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| In its first steps, the Trudeau government raised taxes on most taxpayers (despite promising tax relief for the middle class) and dramatically increased spending and borrowing. BLAIR GABLE/REUTERS FILES |
Opinion: The Liberal mix of higher taxes, more government spending and deeper indebtedness did not result in a robust economy as promised
By Jason Clemens, Milagros Palacios and Niels Veldhuis
The Trudeau Liberals were elected in 2015 promising a new direction in fiscal policy. Their 2015 platform stated that: “Canada’s economy has faltered … It is time for smart, strategic investments that will turn our economy around and get it growing again.” In their inaugural budget in 2016, they talked about the need for “fundamental change” and massive “investments” by government.
In its first steps, the Trudeau government raised taxes on most taxpayers (despite promising tax relief for the middle class) and dramatically increased spending and borrowing. These changes, the government argued, would produce a stronger, more robust economy.
Before assessing the economy’s performance, it’s first important to recognize the Trudeau government’s striking break from a two-decade long policy consensus. First, unlike prime ministers Jean Chrétien, Paul Martin and Stephen Harper, Justin Trudeau voluntarily decided to run deficits to finance additional spending, originally committing to cumulative budget deficits of $25.1 billion over three years and a return to balanced budgets in 2019–20. In fact, the government ran $89.1 billion in deficits over five years (2015–2019) with no end in sight — and it did this pre-recession.
The government also raised taxes, including by imposing a new top income tax rate on professionals, entrepreneurs and business owners. Although it did reduce the federal personal income tax rate for middle-income earners from 22.0 per cent to 20.5 per cent, it also eliminated a host of tax credits. The net effect was to increase personal income taxes for more than 80 per cent of middle-income families. It’s also worth noting that more than 60 per cent of families in the bottom 20 per cent of the income distribution pay higher income taxes today because of the discontinued tax credits.
The higher tax revenues weren’t enough, however, to finance all the new spending the government wanted so additional borrowing was needed. Federal spending on government programs between 2015 and 2019, the latest year for which detailed data are available, increased by $69.1 billion or 27.2 per cent.
Source: Financial Post
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