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| EST. READ TIME 2 MIN.Federal government could balance budget and reduce tax rates with 2.3% spending reduction over two years
A New Federal Fiscal Framework for Canada
- Poor government policy has led to a significant deterioration in Canada’s federal finances over the last decade. The introduction of new and expanded government programs has caused federal spending to increase substantially, resulting in persistent deficits and rising debt.
- Canada also maintains markedly uncompetitive personal income taxes relative to many other advanced economy jurisdictions. This hinders Canada’s ability to attract and retain highly skilled workers, entrepreneurs, and business owners.
- Canada must make meaningful policy reforms by pursuing reductions in both federal spending and tax rates to address the current fiscal and economic challenges.
- The federal government should eliminate 49 federal PIT tax expenditures and remove the three middle income tax rates of 20.5, 26.0, and 29.0 percent while reducing the top marginal PIT rate from 33.0 to 29.0 percent.
- The federal government can introduce a comprehensive tax reform package and achieve a balanced budget by 2026/27 through reducing nominal annual program spending by 2.3 percent over a two-year period.
- Returning to balanced budgets should be viewed as a starting point rather than the end goal.
- Imposing a Tax and Expenditure Limitation (TEL) rule that caps growth in program spending at the rate of inflation plus population growth would be the next step for federal finances over the long-term.
- This would allow for budget surpluses in subsequent years after achieving the initial balanced budget and ensure discipline in government spending for the foreseeable future.
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Jake Fuss
Director, Fiscal Studies, Fraser Institute
Jake Fuss is Director of Fiscal Studies for the Fraser Institute. He holds a Bachelor of Commerce and a Master’s Degree inPublic Policy from the University of Calgary. Mr. Fuss has written commentaries appearing in major Canadian newspapers including the Globe and Mail, Toronto Sun, and National Post. His research covers a wide range of policy issues including government spending, debt, taxation, labour policy, and charitable giving.… Read more Read Less… -
Grady Munro
Policy Analyst, Fraser Institute
Grady Munro is a Policy Analyst at the Fraser Institute. He holds a Bachelor of Arts in Economics from MacalesterCollege in Minnesota, and a Master’s Degree in Public Policy at the University of Calgary. Mr. Munro’s commentaries have appeared in major Canadian newspapers including the Globe and Mail, Financial Post, and Toronto Sun. His research focuses on government spending, debt, and taxation.… Read more Read Less…
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