Ottawa should spur growth through better tax competitiveness and get back into the black by curbing overspending, says the C.D. Howe Institute’s annual Shadow Federal Budget.
In Less Debt, More Growth: A Shadow Federal Budget for 2019
, authors William B.P. Robson and Alexandre Laurin show Ottawa could balance its budget in 2023/24 by using greener, more growth-friendly taxes, containing federal operating costs, and still have room to enhance Canadians’ opportunities to work, save, and retire securely.
“The C.D. Howe Institute’s Shadow Budget for 2019 looks past the overspending and deficits the federal government has adopted as its fiscal signature since its election in 2015,” says Robson. “Our focus is on ensuring the competitiveness and dynamism of the Canadian economy in the near and medium-term, setting the stage for a return to surpluses during the next Parliament.”
Among the key recommendations for Finance Minister Morneau’s fourth budget:
- Responding to the Tax Competitiveness Challenge
- Higher thresholds for personal income taxes.
- Lower corporate income tax rates.
- Require all sellers of digital goods and services in Canada to pay tax regardless of their location.
- Enhancing Security for Canadian Seniors
- Raise tax-deferred saving limits and eliminate mandatory withdrawals from registered retirement income funds (RRIFs) to level the playing field for Canadians who do not have defined-benefit pension plans.
- Encouraging longevity insurance and making the Pension Income Tax Credit and pension income splitting available to all recipients of retirement income.
- Fostering Growth
- Reduce border frictions through higher thresholds for taxes and phase-out of remaining import tariffs.
- Prioritize direct funding for infrastructure projects that fall under federal government control and can move relatively quickly.
- Promoting better job opportunities and supporting education, especially for indigenous Canadians.
- Return to Surplus
- Set a new course on reducing CO2 emissions by raising the GST on transportation fuels to 15%, instead of leaving all of Canada’s carbon reduction eggs in an unpredictable carbon tax basket.
- Rationalize tax credits.
- Cut federal employment costs by giving managers latitude to reward high performers while reducing the number of less valuable positions.