If, as the government says, an overhaul of Canada’s tax code to make it simpler is truly in the air, the country will be in trouble if we only look at taxation as a burden that needs to be lessened.

MP Wayne Long, the politician in charge of the Canada Revenue Agency, told The Canadian Press last week that taxation in Canada is too complicated and is in need of a shakeup, albeit a gradual one.

“When you say the word tax code to people, everybody rolls their eyes. Everybody’s like, ‘Oh, the tax code used to be one book thick, now it’s two books thick. We just keep piling on,’” Long said.

“Is a total review of the tax code needed? Absolutely.”

Why simpler doesn’t mean smaller

But let’s not rush to assume this simplification exercise means taxes need to be cut or eliminated.

Our taxes are complicated for a reason. Nuance is added to prevent fraud. Measures are often qualified or tweaked to enhance fairness. Scandals of the past live on into the future through rules and regulations meant to ensure they never happen again. And politicians make many, many promises along the way, all of which add another layer.

Some of those reasons are perfectly legitimate policy aims that are worth evaluating. Others have unintended consequences that hurt more than they help.

Simplifying the tax system shouldn’t mean stripping away fairness or letting up on integrity. Since tax policy is as much about how our society functions as it is about financing the deficit, a simplification exercise can only be effective if it takes all parts of the equation into account.

But in practical terms, how?

Measuring what taxes really deliver

Economic researchers at the University of Calgary have developed a framework to evaluate what happens when a government undertakes a tax reform, and they are taking a broad view of the social returns of tax.

Their framework includes the traditional dollar-and-cents ways of sizing up a tax measure — cost to the taxpayer, cost and revenues on the government side of things, processing times, administrative costs.

But they also look at outcomes to the fabric of society itself: what happens to social welfare and to the way we live as a result of the tax? How much do we trust government as a result? Who pays more, who benefits most, in what way? And is that kind of distribution something we would consider fair and aligned with the government’s initial policy objective?

“Administrative reform can enhance fairness and trust, but if designed or evaluated narrowly through cost and yield metrics, it can deepen distributional in­equities and erode public confidence,” write the authors , Gillian Petit and Lindsay Tedds.

The University of Calgary academics are collaborating with others from Carleton and Sherbrooke, as well as the Canadian Tax Observatory and Social Capital Partners, to better understand how tax policy interacts with the Canadian economy, its people and the state of its democracy.

The first plank is measuring the social return per administrative dollar spent — the marginal value of public funds used in tax administration.

That’s a mouthful so here’s an example. When the analysts look at the federal initiative to automate tax filing for low-income Canadians, they’ll not just look at the administrative costs. They also ask who the automation actually reaches and put a value on that.

Between 10 and 12 per cent of Canadians don’t file a return at all, meaning they don’t receive the benefits they qualify for. Automatic tax filing is meant to correct this. But whether it reaches these Canadians turns on things that never appear on a cost sheet: a reliable internet connection, a form written in a language they understand, an office they can get to, an hour they can spare.

Get that right and the reform returns more social value — reducing poverty and improving trust in government — than it costs. Get it wrong and some people end up worse off than before.

“The idea is to bring in these public value channels,” Arshad explains. “It forces the government to be very transparent about the choices they are making and who they are targeted at.”

They’re now applying the same lens to child and family benefits, including the Canada child benefit and the federal child care expansion. The team will put numbers on the value of mothers moving into the workforce and on long-run health and development gains for children, and fold them into the evaluation.

Including the social value of tax may seem intuitive. But as soon as Long or anyone with authority starts talking about tax reform, the public conversation is far too often framed very narrowly around how large the tax “burden” is and how it should be lessened.

Instead, we need to ask ourselves what value we get from our taxes, figure out whether they’re worth it, and try to improve the social returns.

That’s how we finance a sturdy society.

Originally published in the Toronto Star on Aug. 22, 2026

At any given moment recently, a reader could glance at their favourite newspaper and see conflicting headlines about condo prices plummeting, houses loitering for weeks on the market, and potential buyers going to absurd lengths to afford a place to live.

Canada’s housing conundrum is in flux. Prices are melting, but housing remains unaffordable in the eyes of many a purchaser. Meanwhile, public pressure and policy urge a dramatic increase in housing supply and new builds. But current housing starts are stagnant at best.

And even though affordability indices show persistent improvement, the gap between house cost and cash flow is still too big.

“The single biggest challenge is that for a great number of Canadians, housing is unaffordable,” says the Canada Mortgage and Housing Corp.’s deputy chief economist, Kevin Hughes, in a recent podcast that analyses the 2026 housing market.

The equations don’t add up, and we need to get to the bottom of it. There are many, many conflicting reasons why. But one of them is an incoherence in tax policy.

Why a $17 billion tax break isn’t solving affordability

Housing-related tax measures cost the federal government about $17 billion a year, and that’s not including subsidies or provincial housing supports. Some of those measures encourage taxpayers to buy homes, some of them encourage more building of supply, and some of them favour renting over buying. Or vice-versa.

Most of them were introduced in the name of affordability.

Exhibit A: First Home Savings Accounts.

How the FHSA became a tax shelter for the wealthy

They were promised in the 2021 federal election campaign as a way to help young people buy their first homes. Implemented in 2023, they are wildly popular among those with extra money on hand.

And no wonder. They’re tax-free on the way in (like RRSPs) and tax-free on the way out (like TFSAs). And if you don’t end up using the funds to buy a home after 15 years, you can transfer the money into your RRSP without affecting your available saving space.

The problem is, they’ve become de facto tax shelters for high-income Canadians of all ages, driving significant fiscal and economic costs — all while fueling demand for homes at a time when supply is the key to stability.

The federal government has now released a second full year’s worth of data and tables about who opens FHSA accounts, confirming earlier trends set out in research by the Canadian Tax Observatory. In 2024, 2.6 per cent of Canadian tax filers — a total of 834,360 individuals — claimed FHSA deductions. That’s almost double the 2023 number.

Over the course of the two years, they sheltered about $8 billion in savings in the accounts.

Who are they? Predominantly, and increasingly, they are relatively well-off individuals, often in their 30s but there are several thousand over the age of 65.

In 2024, you were twice as likely to be an FHSA-holder if you were making more than $80,000 a year than if you were making the median single person’s income of $45,200.

The richer you are, the more you contribute. And high-income Canadians are making up for lost time, often using up all their allotted $8,000 in space in 2024 and filling up their remaining space left over from 2023.

Of course, this all makes sense if you look at the FHSA as a tax shelter. People with more money tend to have more money to put into their accounts.

But it doesn’t make as much sense for first-time housing policy at a time when affordability, especially among low-income households, is difficult. Fuelling demand among those who can already afford to buy homes risks keeping prices higher than otherwise.

And it comes at a fiscal cost too, although it’s hard to say exactly what that is right now. Once provincial matching is taken into account, it’s probably about $2 billion in foregone federal and provincial revenue for this year alone.

Across the country, the housing market is churning mainly because of market forces. Buyers and sellers alike are more uncertain than usual about where the economy and mortgage rates are heading. And the economy is soft these days.

But government policy is also pushing and pulling the market more than usual. Immigration levels are down, but will that continue? Ottawa is actively revamping is national housing strategy, but will that affect market supply and demand? The federal government is pumping billions into building affordable housing. When will it come on-stream in a way that materially affects the housing stock?

Add the FHSA and other tax incentives that fuel demand into the mix, and it’s not just headlines and housing markets that make your head spin. It’s government policy too.

The picture that spoke a thousand words from this month’s G7 summit in France was of the heads of the world’s biggest technology companies sitting around the table with the heads of the world’s most powerful states.

Money meeting power.

It was a working lunch, not the summit itself, and so the CEOs of Anthropic, Google and Open AI aren’t in the inner sanctum quite yet. But they may as well be.

As we know, their technology, the promise of artificial intelligence, their stock prices and the sheer wealth their CEOs represent are redefining pretty much everything about how the world works. And Canada’s “AI for All” strategy presented a few weeks ago is supposed to be comprehensive, designed to meet this moment.

The plan puts funding and thought into AI adoption, productivity enhancement, sovereign capacity and safety. What it doesn’t attempt to do is address the fallout that is already rushing through the broader economy as a result of AI and its tentacles.

Missing, so far, from the government’s thought process is the broader analysis of what will happen to Canada’s fiscal capacity and our time-tested system of relying on employment insurance, the social safety net and progressive income taxes to smooth out the rough edges of inequality and insecurity.

We need to get ahead of this.

Even though policymakers can’t predict exactly what will happen to the labour force, earnings, profits, government revenues and wealth distribution as a result of the AI economy, they do know that all those things are in play. There will be much realignment, and it will be rocky — hurting some and helping others.

The prognostications are all over the map.

Some experts predict widespread job losses, especially among white-collar workers, as automation and AI replace the need for their labour. Others foresee smaller effects on the job market as workers of all kinds use AI as a tool to boost their productivity.

Will tax streams be enough to support our social safety net?

But the nature of work is definitely changing, and that, by definition, will affect how well our traditional economic policy will function. Can employment insurance and other government supports that we normally lean hard on during upheavals be relied upon in the AI economy?

Those programs usually presume a recovery of the workforce as we have known it, and not a world where labour matters less and less.

If there are fewer permanent jobs, will government revenue streams that lean heavily on income tax stay steady enough to support our social safety net? Almost 46 per cent of the federal government’s tax revenues comes from personal income tax.

The nature of wealth is also changing.

The tech bros at the table are the most obvious manifestation of a concentration of wealth and power that has beset the U.S. Canada is different, but those same companies are very active in the Canadian economy. And Canada’s wealth gap — the difference between what the rich own and what the rest of us own — is not only large, it is growing.

‘Who is the wealth going to and who is it going to benefit?’

“The sum total of economic activity is absolutely going to be increasing over time,” says , a professor of practice at McGill University and former head of the Centre for International Governance and Innovation. “Who is the wealth going to, and then, who is it going to benefit?”

In the U.S., there is an interesting idea that has a seat at the table alongside the tech bros and the politicians: taxing the companies who profit handsomely from the AI economy and using the proceeds to give everyday Americans a stake in those companies. Some call it “universal basic capital.”

Sen. Bernie Sanders is proposing legislation, but it’s not just left-wingers who are pushing the concept.

The Trump administration is reportedly in talks with CEOs of AI companies about acquiring stakes that would then be used to redistribute their wealth to the broader public. And the companies themselves have spoken openly about similar ideas.

In Canada, those companies are not domiciled here and the federal government backed away from its attempts to tax them when it cancelled the digital services tax last year.

