Federal Government & Politics II

[YOWetal]

Originally Posted by Truenorth00

I hope that was sarcastic. Running massive deficits to pay off the cohort with the most assets and the least poverty is rather unjust (aside from being unsustainable).

The next government is going to have to implement 90s style cuts. And it's going to be a choice of what to prioritize. I hope they start with reform of the support system for seniors. The current system is wholly unsustainable, yet somehow doesn't provide enough for those who need it the most, while also basically pushing every cent of fiscal capacity towards the support of seniors while ditching literally every other priority.

The chances they focus on cuts to seniors seem like next to nil. I am not sure they will even bite the bullet which is still further off than it was in the 90s but if they do public service, child benefits, climate action seem like more candidates for cuts than seniors.

[MolsonExport]

Best to increase corporate taxes, and tax rates on the Robber Barons Galen Westons of Canada.

[lio45]

Originally Posted by MolsonExport

Best to increase corporate taxes, and tax rates on the Robber Barons Galen Westons of Canada.

Corporations are a more reasonable target than "the wealthy", all things considered (they can't decamp to another jurisdiction as easily). However it's still not a panacea, as they can easily just forward most (or even all) of those increases to their customers.

Remember when the transportation industry introduced a conspicuously separate item on their bills called "Fuel Prices Overcharge"?

Tomahawk Steak -- $72
"Justin Trudeau Tax" Charge -- $2
Total -- $74

[lio45]

Personally, I think the only real long-term solution is to start to live within our means, i.e. reduce the unsustainable generosity of our social safety nets.

[YOWetal]

Originally Posted by MolsonExport

Best to increase corporate taxes, and tax rates on the Robber Barons Galen Westons of Canada.

Besides zero chance of the Cons doing that, it's hardly effective as while it brings in more money from many corps, many others can decide where to book profits. It also is bad for productivity and growth even in the short term but especially the medium term.

We could tax capital gains especially investment properties as low hanging fruit. GST though political suicide would be good economically. We are near the limit on labour taxes. Overall we are pretty near limits in general being in a near economic union with the US any increase will cause leakage and impede growth.

[lio45]

Good point, the only "wealthy" we can hope to tax (though no politician will dare) is home-owning Boomers, especially in the Lower Mainland and GTA.

It would be smart (though I would personally dislike that, from a purely financial point of view) to stop treating real estate as such a favored investment class.

I am still betting on us not being smart (i.e. not selling everything now).

[YOWetal]

Originally Posted by lio45

Good point, the only "wealthy" we can hope to tax (though no politician will dare) is home-owning Boomers, especially in the Lower Mainland and GTA.

It would be smart (though I would personally dislike that, from a purely financial point of view) to stop treating real estate as such a favored investment class.

I am still betting on us not being smart (i.e. not selling everything now).

Like OAS cuts I don't see us taxing Primary Residences. Political suicide. Investment properties would annoy a lot less people and be better for fairness too. If they started it Jan 1 2025 it would also put a lot of properties on the market. (possibly too many)

[Truenorth00]

Originally Posted by YOWetal

The chances they focus on cuts to seniors seem like next to nil. I am not sure they will even bite the bullet which is still further off than it was in the 90s but if they do public service, child benefits, climate action seem like more candidates for cuts than seniors.

Well there's no way out. All the things you mention don't actually reduce the deficit enough. And OAS liabilities are growing faster than everything else. So if they don't do anything, they won't be able to keep the deficit in check or offer the tax cuts they will inevitably want to offer.

They can say what they want now. I think the numbers basically tell us what they do after the election will be another matter. Exactly like the Chretien Liberals running on one platform and then having to go in a substantially different direction after having a crisis of confidence on Canadian bonds. Perhaps the only difference here is that the CPC will be less surprised at the situation than the Chretien Liberals were by the bond market's reaction.

[Truenorth00]

Originally Posted by YOWetal

Besides zero chance of the Cons doing that, it's hardly effective as while it brings in more money from many corps, many others can decide where to book profits. It also is bad for productivity and growth even in the short term but especially the medium term.

We could tax capital gains especially investment properties as low hanging fruit. GST though political suicide would be good economically. We are near the limit on labour taxes. Overall we are pretty near limits in general being in a near economic union with the US any increase will cause leakage and impede growth.

Originally Posted by YOWetal

Like OAS cuts I don't see us taxing Primary Residences. Political suicide. Investment properties would annoy a lot less people and be better for fairness too. If they started it Jan 1 2025 it would also put a lot of properties on the market. (possibly too many)

Lots of things they can't touch (in your opinion) and that's exactly why they have to be touched. Cutting child benefits instead of OAS, will absolutely crush the support of the very cohort keep them high in the polls and that they want to win for the next generation. Climate policy isn't actually very expensive despite what conservatives are telling themselves. The fee and rebate plan isn't a major federal revenue generator and run within each province. Those battery plant subsidies are mostly conditional on production (which is a net revenue generator across the economy and probably for the feds) and isn't actually being dispensed substantially at the moment. Maybe a few billion annually on different programs across government. I would guess less than 1% of the actual federal budget. It's savings to be sure. But not enough to close a $40B deficit. So what does that leave? Especially if they want to offer tax cuts and reduce the deficit?

[YOWetal]

Originally Posted by Truenorth00

Well there's no way out. All the things you mention don't actually reduce the deficit enough. And OAS liabilities are growing faster than everything else. So if they don't do anything, they won't be able to keep the deficit in check or offer the tax cuts they will inevitably want to offer.

