Can Somebody Please Care About Canadian Growth?

Published in The Hub

The federal election call has predictably triggered promises of tax cuts and handouts. These promises are a bait-and-switch. It could be a quick reverse—shortly after the election, the winner announces that a look at the books has revealed worse-than-expected numbers and forced a change in plans. Or, worse, the switch could be bigger and take longer—the new government finances the tax cuts and handouts with even bigger deficits that slow economic growth, squeeze programs, and push taxes up for years to come.

Canadians should demand that election promises be consistent with Canada’s economic and fiscal realities. The federal government already has a high debt burden, and things will get worse with President Trump’s tariff attack. Strategy must be aimed at bolstering Canada’s growth prospects within sustainable finances.

With annual costs from $5 billion to well over $10 billion, the personal income tax cuts promises of the Liberals, Conservatives, and NDP are particularly egregious uses of public funds for little economic benefit. All the proposals cut the marginal income tax rate, the driver of incentives to work, save, and benefit, for only a portion of taxpayers, and where the rate is already low. For everyone else, the relief is too much like the pre-election bribes that seem to be in style nowadays. And beneficiaries may rightly worry that debt-funded tax relief will not last.

Canadians should ask three questions about all election promises. Do they support work and investment? Do they make us more resilient against Trump’s aggression? And, critically, are they fiscally sustainable? We need to see how the parties’ plans add up—or not. Otherwise, the promises are bait, and a switch—fast and cynical or slow and painful—will follow.

By William B.P. Robson, President and CEO, and Don Drummond, a Fellow-in-Residence at the C.D. Howe Institute