Budget 2023-2024

Today the budget for 2023-204 was dropped and on balance a big disappointment. A few good things, but on the whole I would give it a C-. It was not a fiscally responsible budget despite finance minister’s promise. Below are my thoughts on some of the major items.

Perhaps the one good thing in the budget was extending the enhanced GST tax credit to low income individuals which they called grocery assistance but really it is just straight up cash. With inflation still high and hurting lowest income families the most, this makes sense and it is time limited so won’t add too much to debt. So while I can fully support this, there aren’t a lot of other things I agree with.

The health care deal I can understand but I think real problem is doubling down on status quo and lack of reform. As per my earlier post, I think repealing Canada Health Act and transferring tax points to provinces is a better solution. This allows different jurisdictions to try different approaches and we can learn from what works and what doesn’t. I support a parallel private system, but if provinces that stick with government monopoly on payment for basic health care deliver better results, I might change my view. However, without allowing provinces to experiment there is no way to get a side by side comparison, so we can never really know.

The other two big expenditures I was much less a fan of. First was the tax credits for green energy transition, especially electric vehicles. I understand in response the Inflation Reduction Act in US, we had to do something. But I believe a better solution here for same cost would be to just cut corporate taxes by equal amount. Governments have a horrible record of picking winners and losers so better to leave to market. And while yes maybe US might do better on electric vehicles, lower corporate taxes would help attract other businesses. Point of trade is countries focus on area where they have a comparative advantage. And market is far better at determining that than government is. While may be cannot do completely, I think our ultimate goal should be to get rid of all corporate welfare and eliminate as many tax credits as possible and use savings to reduce deficit in short term and once budget balanced then use to reduce corporate taxes beyond corporate tax cut of $21 billion. Yes some subsidies and tax credits probably should stay, but we need far fewer of them, not more.

Next is the dental care plan. I know some may say I sound cruel, but I believe this is a very bad idea and costly. I support the idea of offering assistance for low income individuals to get dental care but this goes well beyond that. It says only for those without private health insurance, but undoubtedly many firms to save costs will drop coverage for employees and some individuals will drop buying insurance for dental care, thus likely making costs much higher. With no co-pays for family incomes under 70K and available to all under 90K, this could easily massively balloon in cost if many ditch their private health insurance and switch to public plan. I would be fine offering a public option that is self funded, but only for low income families should it be tax funded. All provinces in some form or another offer assistance here so why not work with them to expand it to ensure all who struggle to afford dental care covered with feds offering money to top up beyond what provinces offer. This would be far more affordable and still achieve the goal of ensuring access to dental care is not harmed by inability to pay.

On the tax front, despite talk of taxing rich more it was really a meh. No additional brackets added, no increase in capital gains inclusion, and no wealth tax. But AMT changes while right idea seem to just make tax system more complicated. And as we have seen to date, tax hikes on rich almost never raise the amount of revenue intended. As such I think governments should not rely on revenue from such changes and instead make them in name of fairness but any revenue raised is just an added bonus and used to help balance budget sooner. I fear like other tax hikes on wealthy, government will fail to raise amount they predict. Now I do agree with concept that people making a lot of money shouldn’t be paying less tax than those making middle or lower incomes. So changing AMT makes sense here but could probably make it a bit simpler. Anyways on taxation, time for an independent commission to do a whole review to make it simpler, fairer, and more competitive. Unfortunately no party wants to go there for fear they might recommend things they don’t like such as raising GST or in case of Liberals that top marginal tax rates shouldn’t go above 50%. But still focus should be on how can we improve our productivity and growth, not what will win us the most votes.

In terms of overall deficit, once again the government just keeps on spending more. They have only gotten away with it so far thanks to greater than expected revenue. But rather than using greater than expected revenue to balance budget sooner, it seems to be a pattern of using this for additional spending and I fear eventually our luck will run out. Spending restraint is never popular but it absolutely must be done. Considering how much government has increased spending since 2015 even if factoring in economic growth, inflation and population growth is quite worrisome. Even as pandemic programs wind down, our spending is still well above pre-pandemic levels let alone 2015. So the question one needs to ask is with all this extra spending are we better off? I would say emphatically no. Never mind if you look at provincial deficits and adjust for per capita population, only BC is even remotely in line with federal deficit. Others are significantly lower. Some may say it is because most are conservative governments, but perhaps may be those conservative governments are actually spending within their means instead of spending like drunken sailors. Others use debt to GDP saying we are doing well but problem is when you keep on moving the goalposts eventually you end up in not such a good spot. That was attitude Trudeau’s father took and while it seemed to work fine in 70s, eventually it caught up to us and why we needed the austerity of 90s to correct it.

Overall this was a disappointing but not surprising budget. I never expected it to be fiscally responsible since what this government considers fiscally responsible is very different than what I and based on reading newspaper articles, many others see as fiscally responsible.

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