(Ottawa) The deficit is maintained
The rain of billions revealed during the budgetary striptease foreshadowed a significant increase in the deficit, but the Minister of Finance, Chrystia Freeland, managed to keep it below the 40 billion mark for the current financial year. Overall government spending reaches 537 billion and would exceed 600 billion in 2028-2029, according to government projections. True to form, he does not foresee any return to budget balance. The deficit should, however, decrease gradually, but its decline will be much slower than what the government predicted in last year’s budget. The deficit this year is expected to be 1.3% of gross domestic product (GDP) and the federal debt 41.9% of GDP.
New income
Minister Freeland is banking on an increase in revenues to avoid an explosion of the deficit. It relies in particular on the growth of the economy, but also tries to seek dollars from the better off. It digs into the pockets of the richest by increasing the taxable amount of capital gains. Gains over $250,000 made in a year will now be taxable at two-thirds instead of half. Gains made on the sale of a principal residence are exempt. The government estimates that this measure will allow it to raise $19.4 billion over five years even if it will only affect 0.13% of Canadians. Smokers will also have to pay more for their cigarettes or e-cigarettes. By increasing the excise tax on these products, the government hopes to raise 1.7 billion over five years.
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Solving the housing crisis
The federal government aims to add 3.87 million housing units across the country by 2031. Most of the measures had already been announced in recent weeks except that concerning the use of public land to build new buildings. Canada Post and National Defense will sell some of their properties so that housing can be developed there. In Quebec, this measure affects public buildings in Trois-Rivières, Beauharnois, Roxboro and Quebec. The government is allocating an additional $1.3 billion over four years to Canada’s strategy to combat homelessness. All housing measures, including those for the construction of new apartments and those to improve access to property, total 8.5 billion.
Focus on millennials and generation Z
The government is courting the vote of young adults born between the early 1980s and the 2000s. They are mentioned 14 times in the federal budget document. The government is targeting them directly with initiatives such as taking rent payment into account when calculating credit score, extending the amortization period for mortgages to 30 years and increasing the withdrawal limit to 60 000 under the Home Ownership Plan and the increase in loans and scholarships targets them. They are even mentioned in the paragraph on the right to disconnect where the government announces in the budget its intention to modify the Canada Labor Code.
New carbon tax rebate
The government responds to the Canadian Federation of Independent Business, which demanded an immediate reimbursement of the 2.5 billion in carbon tax collected from small and medium-sized businesses since 2019. Some 600,000 SMEs with fewer than 500 employees will be able to benefit from a new credit refundable tax. Quebec companies will not benefit from it since this federal pricing does not apply to Quebec which has its own carbon exchange, but it responds to criticism from conservatives who have made the elimination of this tax their main battleground. Federal carbon pricing applies in eight provinces and two territories. Like Quebec, British Columbia and the Northwest Territories also have their own system.
Replenish the defense
Unveiled with great fanfare last week, Canada’s new defense policy constitutes a major expenditure item in the federal budget. The government is allocating $8.1 billion over five years and $73 billion over the next 20 years for the Department of National Defense, the Communications Security Establishment and Global Affairs Canada. It thus plans to approach the objective of 2% of GDP set by NATO for military spending by reaching 1.76% by 2029-2030.