LOUIS XIV’S finance minister, Jean-Baptiste Colbert, famously declared that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” The Canadian government’s response to the COVID-19 crisis has been to throw money, now counted in the hundreds of billions of dollars, in all directions. Whether it is being well spent is hard to say. Whether it is enough, too much or too little is also hard to say. What is easier to predict is that sometime in the near future, probably in 2021, the government will add up the debts and recognize that it needs more tax revenue to bring the budget back to something approaching a balance. In short, more feathers will be needed, and there will be hissing.
Where will the government look? Bear in mind that this is a minority government which requires the support of at least one of the other parties, mostly likely the NDP, to stay in power. This probably forecloses a number of options including things like raising the GST by a point or two, raising the mid-level tax brackets (remember that Trudeau won election the first time on a promise of tax relief for the middle class) or cutting things like the child care tax benefit. That leaves some other options, many of which fall into the ever-popular “make the rich pay” category.
I don’t know what is going through the mind of Federal Finance Minister Bill Morneau, but I think it is a good guess that at least some of his senior civil servants have drafted a speech that looks like this. I sincerely hope it is not the one that he delivers on the next budget day.
My fellow Canadians, during the COVID-19 crisis, now mercifully in our past, your Federal Government stepped forward to save jobs, buttress incomes and preserve our economy. This came at an enormous cost, now estimated to be about $800 billion or more than 35% of our Gross Domestic Product. We did what needed to be done, but now the price must be paid. Our government is facing a debt burden unlike anything we have seen since the end of the Second World War. Now that the economy is returning to normal, we will all have to tighten our belts.
We recognize that tax increases are very unpopular, and in particular, we do not want to raise taxes on those workers who are still suffering from the income loss experienced in the dark days of 2020. However, over the years our income tax system has become riddled with loopholes, exemptions and deductions which cost Canada over $50 billion per year in tax that would otherwise be collected. By closing these loopholes, we will put our government on a sound financial footing. Some taxpayers will find that they will have lost benefits they enjoyed previously, but the average working family will not be much affected. In all, these measures will increase the amount we collect in taxes by about 17%, surely a small price to pay for the enormous benefits we have all received.
Here are the measures we will take to reduce wasteful tax expenditures, and the amounts that will now be restored to the treasury, each year:
Those fortunate Canadians, numbering about 400,000 in all, who are in the top 1% of all taxpayers may find that they will be paying somewhat more. Although they already pay 26% of all federal income tax that is collected, we are confident that, having no other choice, they will pay these additional amounts.
God bless Canada, God save the Queen.
