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Trump victory means Canada must get serious about tax reform

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5 minute read

From the Fraser Institute

By Jake Fuss and Alex Whalen

Following Donald Trump’s victory in Tuesday’s presidential election, lower taxes for both U.S. businesses and individuals will be at the top of his administration’s agenda. Meanwhile, Prime Minister Trudeau has raised taxes on businesses and individuals, including with his recent capital gains tax hike.

Clearly, Canada and the United States are now moving in opposite directions on tax policy. To prevent Canada from falling even further behind the U.S., policymakers in Ottawa and across Canada should swiftly increase our tax competitiveness.

Before the U.S. election, Canada was already considered a high-tax country that made it hard to do business. Canada’s top combined (federal and provincial) personal income tax rate (as represented by Ontario) ranked fifth-highest out of 38 high-income industrialized (OECD) countries in 2022 (the latest year of available data). And last year, Canadians in every province, across most of the income spectrum, faced higher personal income tax rates than Americans in nearly every U.S. state.

Our higher income tax rates make it harder to attract and retain high-skilled workers including doctors, engineers and entrepreneurs. High tax rates also reduce the incentives to save, invest and start a business—all key drivers of prosperity.

No doubt, we need reform now. To close the tax gap and increase our competitiveness, the federal government should reduce personal income tax rates. One option is to reduce the top rate from 33.0 per cent back down to 29.0 per cent (the rate before the Trudeau government increased it) and eliminate the three middle-income tax rates of 20.5 per cent, 26.0 per cent and 29.0 per cent.

These changes would establish a new personal income tax landscape with just two federal rates. Nearly all Canadians would face a personal income tax rate of 15.0 per cent, while top earners would pay a marginal tax rate of 29.0 per cent.

On business taxes, Canada’s rates are also higher than the global average and uncompetitive  compared to the U.S., which makes it difficult to attract business investment and corporate headquarters that provide well-paid jobs and enhance living standards. According to Trump’s campaign promises, he plans to lower the federal business tax rate from 21 per cent to 20 per cent (and reduce the rate to 15 per cent for companies that make their products in the U.S.). Trump must work with congress to implement these changes, but barring any change in Canadian policy, business tax cuts in the U.S. will intensify Canada’s net outflow of business investment and corporate headquarters to the U.S.

The federal government should respond by lowering Canada’s business tax rate to match Trump’s plan. Moreover, Ottawa should (in coordination with the provinces) change tax policy to only tax business profits that are not reinvested in the company—that is, tax dividend payments, share buybacks and bonuses but don’t touch profits that are reinvested into the company (this type of business taxation has helped supercharge the economy in Estonia). These reforms would encourage greater business investment and ultimately raise living standards for Canadians. Finally, given Canada’s massive outflow of business investment, the government should (at a minimum) reverse the recent federal capital gains hike.

Of course, there’s much to quibble with in Trump’s policies. For example, his tariffs will hurt the U.S. economy (and likely Canada’s economy), and tax cuts without spending reductions and deficit-reduction will simply defer tax hikes into the future. But while policymakers in Ottawa can’t control U.S. policy, Trump’s tax plan will significantly exacerbate Canada’s competitiveness problem. We can’t afford to sit idle and do nothing. Ottawa should act swiftly in coordination with the provinces and pursue bold pro-growth tax reform for the benefit of Canadians.

Business

Taxpayers release Naughty and Nice List

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From the Canadian Taxpayers Federation

By Franco Terrazzano 

CBC President and CEO Catherine Tait tops the Taxpayer Naughty List for dishing out executive bonuses  that cost more than the average Canadian worker makes in a year.

“Santa doesn’t like it when girls and boys are greedy, and forcing struggling taxpayers to pay for Santa-sized executive bonuses is as greedy as it gets,” said Franco Terrazzano, CTF Federal Director. “And Canadian diplomats are on the Naughty List too because Santa likes eggnog as much as the next guy, but even he knows Global Affairs Canada is sipping on a little too much Christmas spirit.

