Instead of dreaming up new taxes to hammer Canadians, Trudeau could start looking at areas to save. Photo credit: Bloomberg/David Kawai
If you hear the sound of water about to crash ashore, that’s the sound of the Trudeau government’s tidal wave of new taxes set to wash over taxpayers in this winter’s federal budget.
The tidal wave is coming because the Trudeau Liberals have spent every penny in the rainy day fund, and then some.
Prime Minister Justin Trudeau inherited a surplus, but has run deficits every year he’s been the boss on Parliament Hill. He’s single-handedly doubled the national debt.
And while Trudeau would love to blame the pandemic, he’s been on a spending binge since 2015, not 2020.
Tax revenue has increased at a robust annual rate of $23.8 billion since 2015. But spending has increased at an even faster rate of $32.5 billion.
There’s a risk Trudeau will turn to a wealth tax to help contain his $53 billion deficit and pay for the boatload of promises he’s made to the NDP to remain in power. At last count, Trudeau promised NDP leader Jagmeet Singh tens of billions of dollars in new social spending.
But evidence across three continents shows that wealth taxes are a fool’s errand.
Singh has been trying to sell Canadians, and Trudeau, on a wealth tax for years.
In the last election, Singh proposed a wealth tax of one per cent on wealth over $10 million. The NDP has said a wealth tax would only soak the rich. But average, everyday Canadians will be left paying the price.
A huge percentage of Canada’s income taxes are already paid by millionaires and billionaires. Canada’s richest one per cent pay more than 20 per cent of the nation’s income taxes. What happens if they leave because the government imposes a wealth tax? Suddenly Canada would have fewer wealthy taxpayers and the tax burden would have to shift to the middle class.
If you don’t think a wealth tax would lead rich taxpayers to leave Canada, think again. In France, 12,000 millionaires left in just a single year due to that country’s wealth tax. France’s socialist government then decided to scrap the entire system.
Rich people tend to be mobile. They can leave Canada and take their wealth with them.
There’s also a very real threat that wealth taxes could take on mission creep. When the income tax was first introduced in Canada, it only applied to the richest of the rich. Today, workers earning $25,000 a year are paying income tax.
A wealth tax might start at $10 million, but the threshold will surely lower over time.
When the NDP first talked about a wealth tax, they suggested a $20 million threshold. Now they’ve set it at $10 million. Next year, they’ll be pushing for $5 million. Five years from now, it could be $1 million, which is an average home value in places such as Toronto and Vancouver.
Wealth taxes can have another unintended consequence: punishing groups who are wealthy on paper, but not in reality. Consider the case of farmers. Many farmers have a lot of wealth on paper, but it’s tied up in land ownership and expensive farming equipment.
Instead of dreaming up new taxes to hammer Canadians, Trudeau could start looking at areas to save.
And Trudeau shouldn’t stop here.
His next target should be corporate welfare.
Last year, Trudeau and his buddy Premier Doug Ford in Ontario handed the Ford Motor Company, a Fortune 500 company, nearly $600 million to retool some plants.
It’s time to stop giving taxpayer dollars to wealthy corporations that don’t need our help.
There are endless ways for Trudeau to save money instead of walloping Canadians with new taxes that could send Canada’s wealthiest taxpayers south of the border to protect their assets.
But, just in case Trudeau once again makes the wrong decision come budget time, Canadians had better take out their umbrellas.
Jay Goldberg is the Ontario Director at the Canadian Taxpayers Federation. He previously served as a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.