However, government proposals to use equity stakes as a way to allow the public to partake in the country’s wealth are becoming more popular. Indigenous collaboration in the development of natural resources is increasingly designed this way. Prime Minister Mark Carney’s new sovereign wealth plan foresees members of the public taking stakes too.

There’s a growing recognition that wealth, not wages, is the path to prosperity.

For sure, we have to go about this differently than the United States, but it’s time we took a cue from them and started thinking outside the fiscal box.

When it comes to ensuring Canadians are able to thrive in the AI economy amidst the rich and powerful, Carney has some solid thoughts.

“You’ll hear me say this over and over again. It is never a good idea to have one option,” Carney said on his way to the G7, under pressure to explain how Canada would deal with the U.S. suddenly ring-fencing everything Anthropic, including ties with Canada’s cybersecurity plans.

“Nobody has done anything wrong in this situation. But we will have done something wrong if we just accept this.”

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Chances are that if a pollster asked just about anyone in Canada if they have anxiety over their personal finances, the answer would be “yes.”

So it’s no surprise that when the United Way commissioned Leger pollsters to measure financial anxiety levels across the country, the results came back with a resounding “of course.”

But that’s not really the answer the pollsters were looking for. Rather, United Way Centraide Canada wanted to dig deeper into the who, why and how — because they were worried sick.

Their front-line community service providers had obviously witnessed a lot of strife and hardship during the pandemic, but several years later, the demand for support had not abated, explained Dan Clement, the president of the charity organization.

If anything, the urgent 2-1-1 calls for services and support were on the rise in all sorts of communities, Clement said, and that was a signal that something was definitely off.

He commissioned some initial polling last fall to test his suspicions. And when they were confirmed, he followed up with a monster web-based poll of more than 8,000 people that dug deep into precarity, household finances and key demographics. The results make this month’s debate about whether Canada is in recession look almost irrelevant.

“Deterioration is especially concentrated among those already in a poor financial situation, where fully 66% report (their financial situation over the last six months) having worsened,” the Leger analysis of the polling data states.

For the record, Statistics Canada’s estimate of the country’s gross domestic product — the broadest measurement of the economy — registered an annualized 0.1 per cent decline in the first quarter and a one per cent decline in the fourth quarter of 2025.

Two negative quarters in a row are often considered to be a recession — with all that word conjures up in terms of hardship and uncertainty. And so the House of Commons as well as a bevy of economists have been combating over whether that is really the case.

Everyone in the chattering classes has had their kick at the can on the recession numbers, weighing in on whether a couple of decimal points make a difference and, if not, what we should be focusing on instead. Trade and investment are taking centre stage.

But the hallmarks of recession — hardship and uncertainty — have been prevalent since the pandemic, the United Way polling shows, and they’ve been on rise in a very concerning way, especially among single parents, newcomers to Canada and young people.

They, we, are fraying.

And that’s a problem for all of us who rely on the steady, reliable participation of a broad swath of consumers to work, buy, save, trade and invest.

The reliability of Canadians is the country’s trademark, underpinned by dependable and deeply embedded social cohesion that has stood the test of time and multiple, intersecting and overlapping crises.

Specifically, those 1,400 respondents to the poll who said they were already in a poor financial state (that’s 17 per cent of respondents), 41 per cent said their household income had decreased over the past six months. And 39 per cent figured their situation would deteriorate further in the coming six months, up from 20 per cent in a previous survey six months earlier.

This precarious group can barely look at their bank statements without having heart palpitations, becoming agitated or losing sleep — even though the poll shows they have little confidence in their own ability to get themselves out of their rut.

They’re seeing their costs soar for food, energy, housing, child care and transportation. And so they’re cutting way back on leisure and clothing, cancelling vacations and renos, and certainly not saving much.

They’re taking on debt, and 72 per cent of this group say they couldn’t get by more than a month if they suddenly lost their main source of income.

They’re frequently looking for community support, often tracking down free meals or seeking housing assistance.

On the other hand, the 49 per cent of respondents who are in good financial shape say they are having a good time playing the markets, experimenting with investment strategies and trying out new financial products. Very few of them are cutting back on anything much, despite higher costs. Food, medicine, housing, transportation and energy costs are easily absorbed. It’s a good life.

The disparity matters, Clement says, because the group at the bottom is expanding, and that affects everyone else. Their anxiety spills over to health, consumption patterns, mental health and the stability of communities everywhere.

Canadian politicians are fond of saying “Canada has what the world wants.” It’s usually in connection to natural resources, but that statement is equally true for the fabric of Canadian society. And now it’s fraying away.

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Norway, Schnor’way.

Canadians in search of socio-economic nirvana often end up taking their cues from Norway and other Scandinavian countries who seem to have it all when it comes to combining strong social safety nets with economic growth and prosperity.

And let’s not knock Norway too much. There are lessons to be learned there, especially on the sovereign wealth fund front.

But right now, as Canadians struggle to find new ways to afford housing, we should be looking to Australia.

Australian legislators are in the midst of daring to do that thing that makes Canadian lawmakers balk: trying to change the tax system so that it encourages the building of new homes, improves affordability for first-time home buyers and confronts intergenerational inequity.

The new measures were the centrepiece of a disruptive budget rolled out earlier this month.

The reason Canada should pay attention is because Australia’s housing market looks a lot like ours right now.

Since 1999, the Australian budget notes, housing prices have risen more than twice as fast as average full-time earnings. Home ownership among people aged 25 to 34 fell seven percentage points between 2001 and 2021.

Australian legislator Gary Maas sees the pressures daily in his suburban riding near Melbourne. Immigration has been intense, prices of homes have soared and wages have not kept up, he says. But those with means have been buying property after property, using a complex system of high-leverage mortgages and tax write-offs.

“We have a bunch of people who are pissed off. They are angry. They’ve done everything they were supposed to do” to save and buy a home, Maas said in an interview during a work trip to Ottawa this week. “It doesn’t make sense.”

In Canada, home ownership among people aged 25 to 39 fell six percentage points between 2011 and 2021. And real house prices compared to disposable income per capita are about 50 per cent higher now than in 2007.

In Australia, policymakers have pointed their finger at their tax system and the way it encourages investors to buy up properties for rental or to build their portfolios, since they traced affordability issues for first-time home buyers to competition from investors.

The budget took aim at “negative gearing” — a measure that allows an investor to reduce their taxable income when rental properties cost more that they earn in rent. Now, previous purchases will be grandfathered, but in the future, negative gearing won’t be allowed on property purchases — unless they are new builds.

The budget also took aim at some of the ways capital gains tax applies to assets. Starting in July, Australia will no longer give a 50 per cent capital gains tax discount and instead replace it with a tax on inflation-related increases, coupled with a 30 per cent minimum tax on net capital gains.

At the same time, immigration is levelling off and the government is investing in affordable housing, Maas says.

Canada’s system is different, of course. We don’t have exactly that.

But we do have a complex system of tax measures that have been set up over the years by politicians hoping to curry favour with voters, be they existing homeowners or young people anxious about getting into the market for the first time.

As a result, we have a mish-mash of a system that costs the federal and provincial treasuries billions every year, fuels demand, favours the wealthy and distorts the housing market in many unintended ways while leaving only our affordability problems intact.

A recent study by the Canadian Tax Observatory tallied up tax expenditures at the federal level alone and found at least nine different incentives costing $17 billion in foregone revenue.

Canada, pushed by tax incentives, has seen an increasingly large amount of investment flowing into the real estate sector over the past 25 years, even as business investment has slumped.

And housing prices have climbed and climbed. Even with the recent slowdown, homes in Canada are really expensive — compared both to the past and to other countries.

In its budget, Australia has taken direct aim at property investors who are competing with first-time home buyers and driving up prices, undermining affordability. They have modelled the changes and foresee 75,000 additional first-time home buyers over the next decade, reversing the previous decade’s decline in home ownership rates.

We have parts of this problem in Canada too. Bank of Canada researchers found in 2022 that buyers of investment properties were taking on debt and exacerbating boom-bust cycles in the housing market because they’re much quicker to buy and sell than people who buy their homes to live in them.

The central bank has been tracking those patterns and finds that even with the current real-estate market softness, investors make up about 25 per cent of mortgaged home purchases.

Maas is convinced the new measures in Australia, combined with spending on transit and affordable housing, will deliver to make home ownership more affordable there.

For now, it’s an experiment in the form of projections in a budget document.

For Canada, it’s an experiment worth watching, even if it’s not Norway.

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Public policy wonks descended in waves upon Toronto this past couple of weeks, bombarding anyone who would listen with their brightest ideas for enhancing Canada’s economy in the face of American intransigence.

If there was a common caveat amidst all the optimism and conference brainstorming, it was this: for any initiative to succeed, policymakers and business leaders alike need to ensure there is trust — with the public, with customers, with business and among decision-makers.

“If I were you, I would put trust at the centre of your export strategy,” said Fatih Birol, executive director of the International Energy Agency, boiling down his advice for a crowd at a Public Policy Forum conference. “Because the world needs trust.”

Yes, it does, and trust is in short supply — hard won, easily lost, especially at a time when fakery and betrayal are commonplace.

That’s why the recent Parliamentary Budget Officer’s assessment of the federal government’s spring fiscal update is particularly troubling. The new Parliamentary Budget Officer, Annette Ryan, just days into her new appointment, hit the ground running with a packet of analyses on the fiscal update — and she didn’t hold back.

She pointed out that the marquis measure in the fiscal update, the $25-billion Canada Strong Fund, lacks so many details that it’s impossible to know how it will attract private-sector investment, mitigate risk or measure success.

Prime Minister Mark Carney is still riding high in public opinion polls, able to maintain the public’s faith that he will somehow figure out a way to lessen Canada’s economic dependence on the United States, boost business investment in Canada and enhance the country’s prosperity.

But it would be folly for his government to assume that just because they say it’s so, the public will believe them indefinitely. Maintaining the public’s trust is paramount for economic policy to take hold.

The new “sovereign wealth fund,” as Carney calls it, has parallels to the Canada Growth Fund and the Canada Infrastructure Bank. They are all set up to use public seed money to attract private capital by mitigating some of the risk involved in investing in big, long-term projects that the government figures Canada needs in order to thrive.

The Canada Infrastructure Bank struggled with governance for years, refined its scope and mandate a couple of times, and has, only now, begun to gain some traction, 10 years after it was first announced. The $15-billion Canada Growth Fund was announced in 2022 to offset risk for investment in emissions reduction. It’s still too early to assess its success.

While the concept of using a smaller amount of federal money to attract much, much more private money for public goods is intriguing, the Canadian public hasn’t yet seen that it can work well. Nor are we able to understand how the new $25-billion fund connects to or overlaps with the other two funds, or what best practices the government has learned from running those two funds over the past few years.

