Connect with us
[the_ad id="89560"]

Economy

Federal government could balance budget and reduce tax rates with 2.3% spending reduction over two years

Published

4 minute read

From the Fraser Institute

By Jake Fuss and Grady Munro

If the federal government reduced program spending by only 2.3 per cent over two years and eliminated a host of tax expenditures, it could balance the budget and reduce personal income tax rates affecting most Canadians, finds a new
study published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“With modest spending reductions and tax reform, the federal government can create the fiscal room to provide tax rate reductions that would benefit most Canadians,” said Jake Fuss, director of fiscal studies at the Fraser Institute and co-author of A New Federal Fiscal Framework for Canada.

Specifically, if the government implemented this spending reduction—and eliminated 49 federal personal income tax expenditures (tax credits, tax exemptions, etc.), which do little to improve economic growth yet reduce government revenue—it could eliminate the three middle federal personal income tax rates (20.5 per cent, 26.0 per cent, 29.0 per cent) and reduce the top rate from 33.0 per cent to its previous level of 29.0 per cent.

As a result, with only two remaining rates, nearly all Canadians would pay a marginal personal income tax rate of 15 per cent. And the federal government could balance the budget by 2026/27.

“In light of Canada’s dim economic prospects and lack of tax competitiveness, the federal government should move away from the status quo and pursue a pro-growth fiscal strategy,” Fuss said.

“At a time when affordability is top of mind, it’s time for Ottawa to reduce tax rates and restore discipline to federal finances.”

  • Poor government policy has led to a significant deterioration in Canada’s federal finances over the last decade. The introduction of new and expanded government programs has caused federal spending to increase substantially, resulting in persistent deficits and rising debt.
  • Canada also maintains markedly uncompetitive personal income taxes relative to many other advanced economy jurisdictions. This hinders Canada’s ability to attract and retain highly skilled workers, entrepreneurs, and business owners.
  • Canada must make meaningful policy reforms by pursuing reductions in both federal spending and tax rates to address the current fiscal and economic challenges.
  • The federal government should eliminate 49 federal PIT tax expenditures and remove the three middle income tax rates of 20.5, 26.0, and 29.0 percent while reducing the top marginal PIT rate from 33.0 to 29.0 percent.
  • The federal government can introduce a comprehensive tax reform package and achieve a balanced budget by 2026/27 through reducing nominal annual program spending by 2.3 percent over a two-year period.
  • Returning to balanced budgets should be viewed as a starting point rather than the end goal.
  • Imposing a Tax and Expenditure Limitation (TEL) rule that caps growth in program spending at the rate of inflation plus population growth would be the next step for federal finances over the long-term.
  • This would allow for budget surpluses in subsequent years after achieving the initial balanced budget and ensure discipline in government spending for the foreseeable future.

Business

Dark clouds loom over Canada’s economy in 2026

Published on

From the Fraser Institute

By Jock Finlayson

The dawn of a new year is an opportune time to ponder the recent performance of Canada’s $3.4 trillion economy. And the overall picture is not exactly cheerful.

Since the start of 2025, our principal trading partner has been ruled by a president who seems determined to unravel the post-war global economic and security order that provided a stable and reassuring backdrop for smaller countries such as Canada. Whether the Canada-U.S.-Mexico trade agreement (that President Trump himself pushed for) will even survive is unclear, underscoring the uncertainty that continues to weigh on business investment in Canada.

At the same time, Europe—representing one-fifth of the global economy—remains sluggish, thanks to Russia’s relentless war of choice against Ukraine, high energy costs across much of the region, and the bloc’s waning competitiveness. The huge Chinese economy has also lost a step. None of this is good for Canada.

Yet despite a difficult external environment, Canada’s economy has been surprisingly resilient. Gross domestic product (GDP) is projected to grow by 1.7 per cent (after inflation) this year. The main reason is continued gains in consumer spending, which accounts for more than three-fifths of all economic activity. After stripping out inflation, money spent by Canadians on goods and services is set to climb by 2.2 per cent in 2025, matching last year’s pace. Solid consumer spending has helped offset the impact of dwindling exports, sluggish business investment and—since 2023—lacklustre housing markets.

Another reason why we have avoided a sharper economic downturn is that the Trump administration has, so far, exempted most of Canada’s southbound exports from the president’s tariff barrage. This has partially cushioned the decline in Canada’s exports—particularly outside of the steel, aluminum, lumber and auto sectors, where steep U.S. tariffs are in effect. While exports will be lower in 2025 than the year before, the fall is less dramatic than analysts expected 6 to 8 months ago.

