Much of what the NDP promised would be popular with progressives, but money doesn’t fall from the sky.
The NDP’S electoral platform envisions massive increases in public spending that would be paid for by higher taxes on the rich. Though the party’s proposals are well-intentioned, it is unclear how they would actually be funded. The taxes proposed to pay for them are insufficient, and the NDP’S vision for Canada is almost certainly unrealistic.
Key promises in the 115-page platform include: national pharmacare; dental and mental health coverage for the uninsured; 500,000 in new affordable housing units; a guaranteed livable income for all Canadians; immediately wiping out 20 per cent of all federal student debt; doubling Canada student grants; reducing carbon emissions by 50 per cent of 2005 levels by 2030; and much, much more.
Much of what the NDP promised would be popular with progressives, but money doesn’t fall from the sky. Unless you’re willing to print your way into hyperinflation, making lavish promises without a clear plan on how to finance them is not good governance.
Consider the NDP’S promise to provide 500,000 affordable housing units. The Liberals’ 2021 budget included a Rapid Housing Initiative that allocated $1.5 billion to create 4,500 new affordable housing units. From that you can extrapolate a ballpark estimate that the NDP plan would cost around $165 billion (or approximately 47 per cent of the annual federal budget) — though complicating factors like economies of scale could lower that number.
The NDP’S housing strategy, which focuses almost exclusively on public subsidization, seems guaranteed to cost astronomical sums, even if those costs are spread over several years.
Similarly, according to a 2020 report by the Parliamentary Budget Officer (PBO), a guaranteed livable income would annually cost anywhere between $30 billion to $71 billion — though whether these numbers are relevant to the NDP’S platform remains unknown since the platform contains scant detail on what a guaranteed income would actually look like. Meanwhile, the NDP estimates that annual costs of national pharmacare would be $10 billion while doubling Canada student grants would cost $1.6 billion.
This is just a preliminary analysis — exact figures are hard to produce given the lack of specificity within the NDP’S commitments. However, were the party to implement its platform, the result would undoubtedly be a revolution in public spending, with federal expenditures easily increasing by at least 20 per cent ($70 billion annually).
How does the NDP hope to pay for everything? When it comes to taxation, economic populism is the party’s ethos. “Just tax the rich” may be a popular slogan, but in practice it obscures the fact that the rich simply cannot by themselves fund what the NDP wants to do.
The NDP have proposed a wealth tax that would apply only to Canadians with over $10 million in net worth — taxing them at one per cent of all wealth above that threshold. They have also committed to increasing the top marginal income tax rate from 33 to 35 per cent, and have promised a two per cent luxury goods tax on things like yachts and private jets.
However, the PBO estimates that a one per cent wealth tax on those with more than $20 million in assets would generate only $5.6 billion per year — not a small sum, but still only a 1.6 per cent increase in federal revenue. The NDP proposal would generate more revenue through a lower threshold ($10 million versus $20 million), but even this is unlikely to yield enough revenue to fund much beyond one major spending program, such as national pharmacare. The revenue potential of wealth taxes are generally overblown, and making them work would require repeatedly expanding who counts as wealthy, as the NDP has already done (until last week, they were committed to the $20 million threshold).
Similarly, the top one per cent of earners in Canada made about $140 billion in income in 2018, representing around 10 per cent of national income. A two per cent increase in their top marginal tax rate would yield only around $2.8 billion — and that would be further diminished by the behavioural effects of higher taxation (i.e. people working less, increased tax evasion).
When it comes to a luxury goods tax, someone should tell the NDP that the markets for yachts, private jets and similar goods are not large enough to generate significant revenue. Appealing to the emotional satisfaction of taxing the opulences of the ultrarich is understandable, but will that pay for the NDP platform? No.
There are some other revenue-generating proposals scattered around — most notably an effort to increase yields on capital gains taxes and a tax on corporations that profited off the pandemic. Even collectively they don’t seem capable of filling the yawning deficit implicit within the NDP’S platform. The revenue they would generate could fund moderate improvements in the welfare state, but not a utopian spending revolution.
This isn’t to say that the NDP would necessarily maintain a massive deficit were it to be elected — it could always balance the budget by raising taxes on regular Canadians, not just the ultrarich, which in practice would mean significant tax increases for the middle class. However, that would likely be unpopular and the NDP does not want to be unpopular — it wants votes.
And so, seeking votes, it has presented a platform that includes a laundry list of luxurious, unaffordable promises and has implausibly made the case that only other people (the ultra-wealthy) will pay, when, in reality, the tax burden would fall on an ever expanding cohort of regular Canadians.
Nonetheless, there are good things in the NDP platform, which is strongest when it makes recommendations that don’t assume unlimited funds. Examples include banning unpaid internships, expunging the criminal records of Canadians convicted of minor cannabis possession, and protecting consumers’ right to repair their own electronic devices (rather than be charged extortionary prices by Big Tech).
If the NDP were more focused on these kinds of improvements, and then prioritized just a few big overhauls (i.e. national pharmacare), its platform would be much more credible. But as it stands right now, their platform is a pipedream.
MAKING LAVISH PROMISES WITHOUT A CLEAR PLAN ... IS NOT GOOD GOVERNANCE.