The spring update itself points to the need to align with existing financing vehicles at Export Development Canada and the Business Development Bank, and the Parliamentary Budget Officer suggests Parliament keep an eye on regional development agencies, federal grants and contributions, and lending done by the private sector.

It’s puzzling to see Ottawa plow billions of dollars into hammers and nails, oil and gas, construction and manufacturing without a corresponding focus on the other half of the Canadian economy — services, the care economy, and the community-based projects that knit us together.

In short, it’s unclear why Carney and Finance Minister Francois-Philippe Champagne felt the need to launch a new fund, unclear how it will leverage private-sector investment, and unclear whether taxpayers will see a return that offsets the cost of the government borrowing money to start the new fund.

What is clear, on the other hand, is that Carney is determined to aggressively use the public balance sheet to redirect the Canadian economy, fully embracing industrial policy in his long-term ambition to entice $1-trillion in new investment in Canada.

Maintaining trust needs to be central if key economic actors are going to show up and participate in this approach to economic policy. If it’s going to work, the government needs their money, their investments, their understanding and especially their patience — because mistakes will be made, failures will occur and time will pass.

In the face of such disruption, the government should absolutely be trying bold new approaches to reset our economy. But it needs to bring the public along for the ride.

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Dana Mason is clearly frustrated.

She and her 26-year-old son both have disabilities, and Mason has been trying for months and months to sign the both of them up for the Disability Tax Credit.

The DTC is interesting to them, not because of the tax credit itself. Rather, qualifying for the DTC is a way to tap into a broader system of income supports.

But Mason, like so many other people living with disabilities and finding it hard to cover daily expenses, has not yet succeeded.

The process “doesn’t make sense,” an exasperated Mason said in a zoom call from her home in Calgary. “I think it’s cruel.”

More than a quarter of Canada’s working age population has a disability of some kind — about eight million Canadians — and the numbers are rising as the population ages.

Where the serious and stubborn policy problem lies is in the fact that poverty among people with disabilities is pervasive — despite multiple layers of government programs and supports.

In the middle of this tangled mess is the Disability Tax Credit. It is the bureaucratic key to unlocking at least 13 different income supports — programs such as the Registered Disability Savings Plan, a variety of medical expense and home renovation tax credits, and most importantly, the Canada Disability Benefit targeted at low-income adults.

Research shows that 84 per cent of people living with disabilities do not qualify for the DTC.

A new study by University of Calgary researcher Gillian Petit done for the Canadian Tax Observatory points to numerous “broken links” that either discourage hundreds of thousands of people from applying or reject them when they do.

The federal government is well aware of the shortcomings, and there’s some openness to tweaking the rules — perhaps as soon as next week’s spring economic update.

Changes can’t come soon enough.

Mason almost gave up a couple of times. She had never really heard much about the DTC and its tentacles, but last year she overheard some chatter about the DTC at her arts and crafts club and decided to apply for herself and her son.

The two of them live with a range of intellectual and mental-health disabilities. Neither of them are working and they lean heavily on Mason’s husband to get by.

Mason knew that qualifying would at least help with groceries. But when she saw the 16-page form to fill out, it stopped her in her tracks.

“I just looked at it, and I put it down,” she recalls. “It made my stomach roll.”

The questionnaire forced her to compare in great detail their abilities to those of nondisabled people, and the process overwhelmed her.

“It digs up all sorts of stuff.”

She turned for help to Inclusion Alberta and Inclusion Canada, which provided a professional “navigator” to steer her through the process, bit by bit. That helped, but the problems had only begun.

Their doctor had to fill out the second half of the forms, but the appointment ended with the doctor using derogatory language and saying Mason’s son’s conditions were not severe enough to qualify.

She left in a storm without paying the bill. She still hasn’t quite pulled all the authorities together to act on behalf of her son. And now they’re both in bureaucratic limbo.

The thing is, the DTC was not initially designed to serve as a gateway to other benefits. It was originally meant to help income-earners offset some of the higher costs of day-to-day living — a tax equity measure that Petit’s research shows is most beneficial to those earning between $35,000 and $39,999 a year.

In 2023, the federal government introduced the Canada Disability Benefit and started rolling it out in July 2025 — its first serious foray into targeting high prevalence of poverty among people with disabilities.

But there’s a catch. To qualify, a person with disabilities has to be certified through the DTC system.

That’s hard, as Mason knows. It means proving that they have severe and prolonged impairments in physical or mental functions that prevent the ability to perform basic activities 90 per cent of the time, day after day.

The eligibility criteria are narrow and exclude episodic disabilities and mental health.

The certification process is costly and cumbersome, requiring the stamp of approval of a medical practitioner.

Women, people with mental-health and episodic disabilities, and those with low income are routinely squeezed out.

Fixing these problems is possible and would be helpful, although still not sufficient in confronting poverty.

For starters, the government could expand the eligibility criteria.

It could cover some of the costs of having medical practitioners fill out forms.

It could consider automatically certifying those who are already enrolled in provincial disability assistance or Canada Pension Plan Disability benefits.

Or it could pay to expand the scope of volunteers who help low-income people file their taxes.

None of these adjustments would get at the insufficient level of benefits flowing to low-income people with disabilities. But at least the benefits would flow.

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It’s tax time, and financial advisers are out in full force, pitching their latest and greatest services to lower your tax bill.

And mentions of the First Home Savings Accounts are everywhere — billboards, Instagram feeds, even in your bank apps.

Not only have FHSAs graduated from a fledgling homebuyers’ support to a mainstream tax-free savings vehicle, they’re now so popular that banks are climbing over each other with incentives.

That’s perfectly understandable for banks and for taxpayers that have extra cash on hand. FHSAs are like a magnet to both.

The terms of the FHSA surpass all other tax shelters the federal government offers. They’re tax-free on the way in, like an RRSP (registered retirement savings plan). And they’re tax-free on the way out, like a TFSA (tax-free savings account). And if, in the end, contributors don’t use the savings to buy a home, they can transfer the money into their RRSP without affecting their space limitations.

But there are unintended consequences.

New research from the Canadian Tax Observatory, shows that the FHSA benefits disproportionately those who least need the support in the housing market: high-income and wealthy households

.

There’s a cost, of course. It comes in the form of foregone revenue to the federal purse — money that could go toward any number of programs.

It also comes in the form of exacerbating some of the more disturbing trends in our economy: intergenerational inequities and the gap between rich and poor.

And in the end, by driving more demand for houses, such measures actually undermine their stated purpose, making housing less affordable over time.

That’s not what the FHSA was intended to do, not by a long shot.

The idea was first pitched by the Liberals in the 2021 election campaign. The aim, as stated, was to help Canadians under the age of 40 save for their first home.

The government launched the program in April 2023. By then, the age restriction was gone, and so was any stipulation that a buyer had to be a first timer. It was opened up to homebuyers of any age who had not owned a home for four years previously.

The stated goal, however, was still helping young, first-time homebuyers break into the market and support “generational fairness,” budget documents stated.

Fast forward to now, and we have some initial data about who is using the accounts. A million people signed up right away. The Department of Finance predicts that the FHSA’s popularity has persisted, budgeting for rising amounts of foregone revenue over time.

Indeed, Finance expects the size of the program will have tripled from 2023 to 2027, costing an expected $1.59 billion in 2027. Provinces that mirror the federal program are also foregoing hundreds of millions a year.

So, who is benefiting?

Unsurprisingly, people with more money to spare put bigger contributions into the accounts, maxing out the $8,000 a year on a regular basis. In the FHSA’s first year, individuals making more than $80,000 made up about 40 per cent of the pool of contributors.

To be sure, focusing on those making $80,000 and above doesn’t tell us much about the very rich. But considering that the median income for individuals was $45,400 that year, there’s no doubt that the more affluent among us are first in line to make solid use of the FHSA as a savings vehicle and as a tax shelter.

When it comes to confronting generational inequities, the data is troubling.

The majority of FHSA contributors are younger than 35, and that was indeed supposed to be the target market for the FHSA. Still, almost a quarter of the contributors were over 35, and there are thousands of them who were 55-64 years old.

And there is a whole separate category of people who don’t show up in the charts and graphs about contributors: parents, especially well-off parents.

In a January 2025 survey from the Canada Mortgage and Housing Corp., researchers found that 41 per cent of first-time buyers received gifts to help finance their down payments. The average size of the down payment was $74,570. More than 20 per cent of those first-time buyers said they would not have been able to purchase their home without that help.

Parental support among well-off families means those buyers are getting younger even as housing prices have gone up, Bank of Canada research shows.

In other words, there is a massive generational transfer of wealth and home ownership happening across Canada, enhanced by the FHSA — which allows more affluent parents to shelter that money, transfer it to their children and perpetuate the cycle of privilege, compounding inequality.

And, it’s costing us about $2 billion a year in foregone tax revenue.

The FHSA is just one of a wide array of demand-side incentives offered by governments in the name of alleviating affordability problems. In a supply-constrained real-estate market, encouraging demand can drive up prices or slow down their market-drive decline, undermining the very goals of affordability.

Canadians need to ask themselves a tough question: is the FHSA, with its popularity, extremely generous tax treatment and lenient qualifying requirements, worth the cost to the treasury, to wealth inequality, to generational fairness, to house prices and to affordability over the long run?

If not, it’s time to reconsider.

Prime Minister Mark Carney was passionate when he addressed party members in Montreal in early April, eloquent in his appeal to Canadians’ universal values as a primary defence against global strife.

“We believe in a just society where we take care of the vulnerable, where we pull together to make life more affordable today and better tomorrow,” he said.

He went on to say that his government is recommitting to that mission, “to build a Canada that’s not just strong, but good; a Canada that’s not just prosperous but fair; a Canada not just for some most of the time, but for all—all of the time.”

That close correlation between fair economic policy and deep social cohesion is central to his statements, and it’s also central to this report.

But we have a serious problem.

More than a quarter of Canada’s working age population has a disability of some kind – about eight million Canadians—and the numbers are rising as the population ages. Where the serious and stubborn problem lies is in the fact that poverty among people with disabilities is pervasive—despite multiple layers of government programs and supports.

The poverty rate among people with disabilities is double that of their non-disabled peers, and after a slight improvement before 2020, that rate has since deteriorated.

The hope was that this would change with the Canada Disability Benefit, enacted in 2023 and implemented in July 2025. But there’s a catch. To get that benefit and at least 12 other income-related supports, a person must first be certified for the Disability Tax Credit (DTC).

“That design choice places the DTC—a non-refundable tax credit created for tax equity purposes, not income support—at the centre of Canada’s disability poverty reduction architecture,” writes University of Calgary researcher Gillian Petit.

