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Trudeau’s new tax package gets almost everything wrong

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From the Fraser Institute

By Ben Eisen and Jake Fuss

Recently, Prime Minister Justin Trudeau announced several short-term initiatives related to tax policy. Most notably, the package includes a two-month GST holiday on certain items and a one-time $250 cheque that will be sent to all Canadians with incomes under $150,000.

Unfortunately, the Trudeau government’s package is a grab bag of bad ideas that will not do anything to get Canada out of the long-term growth rut in which our economy is mired. There are too many to list all in one place, but here are four of the biggest problems with Prime Minister Trudeau’s tax plan.

  1. It reduces the wrong taxes. When it comes to economic growth, not all taxes are created equal. Some cause far more economic harm per dollar of government revenue raised than others. The government’s package creates a holiday on the GST for some items (only for two months) which is a mistake given that the GST is one of the least economically harmful components of the tax mix. Canada’s recent growth record is abysmal, and boosting growth should be a primary goal of any changes to tax policy. A GST cut of any duration fails this test relative to other tax cuts.
  2. Temporary tax holidays shift consumption in time, they don’t boost growth. The government’s GST reduction is actually a short-term tax holiday on certain items that will last two months. There are decades worth of economic research showing that when governments create short-term tax breaks, they may change the timing of consumption, but they won’t contribute to actual economic growth. Shifting consumption from the future to the present won’t help get Canada out of the economic doldrums. This is particularly true of the Trudeau tax holiday since purchases that Canadians may have made after the two-month holiday period will simply be shifted forward to take advantage of the absence of the GST. As noted above, there are better taxes to cut than the GST, but no matter what taxes we are talking about permanent reductions are vastly superior to temporary tax cuts like short-term holidays.
  3. One-time tax rebates don’t improve economic incentives. Perhaps the worst element of the Trudeau government’s announcement was a plan to send $250 cheques to all Canadians earning under $150,000. One-time tax rebates are a terrible way to provide tax relief. When you cut income tax rates, you improve incentives for people to work and invest because they get to keep a larger share of their earnings. This helps the economy grow. One-time rebates that you get regardless of the economic choices you make has no similar effect. This means that the rebate with its $4.7 billion price tag won’t help Canada’s poor growth performance.
  4. It borrows from the future to give to the present. The federal government is currently running a large deficit. This raises the question of who will have to pay the $4.7 billion bill for the one-time payments announced today. The answer is that the government will have to borrow the money and therefore future taxpayers will have to either pay it off or service the extra debt indefinitely. The money the Trudeau government will send out won’t come out of thin air, it’ll have to be borrowed with the burden falling on future taxpayers.

The Trudeau government got one thing conceptually right, which is that there are advantages to reducing the tax burden on Canadians. Unfortunately, the policy package it has put forward to provide tax relief gets everything wrong. It reduces the wrong taxes, shifts taxes temporally rather than cutting them, does nothing to improve economic incentives, and burdens future taxpayers. With the holiday season around the corner, this attempt at a gift to Canadian taxpayers is the economic equivalent of a lump of coal in the stocking.

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It Took Trump To Get Canada Serious About Free Trade With Itself

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From the  Frontier Centre for Public Policy

By Lee Harding

Trump’s protectionism has jolted Canada into finally beginning to tear down interprovincial trade barriers

The threat of Donald Trump’s tariffs and the potential collapse of North American free trade have prompted Canada to look inward. With international trade under pressure, the country is—at last—taking meaningful steps to improve trade within its borders.

Canada’s Constitution gives provinces control over many key economic levers. While Ottawa manages international trade, the provinces regulate licensing, certification and procurement rules. These fragmented regulations have long acted as internal trade barriers, forcing companies and professionals to navigate duplicate approval processes when operating across provincial lines.

These restrictions increase costs, delay projects and limit job opportunities for businesses and workers. For consumers, they mean higher prices and fewer choices. Economists estimate that these barriers hold back up to $200 billion of Canada’s economy annually, roughly eight per cent of the country’s GDP.

Ironically, it wasn’t until after Canada signed the North American Free Trade Agreement that it began to address domestic trade restrictions. In 1994, the first ministers signed the Agreement on Internal Trade (AIT), committing to equal treatment of bidders on provincial and municipal contracts. Subsequent regional agreements, such as Alberta and British Columbia’s Trade, Investment and Labour Mobility Agreement in 2007, and the New West Partnership that followed, expanded cooperation to include broader credential recognition and enforceable dispute resolution.

In 2017, the Canadian Free Trade Agreement (CFTA) replaced the AIT to streamline trade among provinces and territories. While more ambitious in scope, the CFTA’s effectiveness has been limited by a patchwork of exemptions and slow implementation.