They can say what they want now. I think the numbers basically tell us what they do after the election will be another matter. Exactly like the Chretien Liberals running on one platform and then having to go in a substantially different direction after having a crisis of confidence on Canadian bonds.

The cuts certainly could get us to balance on their own. Child benefits alone are get us close enough that growth and restraint could do the rest. But medium to long term you're right OAS, Healthcare are going to hit like a wave and adding a million immigrants a year seems like the only solution currently on the table but is causing more pain than it helps.

[Truenorth00]

Originally Posted by MolsonExport

Best to increase corporate taxes, and tax rates on the Robber Barons Galen Westons of Canada.

The Liberals will probably announce corporate tax increases this week. And then they'll be surprised in a few months when inflation ticks up as the companies pass on the hikes.

Originally Posted by lio45

Good point, the only "wealthy" we can hope to tax (though no politician will dare) is home-owning Boomers, especially in the Lower Mainland and GTA.

It would be smart (though I would personally dislike that, from a purely financial point of view) to stop treating real estate as such a favored investment class.

I am still betting on us not being smart (i.e. not selling everything now).

They should do something to real estate. They won't. Which is why everything else will suffer.

[lio45]

Originally Posted by YOWetal

Like OAS cuts I don't see us taxing Primary Residences. Political suicide.

In other words, anything that avoids long-term catastrophe is immediate political suicide.

I agree with thewave46 that it's going to have to wait until it's the money men, not the politicians, who finally force something to happen. Unlike the politicians, they can.

[Truenorth00]

Originally Posted by YOWetal

The cuts certainly could get us to balance on their own. Child benefits alone are get us close enough that growth and restraint could do the rest. But medium to long term you're right OAS, Healthcare are going to hit like a wave and adding a million immigrants a year seems like the only solution currently on the table but is causing more pain than it helps.

OAS ~ $60B
CCB ~ $30B
Defence ~ $30B

And OAS is growing faster than everything else and being deficit financed at 5%. They could literally eliminate CCB completely (which would be the largest generational attack ever and probably get them turfed next election) and still not have solved the deficit. And they still wouldn't be able to offer any other tax cuts either.

[Truenorth00]

Originally Posted by lio45

I agree with thewave46 that it's going to have to wait until it's the money men, not the politicians, who finally force something to happen. Unlike the politicians, they can.

Look at the rate at which interest on debt is growing. Could double in just 3-4 years. So that reckoning is coming during the next government's mandate.

[lio45]

Originally Posted by YOWetal

Overall we are pretty near limits in general being in a near economic union with the US any increase will cause leakage and impede growth.

Exactly, therefore:

Originally Posted by lio45

Personally, I think the only real long-term solution is to start to live within our means, i.e. reduce the unsustainable generosity of our social safety nets.

[Truenorth00]

Toronto Star's business columnist is going even further than me:

Ahead of Tuesday’s federal budget, speculation is rife that Chrystia Freeland, the federal finance minister, will raise taxes on the wealthy and on corporate profits.

That would have little impact in balancing the books.

Instead, we should debate two measures that have long been contemplated but not enacted because they are regarded as political poison.

If you have some cognac handy, reach for it now.

Two reforms that would help us achieve fiscal balance are raising the age of eligibility for Old Age Security to 67 from 65 and restoring the federal portion of the GST to seven per cent from five per cent.

The imperative to significantly increase government revenues is inescapable.

And restraint in government spending cannot be the sole means of returning to the budget surpluses that Canada ran for 11 consecutive years beginning in the 1990s.

There are limits on taxing the rich. Canada’s top statutory tax rate is already the third highest in the G7. At 53.5 per cent to America’s 43.7 per cent, a further increase in the top rate risks tax flight.

It’s the same story with Canadian corporate taxes. At 26.2 per cent, they are higher than the U.S. rate of 25.8 per cent and the OECD average of 23.6 per cent.

(Small business in Canada is taxed at nine per cent, recognizing its role as the country’s biggest employment provider.)

Meanwhile, OAS payments are among the biggest and fastest-growing expenditures for the Canadian government. They are expected to rise to $96 billion in 2027 from $69 billion last year.

We have the option of aligning with the U.S. by raising the OAS eligibility age to 67 from 65.
...

https://www.thestar.com/business/opi...010f3adc4.html

[MolsonExport]

The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

John Kenneth Galbraith

[lio45]

Originally Posted by Truenorth00

Toronto Star's business columnist is going even further than me:

That columnist insists on raising the age of OAS eligibility, but as discussed here already, there's also the separate option of raising the wealth threshold for OAS eligibility. (Or a mix of both.)

[1overcosc]

Originally Posted by MolsonExport

Best to increase corporate taxes, and tax rates on the Robber Barons Galen Westons of Canada.

That's a feel-good measure, ultimately. You can't actually generate much meaningful increase in revenue with "tax the rich and the corporations". A few billion a year at best. We're talking about multiple tens of billions a year for programs like OAS or pharmacare.

The classic Western social democrat idea of implementing every single social program under the sun and paying for it all with "tax the rich and the corporations" just doesn't work in the real world. If you try, you end up with either a badly overstretched welfare state that can't actually perform its role properly, or massive deficits.. or both, like we have in Canada right now.

A functional welfare state requires being smart and strategic about what's being paid for and what's being funded. OAS, as currently implemented, massively fails that test. It costs a fortune and doesn't even meet the needs of those who really need help.

[lio45]

Originally Posted by MolsonExport

The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.

John Kenneth Galbraith

Selfishness being human nature, people will be voting for unsustainable immediate generosity until the Money Men step in and force massive austerity. How is this fair? It's extreme generational inequity.