And that’s a barrier to 84 per cent of people with disabilities. Only 16 per cent of that population has qualified for the DTC and the access that certification brings to other, crucial programs.

Her report for the Canadian Tax Observatory identifies four different links in the system that a person with a disability must steer through to access proper income security and support: eligibility, certification, access to other programs that require DTC certification, and benefit adequacy.

Petit’s four-link framework for analysis provides a clear and practical way to understand where the system breaks down. Her framework opens the door to pragmatic, near-term solutions for a system that is convoluted, costly for applicants and administrators alike, and difficult to navigate for many—especially those without resources.

Each link has serious flaws that deter or prevent hundreds of thousands of people from accessing benefits.

· Eligibility: The DTC defines disability as a severe and prolonged impairment that restricts basic activities for 90 per cent of the time for 12 months in a row. That definition can exclude many individuals with episodic, mental health and pain-related disabilities.

· Certification: Deterrents to obtaining the DTC certificate include a 16-page application, the time and cost of engaging a qualified medical practitioner to give a stamp of approval, and an opaque adjudication process.

· The DTC as a gateway to other programs: At least 12 programs require applicants to hold a DTC certificate. But even with a certificate in hand, applicants face additional requirements such as tax filing.

· Benefit Adequacy: Even if applicants manage to navigate through the links in the DTC system and finally qualify for the Canada Disability Benefit, it amounts to a maximum of $2,400 a year – a modest amount that, on its own, is insufficient to lift most people out of poverty.

It’s possible to strengthen the system by addressing the weak links in the chain, step by step. This report is meant to provide a structured framework to identify where fixes in the DTC system are most likely to improve outcomes for people with disabilities.

It touches on legislative change that could expand the eligibility criteria for the DTC. It proposes administrative reforms to improve access to the certification process.

And it sets out a series of research priorities to better understand how a well-supported, more simplified and more automated system of certification would work for low-income people with disabilities.

What it does not do is examine in detail the adequacy of benefits that are interconnected, which has been examined elsewhere and is beyond the scope of this paper.

Rather, the report focuses on what’s before us right now: the structure of the Disability Tax Credit, the benefits it unlocks and the broken links in the system. It’s a detailed invitation to government officials, advocates and other researchers to put those universal Canadian values into practice and figure out how to repair a faulty system that stands in the way of that prosperous, fair country we aim for.

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Abdallah Aban is taking a quiet weekday moment in the food court at his local mall, munching on a breakfast sandwich, sipping his Tim Hortons.

His wife and two of his eight children are at work in the nearby Amazon warehouse. But Aban, 60, lost his job there last year and has had no luck finding a new one.

The family is getting by, even though they’re no longer receiving the Canada Child Benefit now that the kids are older, and they’re finding food and rent expensive.

It’s a squeeze more and more Canadians know all too well.

But not all Canadians are suffering similarly.

For now, Canada is not in a recession — although fear of a shrinking economy is never far off in an era marked by Donald Trump and global disruption. And as a country, we’ve managed to eke out a smidgen of growth over the past year.

Since the pandemic ended, life for the wealthy has been a joyride. Financial markets have been soaring. The TSX has risen 87.5 per cent since January 2020. South of the border, the S&P 500 has risen 111.8 per cent during that same time period.

But since the pandemic ended, life for the rest of us has, more often than not, been a grind.

Your pay has inched ahead, but the high cost of housing and food claws back every bit of progress. Dreams of building wealth over time have been replaced with anxiety about slipping further behind, or about what will happen next to your job, your children or your holdings.

For now, Canada is not in a recession — although fear of a shrinking economy is never far off in an era marked by Donald Trump and global disruption. And as a country, we’ve managed to eke out a smidgen of growth over the past year.

Changes in net worth for wealthiest and poorest

But Canada is in an economic predicament. We may have side-stepped the “R-word” for now but, instead, we have emerged from the pandemic into a troubling K-shaped recovery in which the wealthy prosper and millions of Canadians increasingly struggle. The effects of that change — and all that that pattern implies in terms of privilege and ease for a few, and deepening anxiety and hardship for others — go beyond mere statistics. They may well also be planting the seeds of envy, anger and deeper social unrest.

The “K” refers to the shape of lines on a graph of what the economy looks like over the past few years. The upper arm, representing the well-to-do, is on a roll. The lower arm typically groups together the rest of us, or zooms in on the least rich. For that group, it’s a picture of increasing hardship.

The wealth gap in Canada is long-standing, but in recent years it has widenined in a worrying way. Statistics Canada started keeping track of net worth by decile in 1999. Between that time and 2023, the top 10 per cent of wealthiest households in Canada have seen their net worth surge by 195 per cent. The bottom 10 per cent, on the other hand, has seen its wealth contract outright, by 43 per cent.

It’s a classic K.

And it is entrenched. To be sure, the pandemic shook up Canada’s economy and its growth patterns, but not this one. The disparity has persisted, even worsened. The average household in the top 10 per cent was $274,000 richer in 2023 compared to 2019, in terms of wealth. The bottom 10 per cent was up $3,800.

That the wealthier have more than the poor is obvious. The issue since the mid-2020s, though, is how severe the disparity is becoming. The wealth gap now is at record highs. Statistics Canada says the wealthiest 20 per cent of Canadian households hold 65.5 per cent of Canada’s total net worth as of the third quarter of 2025. The least wealthy 40 per cent hold just 3.1 per cent of wealth.

That stark gap results in some Canadians living dramatically different lives from others.

Spending power and financial assets are highly concentrated among the wealthiest 20%

Lower-income Canadians are taking on debt to get by. Before the pandemic, the debt load of an average household was about 300 per cent the size of disposable income. That has risen to 429 per cent.

If they can accumulate assets, it’s mainly their homes, not the often more liquid or profitable stocks or bonds that fuel the portfolios of the rich.

Unsurprisingly, debt-related stress has spiked. The Bank of Canada’s survey of consumer expectations shows that the number of people earning less than $40,000 who are worried they won’t be able to make their payments over the next three months has soared.

On the other hand, the debt load for the highest income group has remained fairly steady at about 130 per cent of disposable income. Their stress around being able to make payments is, as you’d expect, quite low.

Put another way, while many Canadians are increasingly worried about meeting their basic needs, the wealthy are planning fancy vacations.

Marianne, a 20-year-old member of the military who is texting her friends from a corner of a suburban Ottawa food court, wants in on that action. She joined the Forces for job security, income stability and a career path and particularly because she wanted to move out on her own and start an independent life.

She gets room and board on the nearby base, but she dreams of renting an apartment, “just to put a bit of distance between myself and work,” she says.

And so Marianne — that’s her middle name since she didn’t feel comfortable using her whole name — is saving as much of her salary as she can, and investing it in the markets with the help of her local bank branch.

She harbours no illusions of hitting the jackpot. Her holdings churn wildly. Meanwhile, apartments seem extravagantly expensive, and making monthly payments is out of her scope right now. But she has time on her side.

“It’s really a question of being patient,” she insists.

For Marianne, the key to building wealth is holding a steady job with a secure income.

Aban agrees with that. He feels the stress of unemployment, though, even though it’s only been a few months and his family is figuring out how to make ends meet.

It points to another post-pandemic K-shape. Almost half of people earning under $40,000 fear losing their job over the next 12 months, dramatically higher than before the pandemic, the global trade war and the slowdown in growth. If you’re making over $100,000, the fear is minimal.

Homeownership is another key differentiator

Who, exactly, are the people who are on the anxiety-ridden front lines of low wages and the affordability crunch? They are workers in accommodation and food services, or retail. They are women. They’re often recent immigrants, and racialized Canadians — especially south Asians, Filipinos and Black Canadians. They’re living on less now than before the pandemic, since the increase in the cost of essentials has outpaced wage growth.

To be clear, this is not America. There, the economy as a whole is growing faster than Canada’s, but the job market is softer than Canada’s. Low-income American consumers are not as sturdy as they are in Canada. And while both countries have K-shaped patterns in wealth, Canada’s distribution of income — which is not the same as wealth — is less stark.

The American disparities prompt frequent warnings of things falling apart — anger, division, social unrest. We can see the destructive results of worsening inequality appearing before our eyes.

Peter Atwater, the American economist who has popularized the term “K-shaped recovery,” is now warning that inequality in the United States is creating a “caste system” that is unsustainable. There, deepening inequality is frequently linked to political polarization, the erosion of trust in institutions and the crumbling of democracy itself.

We aren’t them. But it’s a lesson on what is at risk. A progressive income-tax system, coupled with a solid social safety net, has stood Canada in good stead, softening the sharp edges off the K-shape on our side of the border.

Increasingly, however, the momentum is shifting toward those on the upper arm of the K through wealth, amassed through investment in financial markets and real estate.

It’s a situation made worse by the fact that wealth begets wealth; investment properties and stocks can compound in growth, and over years and decades, can grow exponentially.

Our progressive tax system, however, is designed to target income.

That’s a big difference, especially these days.

Income is the flow of money coming into a household, through salary, rent or interest. Wealth (or net worth), on the other hand, is the pile of assets a household owns, minus outstanding debt.

The 20 per cent of the least wealthy among us holds just 1.5 per cent of the assets in Canada’s economy, and just 0.7 per cent of the financial assets (stocks and bonds). In a world where affordability and progress — that is, the ability of households to build a nest egg and invest in new ideas — stem from the appreciation of those very assets, that’s a very thin base indeed.

The top 20 per cent, on the other hand, holds 68.8 per cent of the economy’s financial assets like stocks and bonds, and 60.1 per cent of all assets. This too has knock-on effects; assets can grow or produce income which further exacerbates the disparity in both wealth and lifestyle, too.

While the K-shaped nature of wealth accumulation and economic growth runs deep, it’s not at all static. The profound changes gushing through our country — driven by trade wars, artificial intelligence and geopolitical upheaval — mean that the low-key envy and anxiety of Canada today could easily become the resentment-fueled disruption of tomorrow.

Given the risks, it’s time for some tough questions.

Wealth divides us but our economic policy is built on our understanding of income. We need to get a better grip on how wealth grows, who owns it, where it’s stored and where it’s hidden.

And we may need to rethink how our tax policy treats those assets. Even as we keep an eye on how to invest and bolster the Canadian economy, we also need some steely-eyed scrutiny of a system that can favour those with wealth and income-generating assets — low capital-gains inclusion rates and exemptions among them, not to mention a system that is riddled with loopholes and special circumstances.

And the potentially toxic social effects of such a disparity in possibility continue to fester.

For now, we are more often resilient than rebellious.

Marianne, for one, is confident that there is a range of financial solutions available to her as she sets about building a life of independence. She has time on her side as she watches her portfolio grow in fits and starts, and she is watching the rental market closely for a chance to jump in.