Now, however, Trump’s protectionism has reignited momentum to fix the problem. In recent months, provincial and territorial labour market ministers met with their federal counterpart to strengthen the CFTA. Their goal: to remove longstanding barriers and unlock the full potential of Canada’s internal market.

According to a March 5 CFTA press release, five governments have agreed to eliminate 40 exemptions they previously claimed for themselves. A June 1 deadline has been set to produce an action plan for nationwide mutual recognition of professional credentials. Ministers are also working on the mutual recognition of consumer goods, excluding food, so that if a product is approved for sale in one province, it can be sold anywhere in Canada without added red tape.

Ontario Premier Doug Ford has signalled that his province won’t wait for consensus. Ontario is dropping all its CFTA exemptions, allowing medical professionals to begin practising while awaiting registration with provincial regulators.

Ontario has partnered with Nova Scotia and New Brunswick to implement mutual recognition of goods, services and registered workers. These provinces have also enabled direct-to-consumer alcohol sales, letting individuals purchase alcohol directly from producers for personal consumption.

A joint CFTA statement says other provinces intend to follow suit, except Prince Edward Island and Newfoundland and Labrador.

These developments are long overdue. Confederation happened more than 150 years ago, and prohibition ended more than a century ago, yet Canadians still face barriers when trying to buy a bottle of wine from another province or find work across a provincial line.

Perhaps now, Canada will finally become the economic union it was always meant to be. Few would thank Donald Trump, but without his tariffs, this renewed urgency to break down internal trade barriers might never have emerged.

Lee Harding is a research fellow with the Frontier Centre for Public Policy.

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2025 Federal Election

Carney’s budget is worse than Trudeau’s

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By Gage Haubrich

Liberal Leader Mark Carney is planning to borrow more money than former prime minister Justin Trudeau.

That’s an odd plan for a former banker because the federal government is already spending more on debt interest payments than it spends on health-care transfers to the provinces.

Let’s take a deeper look at Carney’s plan.

Carney says that his government would “spend less, invest more.”

At first glance, that might sound better than the previous decade of massive deficits and increasing debt, but does that sound like a real change?

Because if you open a thesaurus, you’ll find that “spend” and “invest” are synonyms, they mean the same thing.

And Carney’s platform shows it. Carney plans to increase government spending by $130 billion. He plans to increase the federal debt by $225 billion over the next four years. That’s about $100 billion more than Trudeau was planning borrow over the same period, according to the most recent Fall Economic Statement.

Carney is planning to waste $5.6 billion more on debt interest charges than Trudeau. Interest charges already cost taxpayers more than $1 billion per week.

The platform claims that Carney will run a budget surplus in 2028, but that’s nonsense. Because once you include the $48 billion of spending in Carney’s “capital” budget, the tiny surplus disappears, and taxpayers are stuck with more debt.

And that’s despite planning to take even more money from Canadians in years ahead. Carney’s platform shows that his carbon tariff, another carbon tax on Canadians, will cost taxpayers $500 million.

The bottom line is that government spending, no matter what pile it is put into, is just government spending. And when the government spends too much, that means it must borrow more money, and taxpayers have to pay the interest payments on that irresponsible borrowing.

Canadians don’t even believe that Carney can follow through on his watered-down plan. A majority of Canadians are skeptical that Carney will balance the operational budget in three years, according to Leger polling.

All Carney’s plan means for Canadians is more borrowing and higher debt. And taxpayers can’t afford anymore debt.

When the Liberals were first elected the debt was $616 billion. It’s projected to reach almost $1.3 trillion by the end of the year, that means the debt has more than doubled in the last decade.

Every single Canadian’s individual share of the federal debt averages about $30,000.

Interest charges on the debt are costing taxpayers $53.7 billion this year. That’s more than the government takes in GST from Canadians. That means every time you go to the grocery store, fill up your car with gas, or buy almost anything else, all that federal sales tax you pay isn’t being used for anything but paying for the government’s poor financial decisions.

Creative accounting is not the solution to get the government’s fiscal house in order. It’s spending cuts. And Carney even says this.

“The federal government has been spending too much,” said Carney. He then went on to acknowledge the huge spending growth of the government over the last decade and the ballooning of the federal bureaucracy. A serious plan to balance the budget and pay down debt includes cutting spending and slashing bureaucracy.

But the Conservatives aren’t off the hook here either. Conservative Leader Pierre Poilievre has said that he will balance the budget “as soon as possible,” but hasn’t told taxpayers when that is.

More debt today means higher taxes tomorrow. That’s because every dollar borrowed by the federal government must be paid back plus interest. Any party that says it wants to make life more affordable also needs a plan to start paying back the debt.

Taxpayers need a government that will commit to balancing the budget for real and start paying back debt, not one that is continuing to pile on debt and waste billions on interest charges.

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