TORONTO: The federal government must curtail excessive spending, balance its budget, and make room for growth-enhancing income-tax relief, says the C.D. Howe Institute’s 2024 Shadow Budget.
In “Less for Ottawa, More for Canadians: The C.D. Howe Institute’s 2024 Shadow Budget,” William B.P. Robson, Don Drummond and Alexandre Laurin note that the pandemic produced a huge jump in federal spending that was already growing too fast, and that the resulting borrowing has left the burden of federal debt too high.
“There’s no reason to be running a perpetual deficit, and no excuse to not return to a balanced budget fairly quickly,” says Drummond, Fellow-in-Residence with the Institute.
Their proposals would rein in spending and borrowing – aiming for a balanced budget by the 2027/28 fiscal year, and lowering the ratio of federal debt to GDP from its current level of 42.4 percent to 35.4 percent by 2028/29. “Ideally, we would get the debt ratio down to its pre-pandemic level,” says Laurin, who serves as C.D. Howe Institute Director of Research. “We can’t practically get there right away, but this budget puts us on the right path.”
Robson, Drummond and Laurin propose a comprehensive review of federal spending to ensure programs are more effective, efficient and fair. Noting that the cost of the federal government’s own operations is way up, with no commensurate improvement in services to Canadians, they emphasize containing the federal payroll. The Shadow Budget recommends reducing department operating budgets for current compensation to their 2023 levels and holding them there for five years, saving $1.5 billion in fiscal year 2023/24 and $8 billion annually over the Shadow Budget’s projection period.
This edition of the C.D. Howe Institute’s annual Shadow Budget also zeroes in on tax provisions that, as Robson, the Institute’s CEO, notes, are spending in disguise. It advocates showing them as spending, and subjecting them to the same scrutiny required for all spending programs.
Beyond reducing the debt burden to a level that is prudent and more fair to younger Canadians, the authors advocate tax changes to reward work and investment. “The federal government taxes personal and corporate incomes too heavily and imposes disproportionate compliance costs,” say the authors. The Shadow Budget proposes restoring the GST to 7 percent over time, lowering the rate for the middle personal income tax bracket to 15 percent in 2027, and lowering the general corporate income tax rate by one percentage point in 2025 and another in 2026.
To alleviate pressure from the immigration-driven surge in Canada’s population, the Shadow Budget proposes reducing the target for new, permanent residents to 350,000 per year, and better-targeted admissions for temporary foreign workers.
The Shadow Budget also recommends rescinding a number of targeted tax measures, establishing a framework for containing future deficits, and reducing the cost of groceries by phasing out supply management for dairy, poultry and eggs.
“Canadians are suffering declines in living standards,” conclude Robson, Drummond and Laurin. “This Shadow Budget is the change of direction the country needs.”
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
