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Fraser Institute

Trudeau and Ford should attach personal fortunes to EV corporate welfare

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From the Fraser Institute

By Jason Clemens and Tegan Hill

Last week, with their latest tranche of corporate welfare for the electric vehicle (EV) sector, the Trudeau and Ford governments announced a $5.0 billion subsidy for Honda to help build an EV battery plant and ultimately manufacture EVs in Ontario. Here’s a challenge: if politicians in both governments truly believe these measures are in the public interest, they should tie their personal fortunes with the outcomes of these subsidies (a.k.a. corporate welfare).

One of the major challenges with corporate welfare is the horrendous economic incentives. The politicians and bureaucrats who distribute corporate welfare have no vested financial interest in the outcome of the program. Whether these programs are spectacularly successful (or more likely spectacular failures), the politicians and bureaucrats experience no direct financial gain or loss. Simply put, they’re investing taxpayer money, not their own.

Put differently, the discipline imposed on investors in private markets, such as the risk of losing money or even going out of business, is wholly absent in the government sector. Indeed, the history of corporate welfare in Canada, at both the federal and provincial levels, is rife with abject failures due in large measure to the absence of this investing discipline.

In the last 12 months in Ontario, automakers have been major beneficiaries of corporate welfare. The $5.0 billion for Honda is on top of $13.2 billion to Volkswagen and $15.0 billion to Stellantis. That equates to roughly $979 per taxpayer nationally for federal subsidies and an additional $1,372 for Ontario taxpayers. And these figures do not include the debt interest costs that will be incurred as both governments are borrowing money to finance the subsidies.

And there’s legitimate reason to be skeptical already of the potential success of these largescale industrial interventions by the federal (Liberal) and Ontario (Conservative) governments. EV sales in both Canada and the United States have not grown as expected by governments despite purchase subsidies. Disappointing EV sales have led several auto manufacturers including Toyota and Ford to scale-back their EV production plans.

There are also real concerns about the practical ability of EV manufacturers to secure required materials. Consider the minerals needed for EV batteries. According to a recent study, 388 new mines—including 50 lithium mines, 60 nickel mines and 17 cobalt mines—would be required by 2030 to meet EV adoption commitments by various governments. For perspective, there were a total of 340 metal mines operating across Canada and the U.S. in 2021. The massive task of finding, constructing and developing this level of new mines seems impractical and unattainable, meaning that EV plants being built now will struggle to secure needed inputs. Indeed, depending on the type of mine, it takes anywhere from six to 18 years to develop.

Which brings us back to the Trudeau and Ford governments. Given the economic incentive problems and practical challenges to a large-scale transition to EVs, would members of the Trudeau and Ford governments—including the prime minister and premier—want to attach a portion of their personal pensions to the success of these corporate welfare programs?

More specifically, assume an arrangement whereby those politicians would share the benefits of the program’s success but also share any losses through the value of their pensions. If the programs work as marketed, the politicians would enjoy higher valued pensions. But if the programs disappoint or even fail, their pensions would be reduced or even cancelled. Would these politicians still support billions in corporate handouts if their personal financial wellbeing was tied to the outcomes?

As the funding of private companies to develop the EV sector in Ontario continues with the support of taxpayer subsidies, Ontarians and all Canadians should consider the misalignment of economic incentives underpinning these subsidies and the practical challenges to the success of this industrial intervention.

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Economy

Governments across Canada should prioritize energy infrastructure—including pipelines

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From the Fraser Institute

By Tegan Hill and Elmira Aliakbari

In a recent meeting with Prime Minister Mark Carney, the provincial premiers discussed major infrastructure and energy projects to be fast-tracked through a new federal approval process. While the general sentiment was that the meeting was productive and collaborative, the British Columbia government seemingly shot down Alberta’s proposed pipeline to B.C.’s northern coast. This political resistance to new pipeline infrastructure overlooks the positive potential impact such projects could have for Canada and beyond.

Prime Minister Carney plans to table legislation that would create a new major projects office tasked with reducing approval times from five to two years, among other measures. Major projects must meet numerous criteria before deemed in the “national interest” and expedited. The premiers have compiled a short-list of projects for consideration though the full list has not been publicly released.

Alberta Premier Danielle Smith’s proposed pipeline would transfer bitumen to the Port of Prince Rupert in B.C., which would open up access to Asian markets. B.C. Deputy Premier Niki Sharma, who attended the recent meeting in place of B.C. Premier David Eby, said the proposal has “no proponent” at this stage and that her government plans to focus on “shovel-ready projects.”

And it isn’t just the Eby government resisting the project—Steven Guilbeault, a member of Carney’s cabinet, recently dismissed the need for additional pipeline infrastructure, including to B.C.’s coast, based on incorrect information about the Trans Mountain pipeline’s capacity and future oil demand.

Again, this political resistance ignores key facts about Canada’s energy sector, including our current overreliance on a single customer. Currently, 97 per cent of our oil exports go to the United States. This heavy reliance on the U.S. market has made Canada vulnerable to U.S. policy changes, as highlighted by the recent threat of tariffs on Canadian energy. Expanding pipeline infrastructure—both westward, as proposed by Premier Smith, and eastward—would help us diversify our export market and allow Canada to reach customers in Asia and Europe.

