Prime Minister Justin Trudeau gives remarks at a fundraiser at the Fairmont Hotel in Vancouver, on Nov. 8.Jennifer Gauthier/Reuters
Finally, the Liberals have done something to help the forgotten Canadians, those unfortunate souls who have to date been cruelly excluded from nine years of Ottawa’s largesse.
We speak, of course, of the wealthy, who will benefit most handsomely from the Liberal government’s move on Thursday to remove the GST (and the HST in some provinces) on a wide range of consumer goods for two months, starting on Dec. 14.
That delightful bottle of Dom Pérignon Plénitude P2 Rosé Champagne 2000 that was just a little too costly at $2,018? As of Dec. 15, it will be value-priced at a mere $1,785. Quaking at the size of the catering bill for an intimate fete for 100 or so? Not to worry, the Liberals are here to help: caterers will be able to supply GST-free canapés, just in time for well-heeled merriment.
If only the above examples were a joke. Instead, this farce is the policy that the Liberals rolled out on Thursday to (once again) try to bribe a surly electorate with (even more) borrowed billions of dollars. This time out, it’s a two-month suspension of the GST on items such as children’s clothing, toys, food, drink (including beer, wine and pre-mixed cocktails) and – of course – real and artificial Christmas trees.
The tax break will cost the federal government $1.6-billion. Then there are the $250 payments that will be sent in the spring to 18.7 million Canadians with an individual net income up to $150,000. That will cost another $4.7-billion, for an all-in tally of $6.3-billion.
The Liberals’ largesse is a policy that is not simply bad; it is awful in many ways.
Most obviously, the Liberals are yet again borrowing money in an attempt to soothe the bruises from the burst of inflation fuelled in part by their previous overspending. The attempt is self-defeating: the added stimulus from the household payments will, all things being equal, slow the pace of interest-rate cuts by the Bank of Canada.
Perhaps the federal budget can be tweaked in such a way as to not completely flatten the fiscal guardrails that Finance Minister Chrystia Freeland set out a year ago. But even if that turns out to be the case, the government is once more digging the debt hole a little deeper in an attempt to extricate itself from its electoral deficit.
The logistics of the plan are hugely problematic. Retailers are expected to reprogram point-of-sale systems in time for Dec. 14 and then switch them back after Feb. 15, as well as to interpret exactly what is and isn’t taxed. Which playthings don’t make the list of “select children’s toys” that are GST-free? Have fun sorting that out in the cashier’s line.
Even if your sole concern is helping out cash-strapped Canadians, the Liberal policy is equally awful. The income test is ludicrously high: a household earning nearly $300,000 could get $500 in payments. (To be fair, at least the Liberals, unlike Ontario’s Progressive Conservative government, have put some kind of income limit on its bribes, er, rebates to taxpayers.)
The suspension of the GST is similarly ill-targeted. The existing carveouts, including on basic groceries, already undermine the purpose of an economy-wide value-added tax, as well as giving an unnecessary tax break to the well-off. The Liberals’ plan magnifies that flaw greatly, suspending the federal sales tax on items that a struggling Canadian household could only dream of purchasing.
It may be that lower-income households need help to cope with the fallout from inflation. If that is the case, there is a tool at hand to deliver such assistance: the GST/HST credit, paid in quarterly installments. Its entire purpose is to soften the regressive bite of the GST for those who can least afford it.
In 2023, that program delivered $10.3-billion in tax-free payments to lower-income households. Even a small slice of the $6.3-billion that the Liberals intend to spend could be put to far better use in aiding low-income households.
More broadly, the Liberals have chosen to spend $6.3-billion in tax relief in pretty much the worst way imaginable. Cutting business taxes would foster investment. Cutting personal income taxes would be pro-growth. Cutting capital gains taxes (or more accurately, reversing planned hikes) would encourage risk-taking. Instead, the Liberals are burning through billions for an economic sugar high.
But here is some holiday cheer: champagne dreams and caviar wishes will be 5 per cent cheaper.