Although Canada’s economy grew in 2025, the job market lost steam. Employment growth has softened and the unemployment rate has ticked higher—it’s on track to average almost 7 per cent this year, up from 5.4 per cent two years ago. Unemployment among young people has skyrocketed. With the economy showing little momentum, employment growth will remain muted next year.

Unfortunately, there’s nothing positive to report on the investment front. Adjusted for inflation, private-sector capital spending has been on a downward trajectory for the last decade—a long-term trend that can’t be explained by Trump’s tariffs. Canada has underperformed both the United States and several other advanced economies in the amount of investment per employee. The investment gap with the U.S. has widened steadily since 2014. This means Canadian workers have fewer and less up-to-date tools, equipment and technology to help them produce goods and services compared to their counterparts in the U.S. (and many other countries). As a result, productivity growth in Canada has been lackluster, narrowing the scope for wage increases.

Preliminary data indicate that both overall non-residential investment and business capital spending on machinery, equipment and advanced technology products will be down again in 2025. Getting clarity on the future of the Canada-U.S. trade relationship will be key to improving the business environment for private-sector investment. Tax and regulatory policy changes that make Canada a more attractive choice for companies looking to invest and grow are also necessary. This is where government policymakers should direct their attention in 2026.

Continue Reading

Business

Land use will be British Columbia’s biggest issue in 2026

Published on

By Resource Works

Tariffs may fade. The collision between reconciliation, property rights, and investment will not.

British Columbia will talk about Donald Trump’s tariffs in 2026, and it will keep grinding through affordability. But the issue that will decide whether the province can build, invest, and govern is land use.

The warning signs were there in 2024. Land based industries still generate 12 per cent of B.C.’s GDP, and the province controls more than 90 per cent of the land base, and land policy was already being remade through opaque processes, including government to government tables. When rules for access to land feel unsettled, money flows slow into a trickle.

The Cowichan ruling sends shockwaves

In August 2025, the Cowichan ruling turned that unease into a live wire. The court recognized the Cowichan’s Aboriginal title over roughly 800 acres within Richmond, including lands held by governments and unnamed third parties. It found that grants of fee simple and other interests unjustifiably infringed that title, and declared certain Canada and Richmond titles and interests “defective and invalid,” with those invalidity declarations suspended for 18 months to give governments time to make arrangements.

The reaction has been split. Supporters see a reminder that constitutional rights do not evaporate because land changed hands. Critics see a precedent that leaves private owners exposed, especially because unnamed owners in the claim area were not parties to the case and did not receive formal notice. Even the idea of “coexistence” has become contentious, because both Aboriginal title and fee simple convey exclusive rights to decide land use and capture benefits.

Market chill sets in

McLTAikins translated the risk into advice that landowners and lenders can act on: registered ownership is not immune from constitutional scrutiny, and the land title system cannot cure a constitutional defect where Aboriginal title is established. Their explanation of fee simple reads less like theory than a due diligence checklist that now reaches beyond the registry.

By December, the market was answering. National Post columnist Adam Pankratz reported that an industrial landowner within the Cowichan title area lost a lender and a prospective tenant after a $35 million construction loan was pulled. He also described a separate Richmond hotel deal where a buyer withdrew after citing precedent risk, even though the hotel was not within the declared title lands. His case that uncertainty is already changing behaviour is laid out in Montrose.

Caroline Elliott captured how quickly court language moved into daily life after a City Richmond letter warned some owners that their title might be compromised. Whatever one thinks of that wording, it pushed land law out of the courtroom and into the mortgage conversation.

Mining and exploration stall

The same fault line runs through the critical minerals push. A new mineral claims regime now requires consultation before claims are approved, and critics argue it slows early stage exploration and forces prospectors to reveal targets before they can secure rights. Pankratz made that critique earlier, in his argument about mineral staking.

Resource Works, summarising AME feedback on Mineral Tenure Act modernisation, reported that 69.5 per cent of respondents lacked confidence in proposed changes, and that more than three quarters reported increased uncertainty about doing business in B.C. The theme is not anti consultation. It is that process, capacity, and timelines decide whether consultation produces partnership or paralysis.

Layered on top is the widening fight over UNDRIP implementation and DRIPA. Geoffrey Moyse, KC, called for repeal in a Northern Beat essay on DRIPA, arguing that Section 35 already provides the constitutional framework and that trying to operationalise UNDRIP invites litigation and uncertainty.

Tariffs and housing will still dominate headlines. But they are downstream of land. Until B.C. offers a stable bargain over who can do what, where, and on what foundation, every other promise will be hostage to the same uncertainty. For a province still built on land based wealth, Resource Works argues in its institutional history that the resource economy cannot be separated from land rules. In 2026, that is the main stage.

Resource Works News

Continue Reading

Trending

X