We now know the details of the 2017 federal budget – the second since the Liberal government came to power. Released on March 22, it’s being characterized as a “stay the course” announcement as there were no new tax breaks announced, no new taxes revealed and no major new funding.
Forecasters were bracing for changes in how capital gains and dividends are taxed. They were also anticipating plans on how to cool pockets of the overheated Canadian housing market. But there was no such announcement.
Suspicion says Ottawa likely wanted to monitor the future of our trade relationship with the United States before making any major moves with the budget. Moreover, the government will certainly want to analyze any significant changes made by the new U.S. government to American personal and corporate tax rates.
No balance in sight
The federal government has no plans to balance the budget in the next four years. They are now projecting a deficit of $23 billion for the 2016-2017 year that will peak at $28.5 billion in 2017-2018 and finally settle in at $18.8 billion by 2022. On a positive note, the debt to GDP ratio, which is a key factor of economic health, is forecasted to be down to 28.4 per cent by 2021-2022.
The Liberal government had campaigned on a promise of a balanced budget after three years in power. When asked about that, Finance Minister Bill Morneau told reporters, “Our plan is to continue to be responsible every step along the way. That’s what you’re seeing here. You’re seeing that we’ll be able to show a decline in net debt to GDP, which is what we focused on as a fiscal anchor and will continue to take that approach moving forward.”
Here are some of the notable changes in the annual budget:
Help for skilled workers
There is growing concern that certain jobs will become obsolete because of technological advances. In response, the government announced the Innovation and Skills Plan – a $2.7 billion project over the next six years to help support and upgrade skills of those workers who find themselves unemployed, and lacking current marketable skills.
Some of this money is to encourage Canadians to start their own businesses, and for others to gain the skills to be rehired. In the budget, it says this money will help unemployed and underemployed Canadians access the training and employment support they need to find and keep good jobs in the new economy.
Changes for families
Employment insurance premiums will increase in 2018 for everyone, from $1.63 to $1.68 per $100. The will raise about $1.4 billion and make room for parental leave to be extended to 18 months. However, this doesn’t mean parents who take time away from work will get more benefit. Parents will now just have the option to extend the same benefit over 18 months if they choose to stay home longer.
In addition to this, the government is setting aside $7 billion in new spending over 10 years for early learning and child care programs. This is said to create 40,000 new child care spaces.
The cost to hire a foreign domestic worker will also go down. The $1,000 processing fee required to obtain a work permit for such a worker will soon be waived.
It’s no secret Prime Minister Justin Trudeau likes to refer to himself as a feminist. That tone came through in this budget, as the government announced it was put through a gender-based analysis before being presented. In an effort to reduce inequity, the government is proposing key investments where gender inequality is said to exist. In the next five years, they have committed $101 million to tackle violence against women. There is also a focus on how to better support indigenous women in vulnerable situations.
Focus on the green economy
The government is also big on going green. It’s making a commitment of $2.37 billion over four years to Canada’s clean technology industry. This is in addition to the $1 billion it committed to clean tech in the 2016 budget. The federal government also outlined its plan to invest $21.9 billion over 11 years in green projects.
No details were revealed on the highly anticipated infrastructure bank in this budget, but they did say the bank, which will aim to raise funds from private sources for infrastructure projects, will be up and running by the end of this year.
Changes in the cost of Uber, beer, and more
The tax credit for public transit passes will disappear as of 2017. And ride-sharing services, like Uber, will be more broadly subject to the same GST/HST rules as taxi companies.
Alcohol taxes are also going up slightly. The change will mean a case of 24 beers will cost an extra five cents and a 750 ml of liquor will soon be seven cents more.
And finally, the Canada Savings Bond program is being scrapped due to poor sales. The government says it’s not worth the time and money anymore since Canadians have more investment option than they did 70 years ago when the program was introduced.
With no new programs, this budget seemed to offer more details on how the money announced in the 2016 budget will be spent. It’s clear until we figure out how our new relationship with the U.S. will fare in the near future, and the government is unwilling to make any bold moves that could potentially hurt them until then.