Abdallah Aban’s optimism comes from context. His job hunt may have been fruitless up until now and he fears employers find him too old to bring onto their payrolls. But compared to his previous life, Canada gives him hope. He fled a civil war in Somalia to come to Canada.

“Anything is better than that,” he says. “I mostly want peace.”

Originally published in the Toronto Star on March 27, 2026. Full set of charts posted on https://canadiantaxobservatory.ca/canadas-k-shaped-economy-by-the-numbers/.

Six years ago today (March 21, 2026), the federal government closed the border to non-essential travel with the United States to curb the spread of COVID-19.

They had already shut down large sections of the economy, and started issuing hundreds of millions of dollars in funding to help companies and workers deal with the pandemic.

Just days earlier, the House of Commons had approved the Canada Emergency Response Benefit, the CERB, sending $2,000 a month to those whose livelihood had evaporated because of the closures.

Little did we know it was just the start of a prolonged economic and health crisis that we would all rather forget.

But the Canada Revenue Agency has definitely not forgotten.

Six years later, the CRA is still chasing down recipients of the CERB (and its successors) who applied for and received their $2,000 a month to stay afloat during the lockdown, clawing back benefits and even confronting them in court if necessary, in an attempt to recover billions in wrongful payments.

The CRA began its recovery efforts in earnest in 2023, and by November 2025 had successfully recouped $3.3 billion from 1.4 million recipients of individual pandemic supports, the agency said in a statement. There’s another $10 billion to go.

“We are sensitive to Canadians’ financial difficulties and work with them to establish payment arrangements based on their ability to pay,” the statement adds. “However, the CRA takes firm and responsible measures against those who seek to avoid paying outstanding amounts.”

The court rulings are now stacking up, and for individuals, they tell a tale of Byzantine rules and desperate people.

At a macroeconomic level, they tell a tale of a government that is on the hunt for revenue but has little strategy about how to find it.

Take the case of Vatankhah v. Canada for example. Court documents show Masoud Vatankhah and his wife ran a tiny café that they had to shut down in August 2020. He applied for and received CERB for six four-week periods.

But CRA later told him he shouldn’t have qualified because he hadn’t earned the required $5,000 in income in the 2019 tax year.

So Vatankhah had a chartered professional accountant go through his paperwork, and the accountant found several major errors. The corrected 2019 tax return calculated his income at almost $7,000 — a version the CRA accepted, issuing a notice of reassessment telling him to pay $478 in back taxes.

But CRA still insisted he had not qualified for CERB and demanded repayment. Back and forth they went, with two formal reviews that kept the argument alive into 2024. By 2025, the courts were involved. A federal court judge ruled last winter that the CRA was being “unreasonable” and sent them back to the drawing board.

To be sure, CRA has a responsibility to collect money owed to the government, especially if there’s fraud or misrepresentation at play. And of course, given the speed and ease at which the CERB was issued in 2020, there were mistakes made.

Statistics Canada found that 35 per cent of Canadian workers who made more than $5,000 in 2019 received CERB payments, and so of course there were problems along the way.

At the time, politicians actively encouraged everyone in tough circumstances to apply for CERB help and said there would be plenty of time later to sort out the paperwork.

But six years later, there are still cases bouncing around in court for tiny amounts of money, with claimants quibbling with the government over how close they were to making the qualifying $5,000 amount.

These are not rich or middle-class people for the most part. Statcan’s study of recipients found they were mainly the poorest of the poor, often young, and often from the accommodation and food services industries.

But now, the CRA’s budget for enforcement and debt collection has been increased, with the expectation that the agency will recoup much more than it spends on its efforts.

An internal audit published just before the pandemic says the CRA recovered just over 60 per cent of the cash it believed it was owed through income tax, and 71 per cent of the GST and HST it was owed.

So it’s a lucrative exercise with decent returns at a time when budgets at all levels are pinched by heightened demands for infrastructure, defence, housing and health care just as the economy slows dramatically.

Provincial governments in February and March have tabled budgets notable for their rising costs and feeble revenue growth. British Columbia raised taxes in a couple of areas, but others have allowed their deficits to balloon. Economists at TD project aggregate provincial revenues to shrink 1.5 per cent in the 2025-26 fiscal year.

At the federal level, Prime Minister Mark Carney has cut income tax, some boutique taxes and some corporate taxes since he came to power a year ago but has not replaced those sources of revenue.

Meanwhile, the third-most common type of complaint received by the federal Tax Ombudsman is about CRA’s collections practices.

In other words, federal authorities are nickel-and-diming individual taxpayers, often in low-income circumstances, while fiscal authorities are side-stepping a full-on conversation about how to fairly finance the society we want and who will pay.

That’s just not sustainable.

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ADDENDUM:

After this piece was published in the Toronto Star, the CRA responded to several questions initially sent to them in mid-March. Here are some numbers from them:

· If a CERB recipient receives a letter from CRA telling them to repay, they can ask for a review within 30 days. If the recipient disagrees with the review, they can apply to Federal Court for a judicial review within 30 days.

· As of March 16, 2026, CRA had received 4,512 applications for judicial reviews for COVID-19 benefits for individuals. Of these, 1,276 are still ongoing; 2,143 were resolved and 1,064 were withdrawn or dismissed.

· So far, the court has returned 118 applications to CRA for additional review.

· As of November 30, 2025, CRA says 773,992 people who wrongly received COVID benefits still had a debt owing. The amount of outstanding money is $10.35 billion, of which $5.41 billion is for CERB and $3.2 billion is for the Canada Recovery Benefit (a later version of CERB).

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It’s tax-filing season again, with all the headaches that brings for Canadians tearing apart their houses and their laptops to find the right paperwork before the deadline.

In theory, at least for low-income Canadians and the most vulnerable among us, the annual scramble should be getting easier. The federal government is starting to implement some changes announced in the last budget meant to automate filing for simple tax situations.

But those changes are only inching along — even as the list of benefits, supports and financial information attached to proper tax filing is growing longer and longer.

More precious than T-4 forms or access to automatic filing, however, is what comes at the end of the dance with the Canada Revenue Agency: the notice of assessment — the document that summarizes your income and confirms how much you owe or are getting back in taxes.

It’s like a Golden Ticket — the key to unlocking federal and often provincial income support as well as trustworthy financial information about every taxpayer.

Without their notice of assessment, taxpayers rich and poor alike, will find it difficult, if not impossible, to access GST credits, caregiver credits, seniors’ benefits, help for groceries, space in your RRSP, your TFSA and your FHSA.

Acronyms aside, you’ll need your notice of assessment to get child benefits, dental benefits, workers benefits and disability benefits. In Ontario, you’ll need it to access social assistance.

There’s more, but you get the idea.

More and more, the notice of assessment is a linchpin to social service delivery at all levels, making it a crucial link in Canada’s social safety net.

But for those who need it most, it’s sometimes hard to get and easy to lose.

“It’s all about having access to the My CRA account, and using it,” says Elizabeth Mulholland, CEO of Prosper Canada, a charity dedicated to financial empowerment that helps low-income people across the country file their taxes.

No one should assume that such access is at everyone’s fingertips, especially if they are living in precarious circumstances. First, you need computer access, with Wi-Fi, and preferably with a secure connection. If you’re setting up an account, you also need identification, previous tax returns, and a steady address.

And let’s hope you don’t get locked out of your account. Getting back in can take several documents, and a password that may need to be sent by mail.

CRA and experts figure about 400,000 people are missing out on their benefits year after year because they’re not filing taxes.

That was the reason why last November, in Prime Minister Mark Carney’s first budget, the government announced a new initiative for automatic filing for low-income people with simple tax situations.

It has potential, but it’s rolling out gradually, and with some hiccups.

There are three different ways the CRA wants to make tax filing more automatic, but only one is ramping up right now, opening up on March 9 for this tax season: SimpleFile, an interactive digital or phone questionnaire which will be available to about 3 million people.

The system has been around for a while, but by invitation-only in the past, and uptake has been low. It’s more accessible this year.

This coming fall, CRA will launch a small pilot project to do “deemed filing” for low-income Canadians who haven’t filed their taxes at all, but should have.

And next March, CRA will start pre-filling tax returns for 1 million people, giving them a chance to approve the information before sending it in. The goal is to reach 5.5 million people by 2029.

The government is purposely moving cautiously so that it can understand the needs of vulnerable populations and consult along the way, says John Fragos, press secretary for the Office of the Minister of Finance and National Revenue.

In the meantime, low-income filers will lean heavily on community tax clinics staffed by trained volunteers, including about 700 chartered accountants in Ontario, and organized by charities like Prosper Canada. Same as it ever was.

“The word ‘automatic’ seems very misused,” says Lisa Rae, Prosper’s director of systems change.

Her frustration is that the federal government has been tossing around the automatic filing concept for years. But she’s hopeful that this time will be different.

Prosper Canada, along with the Maytree and Momentum organizations, are taking CRA’s offer to consult seriously and have designed ways to make the government plan more workable.

They argue that with more efficient use of the financial information the government already has, more formal exchanges of data with provincial governments, and a deeper understanding of the needs and financial flows of low-income people, CRA could catch up to other countries and develop a truly automatic system that would ensure almost $2 billion in unclaimed supports and benefits get into the hands of those who qualify.

Let’s hope the government is listening, and is on the way to making it truly easier for taxpayers of all kinds to find and keep that most-precious of all documents, the notice of assessment.

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Prime Minister Mark Carney’s new multibillion-dollar top-up to the GST credit to help low-income Canadians afford food and essentials is definitely progress.

By using the existing system to target the sector of the population that needs the most help in making ends meet, the measure is more efficient and fairer than other tax measures that tend to show upon the menu.

But let’s get a few things clear.

First, a technical clarification. The prime minister has framed the enhanced and rebranded GST credit as a way to alleviate the costly grocery bill many households struggle with continually.

In fact, there is no GST on most groceries except snacks. Recipients can spend their new-found money on whatever they want, as the PM himself noted. But since so many of the recipients find that food gobbles up disproportionately large portions of their income, the new credit can help. It’s not nearly as generous as anti-poverty advocates had hoped, but it’s not nothing. It’s $11.7-billion over six years, reaching 12 million people.

Second, the credit is not going to do anything to drive food prices down. Conservative Leader Pierre Poilievre is right about that. Food prices are high in most developed countries these days, but especially high in Canada — for many reasons, including weather, currency and supply chain glitches.

Rather, there’s a separate collection of new funds for the “root causes” — money to address supply chain disruptions, encourage the construction of new greenhouses, produce food close to home and help the Competition Bureau ensure there’s less bad behaviour.

