During last year’s federal election, the Liberals promised a tax cut for the middle class in the form of an increase in the Basic Personal Amount (BPA) – the amount of income that is exempt from personal income taxes. They committed to raising the BPA to $15,000 gradually over the next four years from $12,069 in the 2019 tax year. In dollar terms, this much-vaunted tax cut is pretty miniscule – less than $50 monthly once fully implemented in 2023 – and won’t make a real difference for most Canadians. Those who earn income in the $150,000 range will not be eligible for this bonanza. The impact of this change will mean more Canadians not paying any income tax. There are many other taxes as well – payroll taxes, property taxes, excise taxes, carbon taxes, health taxes etc – but they are often offset by government rebates, tax credits and other measures. Although estimates vary somewhat, it seems that about 40 per cent of Canadians don’t pay any taxes at all, which is not out of whack with comparable data in the US and other developed countries.
Canadians are nervous the nation’s economy is veering toward a recession next year.
In a survey for Bloomberg News by Nanos Research Group, 56% of Canadians said there’s at least a “somewhat likely” chance a recession will hit in 2020 — a sentiment broadly held across regions, gender and age. Only 34% said a recession is unlikely, with 10% unsure.
An Abacus Data poll this past summer ranked “Housing Affordability” as the fifth most important issue for Canadians heading into the Oct. 21 federal vote. The issue of housing affordability was only three per cent less important to those polled as “Climate Change.”
Still, I don’t remember any marches or rallies on home buying during the election. Perhaps that is why the policies the parties presented for those issues left so many Canadians wanting.
Politicians campaign in poetry and govern in prose and this past election season is no different. The campaigning period produced billions of dollars in spending commitments, numerous proposed new benefits, and targeted boutique tax credits. Some of these announcements have been properly costed. Other proposals included somewhat questionable numbers or none at all. As voters, we don’t know how these fiscal plans will pan out.
Federal politicians can be forgiven for giving short shrift to fiscal issues. A recent Ipsos poll shows that only 12% of Canadians identify government deficits/debt as a top ballot-box issue, compared to health care (35%), affordability and cost of living (27%), and climate change (25%).
While many Canadians are focused on the continuing amateur hour going on in Ottawa, where Justin Trudeau was just found yet again in violation of ethics laws, the economic news is getting decidedly grim. And although Trudeau seems to feel he is not bound by the same laws that apply to the rest of us mere mortals, there are few if any politicians that don’t find themselves ultimately beholden to the immutable laws of economics. Trudeau is no exception, and more’s the pity for Canada.
Many economic indicators have turned south in recent months, with a loss of 25,000 jobs in Canada in July. This was the second consecutive month of job loss. We have also experienced a weakening Canadian dollar, turmoil in stock and bond markets, and slowing growth in key powerhouse economies around the world such as Germany and China. Add the US-China trade war into the mix and all of the uncertainty for businesses and investment that creates, and we have a perfect storm of economic bad news. Recessions tend to come around every decade or so, and as the last recession took place in 2008, the global economy is ripe for a downturn.