provided for drug insurance, another key demand of the New Democratic Party (NDP).
housing for aboriginals
The budget provides $4 billion over seven years for the development of a housing strategy for aboriginal people living off reserve in urban, rural or northern settings. The money will be paid to the organizations that help them through the Canada Mortgage and Housing Corporation starting in 2024-2025. The government provides 300 million in the first year and 500 million in subsequent years. Only 1.9 billion is budgeted until 2027-2028.
Make the richest pay
The government is modifying the application of the alternative minimum tax (AMT) to prevent the wealthiest from reducing their tax bill to the maximum thanks to all kinds of deductions. He hopes to raise revenues of 3 billion over five years by increasing this minimum tax from 15 to 20.5%. It also changes the income bracket to which the AMT would apply, increasing it from $40,000 to $173,000 per year. The government wants the wealthiest to pay their fair share of taxes while allowing middle-class individuals to loosen their belts.
Aid to Ukraine
The Canadian government will continue to support Ukraine in 2023 with an additional $2.4 billion loan administered through the International Monetary Fund. No new military aid is planned to counter the Russian invasion other than the 200 million already planned for 2022-2023. An envelope of $84.8 million is planned for 2023-2024 for humanitarian aid. This is not new money, but a reallocation of funds already allocated to the Department of Global Affairs. The government is also planning an additional $171.4 million over three years to extend the recently announced temporary immigration program for Ukrainians.