And third, it’s dripping with politics, as you’d expect in a minority government. While the new benefit can be spent on anything at all, the Conservatives and the NDP alike have hammered the Liberals non-stop on food prices. And so that’s the framing — putting the opposition on the spot.

But it is progress all the same, mainly because it’s a concrete acknowledgment of the bread-and-butter hardships that a growing percentage of the Canadian population is feeling — a policy-oriented recognition that was scarce in the federal budget and what has been hard to hear in Carney’s response to the chaos that is U.S. President Donald Trump.

To be clear, there’s no expectation that Carney be warm and fuzzy. The closest he got to public emoting was the hug he gave to the Bonhomme Carnaval last week in Quebec City. He is a charts-and-graphs fan who writes his own literary references into his speeches.

(Indeed, at his news conference on Monday, he spontaneously used his hands to make a graph to explain that the total cost of the tax rebate measure was the delta between the change in overall inflation and the change in food inflation since the end of the pandemic.)

But the charts and graphs from pollsters have continually shown that Canadians are just as concerned about job security, economic stability and making ends meet as they are about Trump.

They’re related, of course. But Carney has not really connected the dots very well until now. His focus has been institutional investors, big business, and foreign leaders.

Central in the Carney government’s first budget in November was a plan to use federal tools and its balance sheet to drive $1 trillion in capital investment in Canadian infrastructure over the course of five years.

He has been aggressive on committing to defence spending, and aggressive on diversifying Canadian trade away from the United States.

And as we all know, he has won praise around the world for vowing to build networks of middle powers — a “third way” to navigate through the antagonism that the United States and China bring to international relations.

With the enhanced GST credit, now branded the Canada Groceries and Essentials Benefit, the Carney government signals it knows it can’t get from here to there without ensuring Canadians at all levels of wealth and income are in solid shape.

“The world is knocking at our door, and momentum is building. But as the Minister of Finance just said, the biggest payoffs will take time,” Carney said on Monday with Finance Minister Francois-Philippe Champagne at his side. “And many Canadians are feeling the pressures right now of everyday expenses. Canadians need a boost today and a bridge to tomorrow.”

Yes, they do. Statistics Canada reports that poverty has been creeping up, the ability to make ends meet has declined and wealth inequality was on the rise last year. Those are not the ingredients Canada needs to attract growth and investment, let alone maintain a decent quality of life.

To lock in the benefits of the new measures, Canadians and government both need to build on the progressive measure taken this week.

Canadians need to make sure they file their taxes — even if they haven’t done so in the past, and even if they aren’t paying any tax on a regular basis. This will ensure they’re in the system to receive the federal payouts.

And governments need to figure out the next step in taking on poverty, inequality and paycheques that don’t cover the bills.

As Carney well knows, the tax equivalent of a warm, fuzzy hug with Bonhomme only goes so far.

-30-

From a distance, it looks like a dirty trick.

The United States leads the world into a negotiation for a global minimum tax. Eventually, painfully, everyone agrees to a complicated, finely-balanced pact that would ensure big multinational corporations all pay at least 15 per cent in taxes.

The goal is a global level playing field and an end to the tax-slashing race to the bottom to attract business.

At the last moment, the U.S. demands and is granted exemptions for its own — the biggest, most powerful companies in the world. And 147 other countries are left wondering whether the pact they’re signing is worth the paper it’s written on.

But sign, they do — mainly to salvage what they can from years of arcane wordsmithing in the hopes of preserving their own tax bases and sidelining global tax havens.

It’s come to this.

In a Donald Trump world where the U.S. routinely bails from international agreements, ignores longstanding rules of engagement and storms ahead in its own interests oblivious of the consequences, convincing Canada and other supporters of the global minimum tax to allow an America-friendly side-agreement seems almost quaint.

But it’s serious business that implicates Canada’s scope to preserve its tax base, compete and share the proceeds.

The global minimum tax talks actually started out on a note of optimism and American leadership.

While many countries had long decried multinational companies’ crafty use of the low- or no-tax rates in some jurisdictions, the campaign to end tax avoidance took a major leap forward in 2021 when then-U.S. Treasury Secretary Janet Yellen threw her considerable influence behind gritty discussions at the Organization for Economic Cooperation and Development.

Canada’s then-finance minister Chrystia Freeland was a close ally, agreeing wholeheartedly with Yellen that a worldwide floor for corporate tax would stymie a global race to the bottom, allow Canada to maintain its corporate tax base and benefit workers with a fairer tax system.

But Canada also hedged its bets, just in case the complex OECD talks didn’t work out. Freeland announced a parallel Digital Services Tax to target large, multinational digital companies active in Canada. As the global talks stumbled, Canada enacted the DST in 2024, making it retroactive to 2022.

As we know, that plan never materialized — going toe-to-toe with Trump’s agenda and losing. And it’s that altercation which can explain the compromises that led to today’s arrangement.

The key moment was last June, just as the DST was about to take effect.

Trump showed up at the G7 summit in Kananaskis, Alta., armed with the dreaded Section 899 of the One Beautiful Bill Act — also known as the “revenge tax.” Countries that embraced the global minimum tax agreement, and especially those who adopted their own DSTs, would face retaliatory high tax rates on individuals making money in the United States.

Under intense pressure from their business communities, the G7 stood down, Canada nixed its DST, and the G7 instead offered up a special arrangement for American companies. Trump removed the revenge tax provision, and the U.S. returned to the global minimum tax table.

And here we are, telling ourselves we’re lucky that the U.S. agreed to anything at all.

The so-called side-by-side agreement announced this month is designed to recognize U.S. arguments that its corporate tax system is fine as it is since it already mirrors what everyone else has signed on to in the main agreement. It doesn’t recognize the U.S. by name, but they’re the only ones who qualify.

Treasury Secretary Scott Bessent hailed it as “a historic victory in preserving U.S. sovereignty and protecting American workers and businesses from extraterritorial overreach.”

It may be a side quest for the U.S., but there are significant implications for the rest of the world — especially since the severe disruption in the global economy means Canada and many other countries are parched for investment and are actively redesigning their investment incentives to be more aggressive.

To be sure, the new package gives Canada some stability as it goes about the hunt for private-sector dollars. And perhaps, if the overall agreement works as intended, tax haven countries will rein in their competitive tax-slashing.

But the side deal gives leeway to the U.S. to decide for itself, at least in some instances, what counts and what doesn’t in the calculation of tax. And it leaves Big Tech and other American corporations alone to continue as they have been, booking up to half their foreign profits in tax havens, according to the EU Tax Observatory.

Meanwhile, the overall deal that Canada is signing on to means tax is no longer much of a tool to attract investment. We do have other, more effective tools — subsidies, predictability, rule of law, and industrial policy writ large. It could be a lot worse.

But it’s not clear the Americans will constrain themselves accordingly. The understood message from America is: trust us.

As if.

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Canadian parliamentarians are taking a crack at squeezing out more government revenue from tax havens, and we wish them all the luck and stamina.

Tucked away from the Conservative-to-Liberal floor-crossings and the nail-biting confidence-vote drama that have dominated this Parliament, MPs on the House of Commons finance committee were contemplating all the places where corporations put their profits.

What initially started as an Opposition “gotcha” strategy meant to tie Prime Minister Mark Carney to the tax practices of Brookfield Asset Management has turned into a fairly serious exercise to tackle one of the thorniest issues in fiscal policy.

Political soap opera this ain’t, but the implications are in the billions of dollars every single year — and Canada is missing out.

That’s anything but new, and Canada is far from alone. Tax avoidance and its more nefarious cousin, tax evasion, have bedevilled policymakers for time immemorial.

Over the years, Canada has thickened its tax code, added auditing resources and investigative powers to the Canada Revenue Agency and law enforcement, joined complex international agreements and is always adopting more advanced technology in the hopes of gaining the upper hand.

But companies and wealthy individuals often seem to be a step ahead, especially those that are well-resourced enough to navigate increasingly complex rules and murky financial transactions.

It’s worth taking another run at it.

Taxing corporations and high net-worth families fairly is more important than ever. Canada needs the economic activity, governments need the tax revenue, and Canadians need to know that the tax system that they pay into — year in, year out — is equitable.

“There’s a constant balancing act between competitiveness — we want our businesses and our multinationals to succeed when they’re competing in foreign markets — and a desire to not facilitate inappropriate tax avoidance and erode the Canadian tax base,” Trevor McGowan, associate assistant deputy minister at the Department of Finance, told the committee.

Canada, like many other countries, is thirstier than ever for business investment, especially now that the global economy is in an uproar and the United States is no longer a dependable source of mutual benefit. And with trust in public institutions in a fragile state, the federal government can’t afford to be lenient.

Parliamentarians find it hard to determine the scope of the problem. CRA has measured the “tax gap” — the difference between what corporations should be paying and what they actually pay — in the past and says that in 2018 it amounted to between $1 billion and $3 billion a year, lower than previous years.

But CRA’s efforts focus on tax evasion (actually breaking the law) rather than tax avoidance, which is just playing footsie with the rules. And they admit up front that their estimate is uncertain.

Independent analysts who try anyway to measure the cost of tax avoidance come up with far higher numbers. Canadians for Tax Fairness figures Canada misses out on $15 billion a year because of tax haven abuse.

But as the prime minister himself said when he was faced with tough questions about Brookfield during the election campaign last spring, setting up corporate shop in a low-tax jurisdiction is legal and a legitimate business strategy.

Even trickier than counting up the missing tax revenue is figuring out what to do about it.

Canada has tax treaties and agreements with a growing number of key low-tax or no-tax jurisdictions — agreements backed up by domestic law that actually allows for Canadian firms to repatriate some types of income back to Canada without paying tax.

In the past few years, the federal government has tightened the screws.

• Like many other developed countries, Canada now imposes a global minimum tax of 15 per cent, mainly touching large companies with foreign subsidiaries. The Department of Finance sees collecting an extra $2.1 billion a year this way.

• Ottawa has now curtailed the deduction of excessive interest and expenses, expecting to raise between $1.6 billion and $1.8 billion a year.

• The government has significantly boosted CRA’s budget for audits and has also updated its anti-avoidance rules that apply to corporations.

• In the last budget, the federal government bolstered its authority over transfer pricing that companies use to account for in-house international trade.

Officials believe their measures are chipping away successfully at the tax avoidance problem, delivering results.

Critics and parliamentarians of all stripes want more though — with good reason. But there are no magic solutions.

The approach of the past has often been to add more rules and complexities, but there’s a chance that amounts to a road map for dodgy activity. The same issues apply to multilateral agreements and tax treaties.

If the entities you’re trying to stymie specialize in hiding behind complexity, adding even more complexity may make things worse. Simpler rules, on the other hand, could help.

