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Federal budget: You can’t solve a productivity emergency with tax hikes

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News release from the Montreal Economic Institute

  • Ottawa still has no plan to return to a balanced budget.
  • Under Justin Trudeau, the federal government has hired over 98,000 new bureaucrats.

Montreal, April 16, 2024 – The increase in the capital gains tax inclusion rate will further exacerbate Canada’s productivity lag, asserted the Montreal Economic Institute in response to the publication of the federal budget this afternoon.

“Canada’s productivity is in crisis and the best way to get it back up is to attract new investments,” explains Renaud Brossard, Vice-President of Communications at the MEI. “And few are those who have been able to lure investments and job creators with promises of higher taxes.

“With this budget, the Trudeau government is shooting us in the foot.”

In the budget, the Trudeau government has announced the capital gains inclusion rate from 50 per cent to 66 per cent for capital gains superior to $250,000 per year.

Last March, the deputy governor of the Bank of Canada, Carolyn Rogers, spoke of a “productivity emergency” in Canada.

Canadians rank second to last among G7 countries in terms of productivity per hour worked, according to an MEI study published last August.

The Institute explains that this lag arises from a shortfall in private non-residential investment. In 2018, this investment amounted to an estimated $27,307 per American worker, but only $17,389 per Canadian worker.

“Every dollar the government expects to subtract from the pockets of investors with this tax hike is a dollar of potential investment lost,” explains Brossard. “It’s time for the Trudeau government to realize it doesn’t have a revenue problem, but rather a spending problem.”

The budget tabled by the Trudeau government today forecasts a shortfall of $39.8 billion for the year 2024-2025.

High interest rates are contributing to this situation, with interest payments on the federal debt estimated to reach $54.1 billion dollars this year, up 14.6 per cent over last year.

The MEI observes that one of the major sources of increased spending is the massive hiring of federal public servants under the Trudeau government.

Since the first Trudeau budget in 2016, the federal public service workforce has grown by more than 98,268 employees. Considered in terms of the number of government employees per Canadian, this represents a 28% increase according to an MEI study published in January.

“The explosion in the number of bureaucrats in recent years is symptomatic of a government that has lost all control over the growth of its spending,” explains Brossard. “There are now 28 per cent more federal public servants per capita, but very few Canadians would tell you that Ottawa is doing 28 per cent more for them.”

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The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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2025 Federal Election

Three cheers for Poilievre’s alcohol tax cut

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By Franco Terrazzano

The Canadian Taxpayers Federation applauds Conservative Party Leader Pierre Poilievre’s commitment to end and reverse the alcohol escalator tax.

“Poilievre just promised major alcohol tax cuts and taxpayers will cheers to that,” said Franco Terrazzano, CTF Federal Director. “Poilievre’s tax cut will save Canadians money every time they have a cold one with a buddy or enjoy a glass of Pinot with their better half and it will give Canadians brewers, distillers and wineries a fighting chance against tariffs.”

Today, federal alcohol taxes increased by two per cent, costing taxpayers about $40 million this year, according to Beer Canada.

Poilievre announced a Conservative government “will axe the escalator tax on wine, beer and spirits back to 2017 levels, ending the automatic annual tax increases.”

The alcohol escalator tax has automatically increased excise taxes on beer, wine and spirits every year, without a vote in Parliament, since 2017. The alcohol escalator tax has cost taxpayers more than $900 million since being imposed, according to Beer Canada.

Taxes from multiple levels of government account for about half of the price of alcohol.

Meanwhile, tariffs are hitting the industry hard. Brewers have described the tariffs as “Armageddon for craft brewing.”

“Automatic tax hikes are undemocratic, uncompetitive and unaffordable and they need to stop,” Terrazzano said. “If politicians think Canadians aren’t paying enough tax, they should at least have the spine to vote on the tax increase.

“Poilievre is right to end the escalator tax and all party leaders should commit to making life more affordable for Canadian consumers and businesses by ending the undemocratic alcohol tax hikes.”

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Business

Saskatchewan becomes first Canadian province to fully eliminate carbon tax

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From LifeSiteNews

By Clare Marie Merkowsky

Saskatchewan has become the first Canadian province to free itself entirely of the carbon tax.

On March 27, Saskatchewan Premier Scott Moe announced the removal of the provincial industrial carbon tax beginning April 1, boosting the province’s industry and making Saskatchewan the first carbon tax free province.

“The immediate effect is the removal of the carbon tax on your Sask Power bills, saving Saskatchewan families and small businesses hundreds of dollars a year. And in the longer term, it will reduce the cost of other consumer products that have the industrial carbon tax built right into their price,” said Moe.

Under Moe’s direction, Saskatchewan has dropped the industrial carbon tax which he says will allow Saskatchewan to thrive under a “tariff environment.”

“I would hope that all of the parties running in the federal election would agree with those objectives and allow the provinces to regulate in this area without imposing the federal backstop,” he continued.

The removal of the tax is estimated to save Saskatchewan residents up to 18 cents a liter in gas prices.

The removal of the tax will take place on April 1, the same day the consumer carbon tax will reduce to 0 percent under Prime Minister Mark Carney’s direction. Notably, Carney did not scrap the carbon tax legislation: he just reduced its current rate to zero. This means it could come back at any time.

Furthermore, while Carney has dropped the consumer carbon tax, he has previously revealed that he wishes to implement a corporation carbon tax, the effects of which many argued would trickle down to all Canadians.

The Saskatchewan Association of Rural Municipalities (SARM) celebrated Moe’s move, noting that the carbon tax was especially difficult on farmers.

“It puts our farming community and our business people in rural municipalities at a competitive disadvantage, having to pay this and compete on the world stage,” he continued.

“We’ve got a carbon tax on power — and that’s going to be gone now — and propane and natural gas and we use them more and more every year, with grain drying and different things in our farming operations,” he explained.

“I know most producers that have grain drying systems have three-phase power. If they haven’t got natural gas, they have propane to fire those dryers. And that cost goes on and on at a high level, and it’s made us more noncompetitive on a world stage,” Huber decalred.

The carbon tax is wildly unpopular and blamed for the rising cost of living throughout Canada. Currently, Canadians living in provinces under the federal carbon pricing scheme pay $80 per tonne.

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