The best thing that can be said about the New Democratic Party’s fiscal plan is that it acknowledges that there is no free lunch.
Released with barely a week to go to the federal election campaign, the NDP’s cost-of-living platform is about the reality that it plans to spend an additional $214 billion over the next five years on some Canadians paying very high taxes. is dependent.
Yet, even if the rich were soaked, the NDP plan would push the deficit to about $50 billion by 2026. And this will happen only if you buy the idea that the Jagmeet Singh led NDP government can control its expenditure. And that its efforts to squeeze the rich will not curtail investment and growth.
“The new Democrats will manage debt and deficit responsibly, rebuild and defend the services that Canadians and their families rely on when necessary to run the deficit, and move toward balance. [the budget] When it makes sense to do so,” the NDP’s cost platform explains, providing a dose of humor relief in an otherwise boring campaign.
The party’s spending plans, which include its signature promise to spend $38 billion over five years on the national pharmacare program, rely on new taxes and tax increases on wealthy Canadians. An NDP government would, for starters, raise the top marginal federal income tax rate from 33 percent to 35 percent, raise the capital gains inclusion rate from 50 percent to 75 percent, and impose a 1 percent tax on the household. Net worth of over $10 million.
Even liberal leader Justin Trudeau, who talks about using the rich as a political punching bag, thinks the NDP is out for lunch.
Mr Trudeau said over the weekend, “The idea that you can go against the successful and wealthy people in this country with unlimited enthusiasm to pay for everything is an idea that reaches its limits at one point.” ” “I don’t think the NDP gets that.”
Taken individually, each of the NDP’s proposed taxes on the wealthy are worth debate. But the party’s plan to lump them all together — raising the federal corporate tax rate from 15 percent to 18 percent and implementing a one-time 30-percent tax on “excess” profits made during the pandemic — is Canada’s would be disastrous for the economy.
Estimated revenue may increase by such measures, which is subject to a large margin of error. While the Parliamentary Budget Officer has reviewed the NDP’s tax proposals on an individual basis, it has not assessed their overall impact on economic growth.
Much will depend on the behavioral response of the rich and what is called the elasticity of taxable wealth. But the degree of uncertainty inherent in PBO projections is such that it would be foolish for any government to rely on them.
What is certain is that higher income and capital gains taxes will act as a deterrent for individuals to work and invest. And a wealth tax would prompt people to move financial assets overseas and sell off domestic non-financial holdings.
This is why most governments that have come to power promising to soak up the rich eventually give up on such efforts.
After the throne promised to “identify additional ways to tax extreme inequality” in last year’s speech, liberals have little to show for it. The April federal budget included a luxury tax that is projected to bring in just $145 million by 2025.
The Liberal platform promises to introduce a minimum 15-percent tax for top income earners, “artificially removing their ability to pay tax through excessive use of deductions and credits.” But projected revenue from that measure has topped $423 million in 2026.
If the past is any guide, Trudeau’s liberals shouldn’t be counted on to keep the line on a $78 billion spending increase over the next five years, on top of the $100 billion in new spending he mentioned. final budget. Liberals have been notoriously reckless when it comes to honoring their fiscal goals.
That doesn’t mean Tories deserve an award for transparency. At the start of the campaign, leader Erin O’Toole said a Conservative government would increase average annual economic growth to 3 percent to balance the budget by 2031. But the party’s cost platform, released three weeks later, dropped the 3 per cent bet altogether.
Overall, the mathematics of the Tory platform remains unclear. The party says it plans to increase Canada workers benefits, overhaul support programs for research and development, offer a 5 percent tax credit on new capital investments, and increase inter-provincial economic growth to 1.5 percent in 2022. Promises to reduce trade barriers. 0.9 percent in 2023 and 0.6 percent each in the next two years. But it offers little in the way of empirical data to support those claims.
The signature Tory spending promise — a $60 billion increase in health care transfers across provinces over 10 years — is back-end loaded. Under the Tories, provinces would receive only $3.5 billion in new funding by 2025–26, but $56.5 billion over the next five years. The Tories nonetheless promise to balance the budget without raising taxes. It sounds too good to be true.
Despite the possibility of having one or both during the next government’s lifetime, neither party has pushed back on its fiscal plan against rising interest rates or a recession. Thus each party’s plans are based more on fantasy than reality.
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