The other main approach is transparency. Europe and Australia are legislating public country-by-country reporting (PCBCR), which requires multinational corporations to make public key financial data in every country they operate.

Canada has some requirements along these lines but the information is not public.

The hope is that transparency will dampen tax avoidance.

“PCBCR really is sunlight as the best disinfectant. It would allow academics and researchers outside of the tax authorities to engage in the kind of research that we need to deal with this whack-a-mole problem,” D.T. Cochrane, senior economist at the Canadian Labour Congress, told the committee.

“There will always be incentive to create these schemes. We need more methods of confronting them.”

A balancing act indeed.

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Three young women from the Vancouver area have just won a contest that would make government officials’ heads explode if they got wind of it.

Kiranjot Kaur Nahal, Khadija Rana and Jasleen Kaur Johal-Takhar responded to a call for ideas on how to pay for public transit improvements in Metro Vancouver, and they went out on a limb: they proposed a tax hike.

Just a little one, though: between 0.5 and 1 per cent added to the provincial sales tax for people in Vancouver.

Generally, bureaucrats scorn that kind of move. In the world of public finance, government revenues all flow into the same pot, and setting up artificial constructs to carve out amounts for special purposes is very inefficient indeed.

Administrators are not the only ones who look askance at the idea of bespoke taxes.

Many of the people the team tells about their pitch dismiss it out of hand, says Johal-Takhar. In fact, the trio itself had the same reaction to concept when they first started considering it as a way to ensure stable funding for transit.

“The three of us were apprehensive,” she said. “Sales tax has a negative reputation. We had a knee-jerk reaction.”

But being masters students at The University of British Columbia ’s School of Public Policy and Global Affairs, they put their research skills to work, looked harder and soon grew to embrace the idea — and eventually win $1,000.

The proposal works on many levels. It spreads the funding burden around. It provides a steady funding stream to a public good that will enable Vancouver’s world of work run more smoothly. It’s fairly simple to administer because it’s attached to an existing system.

And most importantly, the team hopes, it serves as a reminder to taxpayers exactly why they’re paying a small tax and what they get in return, turning their skepticism into support.

“There’s a tangible outcome to their taxes,” Johal-Takhar says.

And that’s the link we in Canada so often forget as we are repeatedly swept up in the political race to cut taxes indiscriminately as if they were a blight on society. The team struck at a disconnect in the public’s discourse on fiscal policy.

In the last federal election campaign, for example, the Conservatives promised an income-tax cut and then the Liberals quickly moved into that space too, hoping to neutralize the Conservative promise. The Liberal measure is expected to drain $27-billion from federal coffers.

And then came the elimination of the digital services tax, the cancellation of the consumer-facing carbon tax, and then, by the time we got to the Nov. 4 budget, the cancellation of luxury sales tax on yachts and fancy cars.

But the budget conversation was all about billions in new spending, investment and cuts — not tax revenue, where it should come from or who should pay. We seem to have forgotten that such revenue finances social supports, health care, infrastructure, training, defence, security and so many other programs that foster a stellar quality of life and a ripe investment climate in Canada.

Our tax conversation is dominated by calls to cut, and the debate is only around how much.

With such a lopsided discourse, it’s no wonder most taxpayers say they feel overtaxed. Polling done a year ago for the Canada Revenue Agency showed that just seven per cent of respondents felt they paid too little.

Back to the contest in Metro Vancouver.

To convince the judges of the contest run by advocacy group Movement that their idea was solid, the team knew it had to demonstrate that the public could actually be persuaded. Dogging them was a failed plebiscite 10 years ago to have the Vancouver region approve a 0.5 per cent increase to sales tax to fund infrastructure.

But similar votes in the U.S. asking citizens to weigh in directly on whether to increase taxes for public transit have proven largely successful, the team showed, pointing to Ohio and Arizona.

Indeed, the American Public Transportation Association shows that in the November 2024 election, 51 out of 61 proposals for public transit measures passed, leading to voter approval for $25 billion (U.S.) in transit improvements.

For sure, there are all sorts of reasons why American voters should not be compared to Canadians right now. And the advocates at Movement, while they plan to run with a version of the contest-winning tax idea, won’t go as far as pushing for a referendum on it.

The region has already indicated that it wants a new revenue tool for transit by 2027, says the advocacy group’s executive director, Denis Agar. For him, and for Johal-Takhar’s team, it’s not a question of “whether” but “how,” and they believe the best answer is a small increase to sales tax.

For the rest of us, their willingness to shout publicly about the direct links between taxation and services is a victory unto itself.

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Every spring, about 2,500 taxpayers traipse through the community clinics that Rebekah Smylie, (she/her) and her team set up at West Neighbourhood House in downtown Toronto to help low-income people file their taxes.

It’s an annual ritual that is essential for many, if they want to receive key government benefits such as the Canada Child Benefit or the GST credit.

Millions of people, mainly low-income, don’t actually file and lose out on a long list of federal and provincial income supports as a result.

It’s about to change — for the better, Smylie hopes.

But that will depend on the federal government’s next steps.

Prime Minister Mark Carney announced in his government’s first budget this month that it wants to issue pre-filled tax forms for those in “simple” tax situations.

But “simple” is in the eye of the beholder. In financial terms, “simple” can mean you probably don’t have intricate investments. You likely don’t owe the government money. Nor do you draw your income from multiple sources.

In socio-economic terms, however, life for low-income taxpayers who are reluctant to fill out forms for the Canada Revenue Agency is anything but simple. And if the CRA wants its new proposals to work, it will need to address that complexity head-on.

Smylie, the manager of financial empowerment at West Neighbourhood House, can rattle off a long list of reasons why some low-income people are reluctant to file.

They may be homeless, or dealing with addictions, or mental breakdowns, or marriage breakdowns. There are language barriers, access-to-computer barriers, lost-their-paperwork barriers.

Some of the would-be filers are working in the gig economy or under the table, and declaring their income is far from straightforward.

Kaite Burkholder Harris sees similar challenges in her work with homeless populations in Ottawa.

If they’re not filing their taxes, it’s because they have no home base, or their ID has been stolen, or they’re just “trying to survive, busy walking to keep warm and get their next meal,” says the executive director of the Alliance to End Homelessness Ottawa.

Tax filing is challenging for almost everyone, and they’re not about to purchase the latest tax software to deal with the CRA, Burkholder Harris says. “It’s just not going to happen.”

And that’s devastating, she adds, because social housing subsidies only go to those who file.

“It’s the key to unlocking everything.”

The trickiest barrier is the government itself.

“It’s pure mistrust,” Smylie says. “It’s really deep.”

Understanding that lack of trust is as complex as the federal tax code itself.

Some people fear they owe money, or that they have unpaid debts languishing from previous years, or that the government will claw back some of their existing benefits. Newcomers to Canada and Indigenous populations have long-standing historical reasons to be leery of government officials handling their data.

Others have tried dealing with the CRA before and feel they have been misled or disrespected. If there’s a mistake on their tax return, undoing it through government chatbots or phone lines is so cumbersome that they may lose out on their benefits while they wait for the CRA to sort things out.

That frustration is certainly not limited to low-income taxpayers, as the most recent auditor-general’s report on the CRA would attest.

And others just don’t want to disclose anything more than they have to, fearing scammers and unscrupulous data collectors.

There are solutions.

Prosper Canada is a national charity that aims to ensure vulnerable people have access to the tools they need to build their financial well-being. They facilitate tax clinics like those at West Neighbourhood House’s across the country, and the services are so much in demand that they have had to turn away people, says CEO Elizabeth Mulholland .

Those volunteers and organizers have built up trusting relationships with their clients, and the CRA could work with them to introduce automatic filing, she said.

The same goes for case workers and those who work with recipients of social assistance, says Burkholder Harris.

At the same time, the CRA should make sure to move gradually and cautiously to make sure it doesn’t make filing any worse, Mulholland says. Is there a way to ensure automatic form-filling comes with a final sign-off from every taxpayer in the system? Is there a way to assure taxpayers that if there is an inadvertent mistake on the form, it can be corrected quickly and without penalty?

Automatic tax filing can seem like a no-brainer. Vulnerable people are missing out on benefits, and the government already has access to much of the information it needs to make a match. Lots of other countries do it.

But let’s make sure we use our brains with this no-brainer. There are many complex reasons why some people don’t file their taxes, and the solutions need to take their circumstances into account.

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The news junkies who tend to drive political chatter have come away disappointed after Mark Carney’s first budget this week.

They (OK, we) were underwhelmed — there were no surprises, the budget was pretty much as advertised, and the previously-touted big sacrifices at the altar of economic overhaul were things we already knew were coming.

Here’s a news flash: the budget is not for the finance junkies, not really.

It’s for the public, and in this age of nasty U-turns, disruption and volatility, the predictable nature of Budget 2025 is one of its strongest points.

For a budget to have staying power, it’s not enough to wow those who are hooked on the adrenalin of receiving a list of shiny political objects.

Rather, a budget’s long-term success depends on bringing the public along, and building trust with the very households, corporations and organizations the government needs to implement its budget decisions.

That is especially true of this one.

Over the past few weeks, Carney let it be known that his first budget would dramatically ramp up defence spending, finance home-building, lean in to infrastructure and favour help for business over social programs.

He also primed the public for larger deficits and government layoffs.

But the work of building up the trust that will ensure this budget turns into a long-term plan to whip the Canadian economy into shape has only just begun. For this budget to truly succeed, Carney will need to marshal public support at every single step, because it’s not at all obvious that regular Canadians stand to benefit.

For one, the payoff for the public of this “supercharging” exercise (as the Liberals dubbed their revival plan for the economy) is a very long way away — even if everything goes according to plan.

As Carney and Finance Minister Francois-Philippe Champagne pitch it, there’s a chain reaction that is required to face down the changed economic reality of 2025, and its foundations are in this week’s budget. It’s a big bet that requires a lot of moving parts to come together, with the hope that the benefits will eventually flow to all corners of the Canadian economy.

First, the government borrows billions of dollars for capital investment.

The deficit balloons, and the government uses that money and money already baked into the fiscal framework to pull together almost $500-billion in cash, tax breaks, lending and long-term commitments, all in an effort to expand the ability of the Canadian economy to produce goods and services.

Then, it sets up new structures or reforms old structures, streamlines regulations, absorbs some risk and spices up tax incentives to get that money out into the world.

At that point, the private sector is expected to step up with $500-billion of their own, investing to take advantage of the opportunities the government has fostered.

Along the way, the companies and government entities leading the way on “supercharging” will presumably hire people, pay them good wages, enhance their training and boost everyone’s productivity.

That’s the plan anyway.

