Fiscal and Tax Policy - Op Eds

The 2015 federal election heralded a new approach to federal fiscal policy. Serious was out. Spending only as much as revenue would cover was not cool. Unserious was in. Deficits were the new thing.

That was inevitable during the pandemic. For a time, the government could reasonably claim that hundreds of billions of debt-financed spending were needed responses to sickness and lockdowns.

But the COVID measures are behind us. The 2023 fall economic statement from Finance Minister Chrystia Freeland on Tuesday underlines that the federal government is not serious about managing our money. Yet again, the update has revealed previous fiscal projections as meaningless, with tens of billions of new spending layered on…

In public policy, as in life generally, we often recognize mistakes by others more easily than we recognize mistakes we make ourselves. Italy just goofed big-time with a windfall tax on its banks, and Canadians should take notice.

Last month, the coalition government of Italian Prime Minister Giorgia Meloni announced a surtax of 40 per cent on the profits of the country’s banks. The announcement triggered a crash in bank stocks – a loss of €10-billion in a single day – and a storm of criticism from investors, economists and elected representatives, including members of the coalition.

Ms. Meloni’s government has since backtracked, capping the amount at 1 per cent of bank assets, and exempting smaller banks. But the…

There’s been rampant inflation in Canada since early 2021. And while money losing its purchasing power hurts on its own, tax provisions that ignore inflation can multiply the pain for Canadians.

Inflation interacts with various tax provisions, often increasing their bite, with little transparency or legislative oversight. This happens in many ways, notably when prices and incomes rise, but the thresholds for determining tax payable and tax credits do not.

For example, if income tax brackets do not rise with inflation, people whose wages have simply grown with inflation can get inadvertently pushed into higher-taxed categories – even when the real value of their wages has not changed.

Some of these interactions…

The decline of Canada’s labour productivity is making headlines across the country and raising concerns about the country’s economic prosperity. In real terms, per capita GDP has been stagnant since 2017. As University of Alberta economist Trevor Tombe has pointed out, Ontario’s output per capita is now on par with Alabama’s. More than ever, Canada needs tax reform to foster economic growth.

Lack of investment is not the sole explanation for our disappointing productivity performance but it is almost certainly a major contributor. The stock of business capital per worker has been on a declining trend since 2015. Canada fares very poorly compared to its neighbour: each U.S. worker, on average, benefits…

The 2023 federal budget rests its case for fiscal discipline, even restraint, on promised savings in operating expenses that amount to billions of dollars. Key passages from this part of the budget include:

“Budget 2023 proposes to reduce spending on consulting, other professional services, and travel by roughly 15 per cent of planned 2023-24 discretionary spending in these areas.” “Budget 2023 proposes to phase in a roughly three per cent reduction of eligible spending by departments and agencies by 2026-27.” “Budget 2023 announces the introduction of cross-government program effectiveness reviews, to be led by the President of the Treasury Board. The first review will examine skills training and youth programming, to…