Budget battle
Liberals defend spending plan amid backlash from doctors
Pushback was fast and furious the day after the Liberals unveiled $39.3 billion in net new spending along with a new tax increase that Prime Minister Justin Trudeau said is targeted at the “ultra-rich” but medical professionals and others say will hit them hard.
Indigenous leaders, disability groups, doctors, real estate investors, business groups, opposition Conservatives and other political rivals of the Trudeau government blasted measures that either didn’t go far enough for some, or for others were bitter reminders of 2017 when Ottawa tried to tax investment income of small corporations only to climb down in the face of a fierce backlash.
What it all means is that despite prebudget fanfare about how Liberals will “solve” the housing crisis, expand child-care spaces, and help schools feed hungry children, the Trudeau government has a massive selling job on its hands.
That includes trying to win over premiers angry that the prime minister is stepping all over their turf but who the government needs to roll out many of their key measures.
The pitch began in earnest Wednesday in Parliament, with senior Liberals admitting they face a need to deliver results ahead of an election expected next year.
Trudeau invited cameras and reporters to a caucus meeting where he staged a show of unity with his MPs, and accused Conservatives of siding with “multimillionaires” in opposing the budget and its change to how taxes are paid on capital gains.
That’s a new measure Trudeau says will raise more than $19 billion, but only hit about 40,000 of the “ultra wealthiest” Canadians.
“We’re asking them to pay their fair share so that younger generations can have the same opportunities that (gen-)Xers, Boomers and other generations had when they were starting out in their lives,” said Trudeau. “The people that are driving our economy, the millennials and gen Z, who make up the majority of our workforce already, deserve the same advantages.”
The budget proposes to increase the portion of capital gains that is taxed from 50 per cent to 66 per cent. The increase will apply to all corporations and trusts, along with individuals whose capital gains exceed $250,000 in a year, effective June 25. The budget said it would impact individuals who have an average gross income including capital gains of $1.4 million, mostly when they go to sell a stock or an asset. And it won’t apply to sales of principal residences, but it could apply to properties like cottages.
Trudeau said Conservatives are “against asking the ultra-rich to pay their share.”
“My phone’s been blowing up for two days,” said Dr. Paul Healey, an Oakville emergency physician. Healey and his wife, a physician, run a Facebook group called Physician Financial Independence that counts 35,000 members who are in an uproar over the changes.
“I don’t think most Canadians consider physicians to be ultrarich,” Healey said in an interview. “Yes, we are, you know, wealthier than average, but it is going to affect every professional in Canada who has a corporation. So it’s lawyers, doctors, the auto mechanics who run a business. It’s all kinds of people who use the corporate structure,” including female doctors who use it to cover maternity leave.
“One of the big advantages of the corporate structure is that you can use it to save for your retirement, because we don’t have pensions, we don’t have benefits, we don’t have a lot of things employees would have,” he said. “We have to save within our businesses. So when you have investments and eventually you want to retire, you have to start to sell them to have money to live on.”
Family doctor David Edward-Ooi Poon said, “If the government intended to tax physicians after we were pushed to the edge during the pandemic, this shows doctors, particularly young ones, that our work is not valued, that if we work harder we should be taxed more,” said Poon. “Many of my colleagues are considering moving to the U.S. or other countries where physicians make more, or lowering their hours to reduce the tax burden. For our strained health-care system to improve, I would hope that physician retention is a priority.”
Goldy Hyder, head of the Business Council of Canada, which represents Canada’s executives and large companies, said the increase in capital gains taxes “might appear to be good politics to some, but it is bad economic policy for all. Wealth redistribution is not wealth creation, he said in a statement on what it calls a “tax-and-spend” budget.
Finance department officials told the Star that if you count all new spending announced by the Liberals since the November fall economic statement and including the 2024 budget, it adds up to $61.2 billion in new spending. That is offset by new revenues from the budget, mostly from the capital gains changes but also tobacco excise duties, that add up to $21.9 billion in total, meaning net new spending is $39.3 billion.
Conservative Leader Pierre Poilievre slammed the plan overall as an “orgy of spending” that will not help ordinary Canadians.
“We know who will not pay,” said Poilievre. “It will not be those with trust funds who protect their millions of inheritance, like the prime minister, nor the billionaires who invite him to their private Caribbean islands. They will hide their money.”
“Who will pay? The one who will pay is the welder or waitress who cannot pay their mortgage because he has inflated the mortgage rates.”
Assembly of First Nations national chief Cindy Woodhouse Nepinak said $9 billion for health, children’s education and business loan guarantees was welcome but falls “short of closing the long-standing infrastructure gaps that creates so many difficulties for First Nations people.”
Neil Hetherington, chief executive officer of the Daily Bread Food Bank, said the $200-a-month disability benefit tied to family income will do little to lift some 600,000 disabled Canadians out of poverty.
“What we saw in the budget absolutely does not represent what the legislation clearly dictated, and that legislation said it was going to lift people out of poverty and it doesn’t,” said Heatherington. The Daily Bread food bank is now feeding one in 10 Torontonians, and this month will have had 330,000 “client visits,” many of whom are disabled, he said. “People need the support now, this doesn’t come for another 15 months,” adding he hopes the government will enhance the benefit.
Bloc Québécois leader Yves-François Blanchet took a shot at the budget’s moves that he said tromp on Quebec jurisdiction and suggested Trudeau should run in his “preferred province of Ontario.”
Some provinces are pushing back. Alberta has promised it will legislate against what it says is Ottawa’s attempt to do an end-run around the provincial government, and require any federal funding agreements to have provincial approval, a bill Liberal cabinet minister Randy Boissonnault called “bonkers.”