OTTAWA—The 2016-17 federal budget is a missed opportunity to implement a fair tax agenda and build Canada’s shrunken fiscal capacity that is needed to fight inequality, the Broadbent Institute says.
The new Canada Child Benefit is welcomed, as is a commitment to enhance the Canada Pension Plan and funding to consult Canadians on electoral reform. The new income tax cut, however, is ill-advised as it will deliver half of all the benefits to the top 10% of income earners, with two-thirds of Canadians not receiving any benefit at all because they don’t earn enough; the increase to the top income tax rate applicable to the top 1% earning more than $200,000 will not fully offset the tax cut.
And although the government committed to reviewing the tax system, keeping the corporate tax rate at 15% and a lack of serious action to close tax loopholes that particularly benefit the top 1% of Canadians, such as special treatment of stock options, means federal tax revenue as a percentage of GDP is lower than in the mid-1960s before the creation of much of the modern welfare state.
Given this shrunken fiscal capacity, investments in key areas fall short and underline many of the challenges facing the country. An increase to the Guarantee Income Supplement for some single seniors is a first step to address seniors’ poverty, but much more needs to be done in this area given Canada’s retirement savings crisis, as outlined in a recent Broadbent Institute report authored by statistician Richard Shillington.
New infrastructure investment is welcomed, even though it falls short of a Liberal campaign commitment to spend $5 billion more in each of next two years. If spent wisely, public infrastructure investment will boost productivity in the long-term through enhanced competitiveness, productivity and higher real wages, according to an independent report prepared last fall by the Centre for Spatial Economics for the Broadbent Institute.
But more needs to done to help families and communities -- and the Liberals need to tackle Ottawa’s fiscal capacity problem to do so, given the federal government is now the smallest it’s been since before the Second World War, says Rick Smith, Executive Director of the Broadbent Institute.
“If the federal capacity were at the same level as in 2006, Canada could afford eight national child care programs. Think of what that could do for families and communities,” said Smith, noting only $400 million is allocated in 2017-2018 to support the establishment of a national framework for child care.
“That’s why failing to address Ottawa’s fiscal capacity problem is such a missed opportunity. Think of what we could build together. Strangling the ability of the federal government to deliver many important programmes is arguably Stephen Harper’s most significant achievement. Despite some steps forward in the budget, the Liberals have not reversed this sorry state of affairs.”
For more information, please contact Sarah Schmidt, Director of Communications, Broadbent Institute, 613-857-2814 or sschmidt[at]broadbentinstitute[dot]ca.