Federal Budget 2024 | Freeland forecasts stable deficit despite shower of new spending

(Ottawa) The Trudeau government plans to keep the deficit below $40 billion over the next two years, despite $36 billion in new spending on housing, national defense and artificial intelligence, among others, announced during of the last two weeks.

To achieve this, it will draw more from the pockets of wealthy taxpayers as well as those of smokers while benefiting from economic growth that is slightly stronger than expected just six months ago.

Criticized by the Conservative Party, business people and certain economists who accuse it of having lost control of spending, the Liberal government maintains in its budget tabled Tuesday that it respects the budgetary anchors essential to maintaining the AAA rating of Canada, in particular by keeping the deficit below 1% of GDP.

Finance Minister Chrystia Freeland says Ottawa is succeeding in meeting its targets while making the necessary investments to tackle the housing crisis and the rising cost of living that are hitting many Canadians hard. It also confirms the equivalent of $36 billion in new spending over five years, several of which were announced before the budget was tabled by Justin Trudeau and his ministers.

“Canadians know how important it is to manage their budget responsibly in the face of rising living costs. They rightly expect their government to do the same,” said Mr.^me Freeland in his speech to the House of Commons.

Thus, the minister forecasts that the deficit will stand at $39.8 billion in 2024-2025 and will reach $38.9 billion in 2025-2026. Red ink will still be in place in 2028-2029 since the deficit should be 20 billion.

The good performance of the economy will allow Ottawa to bring in $3.4 billion more than expected this year and $3.9 billion next year. The wealthiest will also be called upon to replenish federal coffers. Minister Freeland announces that as of June 25, the portion of capital gains that is taxable will increase from 50% to 66% for people who declare more than $250,000 in capital gains annually. This measure, which would affect 40,000 taxpayers, should bring in 19.3 billion over five years, including 6.9 billion dollars this year and 3.37 billion in 2025-2026.

“I know there will be many voices raised in protest. No one likes paying more taxes, even those who can most afford it. But before they complain too much, I would like the 0.1% of Canadians affected to ask themselves the following question: what kind of Canada do you want to live in,” asked the minister before offering a series of answers to this question.

To sweeten the pill, the country’s big money maker is proposing to increase the cumulative exemption for capital gains on the sale of a small business or agricultural and fishing property by 25% to increase it from one million to 1 .25 million. This measure will deprive the tax authorities of $1.6 billion over five years.

Minister Freeland also announces a reduction in the size of the public service through attrition of 5,000 employees over the next four years, a measure which should result in savings of $4.2 billion in total.

Starting Wednesday, excise duties on tobacco will be increased by $5.49 per cartridge while vaping products will be subject to a 12% increase in excise duties.

Range of measures for housing

In terms of spending, the Trudeau government confirms the implementation of a range of measures totaling 8.5 billion to accelerate the construction of housing in the country, in addition to advantageous loan programs. Its objective is ambitious: a minimum of two million new housing units more than the 1.87 million housing units planned by the Canada Mortgage and Housing Corporation by 2030. It also proposes building housing on land owned by Canada Post and National Defence, in addition to converting underutilized federal buildings into housing.

Ottawa is also proposing to invest 1.5 billion over five years to lay the foundations of a national drug insurance program – a first phase which will provide coverage for diabetes medications and contraceptives. It will also increase the interest-free student loan and scholarship program by $1.1 billion.

The $5,000 subsidy program for the purchase of an emission-free vehicle is extended for two years. The bill is estimated at $607 million.

Debt costs on the rise

The fact remains that the costs of accumulated debt will continue to increase over the coming years. These costs will increase from $54.1 billion this year to $64.3 billion in 2028-2029.

Since coming to power, Justin Trudeau’s Liberals have never presented a balanced budget. The accumulated debt increased from 628 billion to more than 1213 billion.

“This budget is worse than we expected. The government is using a capital gains bazooka measure to finance still extraordinary expenses that are not sustainable in the long term. It is a budget that will make private investment less attractive in the economy. We are going to exacerbate the productivity problem in Canada,” said Robert Asselin, who advised Paul Martin and former Finance Minister Bill Morneau and who is now first vice-president of the Business Council of Canada.

In the budget, the Trudeau government announces its intention to “match immigration levels to the capacity to house people.” Starting in the fall, Ottawa intends to include for the first time the admissions of permanent residents and the admissions of temporary residents in the immigration levels plan.

However, a government source clarified that the government will focus on reducing the number of temporary immigrants such as foreign students, temporary workers and asylum seekers. Thus, the objective of welcoming 500,000 permanent residents per year starting in 2025 remains unchanged.