The Upcoming Federal Budget Will Deliver More Political Messaging Rather Than Real Change Or Benefits

It looks like we’re finally going to get a federal budget , but not in October as originally thought. Prime Minister Mark Carney in the House of Commons said he is “looking forward … to releasing the budget on November 4 (and it) will contain the biggest investment in this country’s future in a generation.”

He also continued to trot out the vacuous phrase that the government will “spend less to invest more” and that the “operational budget will be balanced in three years.”

It’s shameful that the budget was not presented in the spring since it will have been 567 days since the last federal budget was presented by the time it comes out. I can forgive the first 365 days, but not the next 202 days.

Since the government’s fiscal year commences on April 1, 218 days will have passed without Canadians knowing how their precious tax dollars have been spent. It’s highly inappropriate and Canadians should not accept the tired old excuses to forgive this kind of non-accountability.

Regarding the “spend less to invest more” phrase, it’s a nice-sounding one for the financially illiterate voter that signals increased government spending . For those who buy into the ideology that increased government involvement in our lives is wholly appropriate and necessary, it fits nicely.

And balancing the operational budget within three years is a deceptive and old accounting trick . In the government context, such a separation of spending is intended to try to pretend that some spending is an “investment” rather than a current cost. But if the government spends money and incurs debt, it’s highly doubtful that lenders will care if it’s labelled as “operational” or an “investment.”

In other words, if the overall deficit is $100 billion, it is useless to label $60 billion as “capital” and the remaining $40 billion as “operational.” Again, such a separation is a tired accounting trick designed to divert attention from the big picture.

So, what can we expect to see in the budget besides a historically high deficit? Well, for tax measures, we should remind ourselves of the unimpressive taxation promises in the Liberal Party’s 2025 election policy platform.

The signature tax policy was a one per cent reduction in the lowest personal income tax bracket. That promise was put before Parliament in the short spring sitting, but has not yet passed into law. It will most likely pass in the current sitting, but the government has been crowing about this measure as if it’s law for some time now. I’m sure we’ll see more crowing about it in the upcoming budget, but it is a minuscule measure for the average Canadian (less than $200 of savings annually).

The Liberals also promised:

• To reduce the minimum registered retirement income fund withdrawal amount by 25 per cent for one year. Given that 2025 will be almost complete at the time of the budget release, this measure will likely need to be made effective for 2026 to ensure fairness;
• To expand the labour mobility tax deduction by reducing the required travel distance from 150 kilometres to 120 kilometres and “consult” on increasing the current $4,000 annual deduction limit;
• To introduce a new refundable health-care workers hero tax credit, which was short on details, but apparently will pay personal support workers up to $1,100 a year;
• To expand the critical minerals tax credit and the Canadian exploration expense deduction (no details were provided);
• To revive the unimpressive multi-unit residential building tax shelter from the 1970s as a “plan” to stimulate private rental housing development;
• To conduct an “expert review” of the corporate tax system.

I also expect to see an update regarding the 100 day plan that the finance minister announced on Sept. 2 for the Canada Revenue Agency (CRA) to improve its call centres. In a clearly knee-jerk fashion, the CRA last week announced that as of Sept. 8 — six days after the plan’s announcement — it had increased the number of employees in contact centres and it will “continue augmenting the number of agents in the coming weeks.”

This train wreck is a systemic, long-standing mess whose root causes won’t be solved by simply adding bodies. The 100th day of the plan is on Dec. 11, more than a month after the release of the budget. We’ll see if the budget has any further announcements on this. In the meantime, the CRA appears to be committed to tracking progress .

Canadians have endured more than 10 years of governance that views taxation less as a tool of sound economic stewardship and more as a blunt ideological instrument for social engineering and political messaging. I don’t expect that to change in the Nov. 4 budget. Real change would mean Big Bang personal and corporate tax reform: big ideas and bold thinking that encourage investment rather than having the government do the investing.

Carney declared himself to be a “great fiscal and budgetary expert” in the House of Commons last week, but good taxation policy does not appear to be part of the repertoire of his new government. Gimmicks might fool some, but they won’t fool lenders, business owners or anyone who has ever balanced a set of books.

I’ll be in Vancouver this week watching the great classic rock band, The Who, belt out their classic song Won’t Get Fooled Again. Canadians would be wise to remember that refrain when the budget drops. We can either demand bold leadership and a tax system that rewards hard work and risk-taking or settle for being fooled — and misled — again.

• The government can't do math, but the average Canadian is to blame for not calling it to account
• CRA and government are getting in the way of a more certain tax system to our detriment

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

_____________________________________________________________

If you like this story, sign up for the FP Investor Newsletter.

_____________________________________________________________