BUDGET FOCUSES ON YOUNG CANADIANS

Cash for homes, daycare, more tax for wealthiest

OTTAWA • Finance Minister Chrystia Freeland tabled a budget with higher deficits, higher spending and higher taxes on the country's wealthiest people, as the Liberals revealed a spending plan designed for younger Canadians.

Freeland introduced the budget Tuesday after already having revealed much of its contents in the weeks before. In last fall's fiscal update, she forecast a deficit of $40 billion for the fiscal year that has just ended, a number she hit.

But over the next five years those deficits will all be slightly larger than forecast, adding up to $10.3 billion in extra red ink over that time.

Since they first began pre-budget announcements three weeks ago, the governing Liberals have made it clear the budget would be focused on Millennial and Gen Z voters. In her budget speech, Freeland said those generations need help given the swift rise in housing costs and other inflationary pressures.

“We want their hard work to be rewarded, as it has been for us. We want them to look forward to the future with a sense of anticipation, not angst,” she said.

Freeland said that maintaining a society where Canadians who work hard can get ahead and afford a good life is essential to the country's future.

“Democracy is not inevitable. It has succeeded and succeeds because it has delivered a good life for the middle class. When liberal democracy fails to deliver on that most fundamental social contract, we should not be surprised if the middle class loses faith in democracy itself,” she said.

The government will spend $480 billion next year, including $54 billion in payments on the country's debt.

Freeland lauded her government's fiscal restraint, saying the government will trim the number of civil servants, which currently stands at 368,000 people, by 5,000 positions over the next four years through attrition.

She insisted the government is looking for ways to save taxpayer dollars.

“It's not our money. It is the money of Canadians. And they quite rightly expect us to be really thoughtful about what we spend it on,” Freeland said, but added that at this point, Canadians expect to see the government investing in their prosperity.

“I don't think it is an eccentric view to believe that Canada, a growing country, needs to make investments in our country and in Canadians right now.”

Among the new spending is more money for home building, including tax measures that allow firsttime buyers to take more money out of their RRSP for a down payment and to delay when they start repaying the money.

There is also $1.1 billion for interest-free student loans and grants, more funding for the Liberal daycare program and for the first phases of national pharmacare that will cover insulin and contraceptives, funding for a new disability benefit and money for AI research.

The Canadian economy is currently giving the government a boost, heading for a soft landing instead of a recession and leading to a better-than-expected unemployment rate and GDP numbers that will give the government more tax revenues to work with.

Freeland also announced new capital gains taxes, levelling higher taxes on capital gains for people who make more than $250,000 selling stock or property other than a person's primary residence.

Currently, 50 per cent of capital gains profits are taxed, compared to 100 per cent of employment income. That will remain the case for the first $250,000 of capital gains income, but will rise on income above that level to 66.6 per cent.

The government estimates it will apply to only 0.13 per cent of personal income tax filers and just 12 per cent of corporations. It is expected to bring in nearly $20 billion in tax revenue to the government over the next four years.

Robert Asselin, a vice-president with the Business Council of Canada, said the amount of money the tax will raise is a clear indicator of the impact it will have on the broader economy.

“When you get $5 billion a year from a tax measure, it's not targeted to the super rich. It's targeted at large businesses, to entrepreneurs, to innovators, which I think will be very detrimental to the business and investment climate in Canada,” he said.

Asselin said when businesses and corporations are taxed heavily on their investments, they stop making those investments, causing a domino effect of fewer investments and employee hires.

Freeland said she doesn't expect the tax to hurt the business climate, pointing out that capital gains taxes were higher in the 1990s when business investment was higher than it is today.