Deputy Prime Minister Chrystia Freeland speaks during a press conference in St. Thomas, Ont., on May 13.Geoff Robins/The Canadian Press
Duane Green is the former chief executive of a Canadian asset manager.
The latest Liberal government budget is the continuation of eight successive years of massive deficit spending coupled with a clear tax-and-spend mindset. All of this under the guise of “fairness.” What about economic growth?
I can’t understand why we wouldn’t want to think boldly and strive for fairness, while at the same time spurring growth in order for all Canadians to benefit. We need to break the ideology that fairness is synonymous with raising taxes to spend more – in other words, redistributing wealth.
The 2024 budget criticism has largely centred around the increase in taxes that will undoubtedly stifle investment and continue the precipitous decline in Canadian productivity, thus impeding the country’s ability to create a viable strategy for growth.
This latest round of tax and spend should not come as a surprise. Since 2015, we have seen that the fiscal strategy hasn’t been a strategy to grow the wealth of Canada overall. Instead, it has been focused on running inexplicable deficits by spending money Canada doesn’t have and raising taxes for everyone in order to spend more. This underscores the challenges posed by an overreliance on redistribution at the expense of wealth creation.
I pay my taxes to help ensure Canada will invest to grow while at the same time to make sure we provide a social safety net for all Canadians. However, there is a real cost to achieving this, and it can’t simply be to raise taxes under the premise of creating fairness and to make spending headlines.
Social welfare programs play a crucial role in promoting social equity, but their effectiveness ultimately hinges on sustainable economic growth. Without a vibrant economy generating sufficient wealth, redistributive measures simply become unsustainable.
The days of the Chrétien-Martin Liberal governments that saw Canada wrestle the deficit down and balance the budget is a distant ideology from the current Liberal government of today. We have to stop politicizing the economic future of Canada and look at how best the country can compete on the global stage, while ensuring a strong economy that all Canadians can benefit from.
For almost a decade, Canada has witnessed a shift in fiscal policy primarily aimed at redistributing wealth. As data from Statistics Canada and the Organization for Economic Co-operation and Development reveal, this focus on redistribution has coincided with concerning declines in gross domestic product growth and productivity.
Statistics Canada data from 2015 onward paint a sobering picture of the country’s economic trajectory with weak GDP growth. At the same time, productivity growth, a key driver of long-term economic prosperity, has stagnated, with Canada consistently trailing its OECD counterparts.
There is a correlation between the emphasis on wealth redistribution and the slow pace of economic expansion. High taxes and regulatory hurdles have deterred businesses from expanding and have discouraged risk-taking, contributing to Canada’s weak growth. The economy has been in decline, and the emphasis on redistribution has created disincentives for entrepreneurship, investment and innovation.
Fairness does not need to come at the expense of growth of the Canadian economy, nor do they need to be mutually exclusive.
It will take all levels of government to develop sound tax policy, create an environment to incentivize investment and decrease regulatory hurdles to grow the economy in order to retain and attract skilled workers, business and entrepreneurs that see Canada as a great place to invest, live and work.
It will mean making big, bold, meaningful decisions that will protect the social fabric of the nation, and at the same time create a framework for economic growth that enhances productivity and competitiveness. Balancing fairness and growth necessitate a recalibration of fiscal policy.
There is no reason why we can’t have both. The current cycle of tax and spend is not what Canada needs. You cannot tax your way to prosperity. We need to embrace policies that foster both fairness and growth, where economic success benefits all Canadians.