“The short-term effect of those projects is thousands of good jobs in construction, the trades and logistics,” Carney said Wednesday in a post-budget news conference at a public transit yard in Ottawa. “The longer-term effect is high-paying fulfilling careers with recurring contracts year after year. That is what a trillion dollars in investment builds.”

The end goal is a Canadian economy that is less dependent on the United States, more efficient and competitive around the world, and able to resume a steady pace of growth.

This is a far cry from the Keynesian approach to economic revival that we are familiar with, and that Canadians at least sort of believe has worked in the past

The era of government spending on job creation, directly using its spending power to juice up consumption and economic activity, has been replaced — in Canada and elsewhere — by a morphing definition of industrial policy that takes aim at leveraging private sector investment to boost productivity.

“Industrial policy, once seen as secondary to market forces, is returning to the forefront,” the budget confirms.

Regular Canadians could benefit if and when the new-found productivity produces jobs, higher wages and broad economic growth.

Carney had some thoughtful remarks about this approach to economic policy when he was in Asia a few days before tabling the budget. With geopolitics and technology fundamentally changing the way the world works, clinging to the economic equations of the past won’t suffice.

“At the core of this will be a new partnership between government and business at the service of our fellow citizens,” he said.

The central bank is down for the supply-side, productivity-enhancing approach too.

“We’ve over-relied on priming demand and not spent enough time on the tougher decisions of structural reform and making the investments that we need to actually grow the economy over the long term,” Bank of Canada Governor Tiff Macklem said in an interview with Bloomberg at the end of September.

That appears to be what Carney is banking on. And for sure, this could all happen and the prime minister’s plan could work. We can hope.

But it could just as easily not happen, especially since investors have not responded en masse in the past to many years of incentivizing, competitive taxation, subsidies and blatant pleading of all kinds.

That’s where government building trust with the public becomes essential. The rewards of this plan, if they materialize as hoped, are far off in the distance. We don’t really know who will reap the benefits or how — or even whether — they will trickle down. The subtext of Carney’s budget is “please be patient.”

The public is being asked to trust that Carney’s plan will prompt investors to change course, put billions of dollars into changing how Canada’s economy works, and stick around for the long term.

It’s an enormous ask, even if Carney hasn’t spelled it out clearly.

In the lead-up to the budget, Carney took the rare step of addressing Canadians on prime-time television, warning us that we will be asked to make sacrifices.

He took some political heat in the days after that speech for not naming those sacrifices.

The obvious answer is that he was referring to the budget’s cuts to the public service. But there’s a more subtle answer contained in the budget that applies more broadly: an economy that will see no growth this year.

Economic growth in Canada was already tepid in recent years. But the tariff battle with the United States has erased even that growth, setting Canada on a growth trajectory that is 1.8 per cent below where it would have been.

That’s unless we do things very differently, and that process has only just begun.

Canadians don’t yet know who will be paying the price for the change in geopolitics that is roiling us, beyond the workers in the industries that have been hit hard and directly by American tariffs. We haven’t yet had the difficult political conversation about how to cushion the blow for those who are side-swiped and how to share the wealth of those who prosper.

Despite what pundits may say, Carney and Champagne were wise to ease the public into their plan by rolling it out piece by piece before budget day was upon us.

But preparing the public was only one step of many. They will also have to sustain their trust-building measures for the long term if they want to both persuade private investors to find $500 billion and put it to good use in Canada, and for voters give them time to set Canada on a new path.

In his speech in Asia, Carney had some other “wise words” that he meant as advice to world leaders but could be applied to his own government right now.

He quoted an Indonesian leader who said, according to Carney: “Growth that excludes is growth that divides …. Division causes instability, and instability is not conduce to peace and prosperity.”

Carney added: “And we’re here, of course, for peace and prosperity.”

Yes, we are. But that’s going to mean some long, hard work by government and business alike to build trust. It’s a complex bet on how to fix Canada’s future that has only just begun to take shape.

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What he delivered was HIS world.

Investment—driven by the government, and then partly paid for by the private sector if things go according to plan—is at the centre of the November 4 document that boasts it will inject $1 trillion into the economy to bolster growth and productivity over the next five years.

Half of that is paid for by government: there’s $500 billion in government money for infrastructure, defence, home building and other business initiatives, earmarked with the sole purpose of driving an equal amount of investment from the private sector.

Clearly, Carney is not afraid to use the country’s balance sheet to meet the goal.

What’s surprising, perhaps, is his timid use of tax as a tool in this effort—even though taxation is usually one of the first things finance ministers turn to when they’re trying to prod the economy into action. Most of the investment incentives come in the form of capital spending.

They didn’t do nothing on the tax front. Here are some of the main, new tax measures meant to drive growth, productivity and investment in a hurry:

• The tax star of the day is the “productivity super-deduction,” which will allow businesses to write off a broader scope of capital costs more quickly, and is meant to address the competitiveness gap between Canada and the United States. It means about $1.5 billion in foregone revenue over the next five years, and is expected to make a difference to the manufacturing sector and liquified natural gas in particular.

It’s targeted, it doesn’t break the bank and it ensures Canada’s investment terrain remains competitive with the United States.

• Research and development gets a boost too, by expanding access to the Scientific Research and Experimental Development tax incentive, worth almost $300 million over five years.

• For climate, the budget foresees entrenching investment tax credits and extending the timespan for the carbon capture and storage credit to 2035.

• Critical minerals get a tax-related boost through a new provision allowing for flow-through shares which allow shareholders to claim exploration credits that would normally go to corporations.

For regular people and consumers, the budget is mostly a story of removing rather than adding new measures.

• The luxury tax on fancy boats and aircraft, imposed by the previous incarnation of Liberals to target the rich, has been cancelled in the name of helping the aviation and boating industries. The feds will forego $135 million over five years for this.

• The underused housing tax, initially meant to discourage foreigners from buying Canadian houses and driving up prices, has been cancelled in the name of efficiency. The cost is $150 million over five years.

• The budget adds some details around how it plans to remove the burden of filing taxes for those with low income and simple tax situations. The government’s auto-filing plan was announced last month, and the budget explains how it will work. If a low-income person hasn’t filed taxes in the last three years, the Canada Revenue Agency will do it for them based on the information it has. There’s an opt-out provision and an appeal process, and it starts this taxation year – pending changes to legislation.

All in all, the government initiatives are meant to re-orient the Canadian economy to better deal with an unpredictable United States by lighting a productivity fire underneath Canadian companies and encouraging them to expand their focus to global markets.

And we hope those efforts are successful.

But in the meantime, it’s worth paying attention to the chart and table on page 7 of the Impacts Report stuffed at the back of the main budget document. Poverty, the numbers show, is slowly on the rise, especially among single people, lone-parent families and racialized populations.

“These groups often face systemic barriers to financial security, making them more vulnerable to financial instability, food insecurity, and lack of adequate affordable housing,” the report states.

An economic plan that is meant to boldly steer Canada in a different direction can’t do so if it forgets about that 10 per cent of the population.

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By the numbers:

Expected tax revenue in fiscal year 2025-26: $426.2 billion

Expected tax revenue by fiscal year 2029-30: $479.8 billion

Total tax revenue as a percentage of GDP in 2025-26: 13.4 per cent.

Total tax revenue as a percentage of GDP in 2029-30: 13.0 per cent.

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Instead, we’ll be able to move from the metaphorical to the metaphysical, since we will at last have solid information to work with in the form of the much-anticipated federal budget.

The budget will be a detailed look into Prime Minister Mark Carney’s plans to invigorate the Canadian economy and position it for a new era in a world that is unpredictable, sometimes hostile, and promises far less momentum than we’re used to.

The backdrop to next week’s budget is harsh, and this morning’s smattering of economic news reminds us of some disturbing trends. Statistics Canada reports that Canada’s economy contracted 0.3 per cent in August, erasing July’s gains and setting the third quarter up for essentially no growth. And CN Rail, one of Canada’s largest companies, says it is scaling back its capital investment plans by $600 million.

What Carney does or doesn’t do on taxation is central, of course, since tax pays for public services and serves as a tool to engineer the economy – rewarding some behaviours and discouraging others.

Here’s what I’ll be watching for:

· Fresh results: For the fiscal year that ended in March 2024, the federal government collected $382 billion from Canadians through personal income tax, corporate tax, goods and services tax, excise duties and other smaller taxes.

Federal tax in 2023-24 amounted to 13.0 per cent of Canada’s GDP, which is fairly average over the course of the past few decades but higher than the 11.4 per cent collected in fiscal 2011-12 and lower than the 14.4 per cent in fiscal 2000-01.

What was fiscal 2024-25 like? The Finance Department has been sitting on those numbers but will need to show its hand in the budget.

· Fresh forecasts: Forecasting federal tax intake and revenue flows is tricky at the best of times, but the numbers form the basis of projections not just in government but in the private sector as well. The last update came almost a year ago, but that is an eternity in fiscal terms. Since then, Carney has cut income tax and eliminated the digital services tax, and the economy has slowed. With the added volatility of today’s economic environment, the budget’s view on tax intake for the next five years will be interesting indeed.

· Investment: Unleashing – or “catalyzing,” to use Carney’s language – private sector capital investment has been a key focus of the prime minister from the get-go and is likely to be a central theme of Tuesday’s budget. Tax measures can be an important tool, but not all tax incentives are created equal. Some corporate leaders are clamoring for an across-the-board corporate tax cut. But others are more focused in their ask, hoping for capital-cost allowances to be accelerated, broadened and made more permanent to better compete with American provisions.

· Auto-filing: In a streak of pre-announcements highlighting what to expect in the budget, Finance Minister François-Philippe Champagne committed to pre-filling tax returns for 1 million low-income taxpayers in the 2026 tax year so that they can receive more government benefits. They’re aiming for up to 5.5 million people by the end of 2028. It’s a significant, positive step that could be material for low-income Canadians who aren’t accessing all the benefits to which they’re entitled. The details about how this program works will be important. Will the new system be fully automatic? How will the government persuade reluctant filers to come on board?

· Affordability: Recent polling shows that Canadians are preoccupied with the cost of living and economic stability, and the tax measures in the budget would be an opportune way for Carney to meet people where they’re at – tempting for a minority government that struggles at times to show compassion. What will that look like and how will those measures be paid for?

· Party favours: What tax incentives for favourite sectors or demographics will be hidden away in the appendices? Every budget is deeply political, and this one will be no different.

· Corporate tax review: The Liberal election platform committed to a wholesale review of the corporate tax system based on “transparency, simplicity, sustainability and competitiveness.” Will this budget spell out a process?

Whether Carney’s foundational budget swings for the fences, chalks up some base hits, strikes out, or hands the Conservatives the opportunity for a walk-off home run, the details will matter to the pocketbooks and the prosperity of regular Canadians.

Go Jays!