And pipeline expansion is not just about exports; it’s also about enhancing energy security at home. Some parts of our country, namely Ontario and Quebec, remain heavily dependent on U.S. pipelines to meet their energy needs. Specifically, due to the lack of an west-east pipeline dedicated to oil, for more than 70 years Canadian oil extracted in Alberta has passed through the U.S. via Enbridge’s network before returning to Ontario.

Finally, this discussion shouldn’t be limited to oil. There is and will continue to be strong demand for liquefied natural gas (LNG) in many parts of the world, including in Asia, for many years to come, which presents Canada with a significant opportunity to become a major LNG exporter and provide cleaner-burning fuel to countries such as China and India. However, building the necessary infrastructure (pipelines and LNG terminals) is critical if we’re serious about seizing this opportunity.

Governments across Canada should support critical energy infrastructure, including pipelines. This means putting politics aside and recognizing the importance of infrastructure in expanding export opportunities, ensuring energy security, reducing global emissions and creating prosperity across the country.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Elmira Aliakbari

Director, Natural Resource Studies, Fraser Institute
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Business

This Sunday, June 8, is Tax Freedom Day, when Canadians finally start working for themselves

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From the Fraser Institute

By Milagros Palacios, Jake Fuss and Nathaniel Li

This Sunday, June 8, Canadians will celebrate Tax Freedom Day, the day in the year when they start working for themselves and not government, finds a new study published by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“If Canadians paid all their taxes up front, they would work the first 158 days of this year before bringing any money home for themselves and their families,” said Jake Fuss, director of fiscal studies at the Fraser Institute.

Tax Freedom Day measures the total annual tax burden imposed on Canadian families by federal, provincial, and municipal governments.

In 2025, the average Canadian family (with two or more people) will pay $68,266 in total taxes. That’s 43.1 per cent of its annual income ($158,533) going to income taxes, payrolltaxes (including the Canada Pension Plan), health taxes, sales taxes (like the GST), property taxes, fuel taxes, “sin” taxes and more.

Represented as days on the calendar, the total tax burden comprises more than five months of income—from January 1 to June 7. On June 8th—Tax Freedom Day—Canadians finally start working for themselves, and not government.

But Canadians should also be worried about the nearly $90 billion in deficits the federal and provincial governments are forecasting this year, because they will have substantial tax implications in future years.

To better illustrate this point, the study also calculates a Balanced Budget Tax Freedom Day—the day of the year when the average Canadian finally would finally start working for themselves if governments paid for all of this year’s spending with taxes collected this year.

In 2025, the Balanced Budget Tax Freedom Day won’t arrive until June 21. “Tax Freedom Day helps put the total tax burden in perspective, and helps Canadians understand just how much of their money they pay in taxes every year,” Fuss said. “Canadians need to decide for themselves whether they are getting their money’s worth when it comes to how governments are spending their tax dollars.”

Tax Freedom Day for each province varies according to the extent of the provincially and  locally levied tax burden.

2025 Provincial Tax Freedom Days

Manitoba                                    May 17
Saskatchewan                            May 31
British Columbia                       May 31
Alberta                                         May 31
Prince Edward Island               June 2
New Brunswick                          June 4
Ontario                                        June 7
Nova Scotia                                June 10
Newfoundland & Labrador     June 19
Quebec                                        June 21

CANADA                                    June 8

 

Canadians Celebrate Tax Freedom Day on June 8, 2025

  • In 2025, the average Canadian family will earn $158,533 in income and pay an estimated $68,266 in total taxes (43.1%).
  • If the average Canadian family had to pay its taxes up front, it would have worked until June 7 to pay the total tax bill imposed on it by all three levels of government (federal, provincial, and local).
  • This means that Tax Freedom Day, the day in the year when the average Canadian family has earned enough money to pay the taxes imposed on it, falls on June 8.
  • Tax Freedom Day in 2025 comes one day earlier than in 2024, when it fell on June 9. This change is due to the expectation that the total tax revenues forecasted by Canadian governments will increase slower than the incomes of Canadians.
  • Tax Freedom Day for each province varies according to the extent of the provincially levied tax burden. The earliest provincial Tax Freedom Day falls on May 17 in Manitoba, while the latest falls on June 21 in Quebec.
  • Canadians are right to be thinking about the tax implications of the $89.4 billion in projected federal and provincial government deficits in 2025. For this reason, we calculated a Balanced Budget Tax Freedom Day, the day on which average Canadians would start working for themselves if governments were obliged to cover current expenditures with current taxation. In 2025, the Balanced Budget Tax Freedom Day arrives on June 21.

    Milagros Palacios

    Director, Addington Centre for Measurement, Fraser Institute

    Jake Fuss

    Director, Fiscal Studies, Fraser Institute

    Nathaniel Li

    Senior Economist, Fraser Institute

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