“For billing taxpayers $51,000 a month on booze, Global Affairs Canada bureaucrats find themselves on Santa’s Naughty List.”

Ontario Premier Doug Ford made the Taxpayer Naughty List for extending political welfare after promising to scrap it. And for breaking his promise to cap property tax increases, Winnipeg Mayor Scott Gillingham is also on the Naughty List.

For resigning over wasteful spending and saving taxpayers’ money in the process, former Kensington mayor Rowan Caseley tops the Taxpayer Nice List. Newfoundland and Labrador Premier Andrew Furey also made the Nice List for cutting gas taxes and fighting the federal carbon tax.

“Santa is getting hammered by carbon tax bills on his reindeer barn, so Prime Minister Justin Trudeau lands on the Naughty List for making everything more expensive with his carbon tax,” said Kris Sims, CTF Alberta Director. “Alberta Premier Danielle Smith and Saskatchewan Premier Scott Moe made Santa’s good books for taking action against Trudeau’s carbon tax.”

You can find the entire 2024 Taxpayer Naughty and Nice List here.

Taxpayer Naughty List:

  • CBC President & CEO Catherine Tait
  • Prime Minister Justin Trudeau
  • Ontario Premier Doug Ford
  • Global Affairs Canada
  • Winnipeg Mayor Scott Gillingham
  • The entire federal bureaucracy

Taxpayer Nice List:

  • Former Kensington Mayor Rowan Caseley
  • Saskatchewan Premier Scott Moe
  • Newfoundland and Labrador Premier Andrew Furey
  • Alberta Premier Danielle Smith
  • Parliamentary Budget Officer Yves Giroux
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Business

Biden announces massive new climate goals in final weeks, despite looming Trump takeover

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From LifeSiteNews

By Calvin Freiburger

Outgoing President Joe Biden announced a new climate target of reducing American carbon emissions from 61-66% over the next decade, even though President Trump would be able to undo it as soon as next month.

Outgoing President Joe Biden announced December 19 a new climate target of reducing American carbon emissions of more than 60% over the next decade, even though returning President Donald Trump would be able to undo it as soon as next month.

“Today, as the United States continues to accelerate the transition to a clean energy economy, President Biden is announcing a new climate target for the United States: a 61-66 percent reduction in 2035 from 2005 levels in economy-wide net greenhouse gas emissions,” the White House announced, the Washington Free Beacon reports. The new target will be formally submitted to the United Nations Climate Change secretariat.

“President Biden’s new 2035 climate goal is both a reflection of what we’ve already accomplished,” Biden climate adviser John Podesta added, “and what we believe the United States can and should achieve in the future.”

The announcement may be little more than a symbolic gesture in the end, however, as Trump is widely expected to withdraw the United States from the Paris Climate Agreement upon resuming office in January, in the process voiding related climate obligations.

Trump formally pulled out of the Paris accords in August 2017, the first year of his first term, with then-U.S. Ambassador to the United Nations Nikki Haley stating that the administration would be “open to re-engaging in the Paris Agreement if the United States can identify terms that are more favorable to it, its business, its workers, its people, and its taxpayers.”

Such terms were never reached, however, leaving America out until Biden re-committed the nation to the Paris Agreement on the first day of his presidency, obligating U.S. policy to new economic regulations to cut carbon emissions.

In June, the Trump campaign confirmed Trump’s intentions to withdraw from Paris again. At the time, Trump’s team was reportedly mulling a number of non-finalized drafts of executive orders to do so.

Left-wing consternation on the matter is based on certitude in “anthropogenic global warming” (AGW) or “climate change,” the thesis that human activity, rather than natural phenomena, is primarily responsible for Earth’s changing climate and that such trends pose a danger to the planet in the form of rising sea levels and weather instability.

Activists have long claimed there is a “97 percent scientific consensus” in favor of AGW, but that number comes from a distortion of an overview of 11,944 papers from peer-reviewed journals, 66.4 percent of which expressed no opinion on the question; in fact, many of the authors identified with the AGW “consensus” later spoke out to say their positions had been misrepresented.

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