OTTAWA—The 2015-16 federal budget contains costly measures that will exacerbate economic inequality and see billions flow to Canada’s wealthiest families while leaving the majority of Canadians with no benefit at all, says the Broadbent Institute.
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In addition to transferring $2 billion annually to the wealthiest families through its new family income splitting scheme from which most families can’t benefit, the budget tabled Tuesday will see additional billions of foregone tax revenues used to finance the doubling of Tax-Free Savings Account contribution limits to $10,000. This change reduces the progressivity of our tax system since only the wealthy can take full advantage of it.
The existing TFSA program is already projected to cost the federal government up to $15.5 billion annually when it matures. The current combined contribution limits for RRSPs and TFSAs allow ample room for the lifetime saving requirements of all workers earning up to at least $200,000 annually. This means the great majority of Canadians would enjoy no significant benefits with the expansion but will bear the burdens of an expanded TFSA by enduring reduced public services or bearing the increased taxes needed to offset the lost revenues.
“This budget should be called the inequality budget. It leaves out Canadians that need a break and hands billions to the country’s wealthiest families that don’t need a leg up. This approach is unfair, expensive, and just plain bad public policy,” said Rick Smith, Executive Director of the Broadbent Institute.
Despite a slowing economy and rising unemployment, the budget failed to invest more than token amounts in new investments in infrastructure, innovation and skills training, which are needed to create and sustain good jobs and a more productive and sustainable economy. For example, funding commitments in the budget for transit in Canada’s big cities fall short of what’s needed, beginning in 2017-18 under a public-private partnership model. This will come after government investment in infrastructure has been flat due to fiscal austerity programs.
“The Harper government is making the wrong choices. Tackling Canada’s economic inequality problem should be a priority. Instead, this budget will exacerbate it,” said Smith.
For more information or arrange an interview with Rick Smith, please contact:
Sarah Schmidt, Director of Communications, 613-857-2814 or sschmidt[at]broadbentinstitute[dot]ca