Government services faltering despite Ottawa’s tax hikes

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Appeared in National Newswatch, July 4, 2024
Government services faltering despite Ottawa’s tax hikes

According to a study published by the Fraser Institute, 44.6 per cent of the average family’s income will be consumed by taxes of all kinds in 2024. Thus June 13—which is 44.6 per cent of the way through the year—was “Tax Freedom Day.” In other words, on average, the work done and income earned from January 1 to June 12 is consumed by government. This tax bill, most Canadians believe, is too high, but alas a tax-happy federal government is unlikely to provide relief.

Indeed, the Trudeau government recently made another effort to push Tax Freedom Day further back into the year with its increase to capital gains taxes, adding to its long record of tax increases since coming to office in 2015. The list of tax hikes includes a new top income tax bracket in 2016, the carbon tax first imposed in 2019 and increased every year since, five consecutive annual Canada Pension Plan tax hikes from 2020 to 2024, special taxation of financial institutions imposed in 2022, continued threats of special taxation of grocery stores, and announced plans for a tax on share buybacks.

With such enthusiasm for tax hikes, it cannot be a surprise that since the Trudeau government took office in 2015, the number of employees at the Canada Revenue Agency increased from around 40,000 to almost 60,000 by 2023. Compare this growth of almost 50 per cent to the growth rate of private-sector employment—from 2015 to 2023, combined growth for the private sector and self-employment was about 11 per cent.

But alas, all these new taxes and government growth have not yielded positive results. From the third quarter of 2015 to the first quarter of 2024, growth in real GDP per-person (a common indicator of living standards) was less than 1 per cent cumulatively versus nearly 16 per cent in the United States. The productivity improvements that deliver sustainable economic growth rely on business investment, but that has badly stalled in Canada, too. Since the third quarter of 2015, real business investment in machinery, equipment and non-residential structures is down about 19 per cent on a per-person basis.

Nor have Canadians received improved government services as a result of higher taxes.

Health access is getting worse, with wait times for medical care continuing to increase. And even the Liberals have effectively admitted their national child-care program, which they began implementing in 2021, has created widespread shortages.

Similarly, on two core federal government functions—public safety and national defence—even as Canadians pay new and higher taxes, outcomes are dismal. Crime is rising and Canada’s military readiness is “dangerously inefficient.” In fact, at the end of last year the commander of the Royal Canadian Navy said it “faces some very serious challenges right now that could mean we fail to meet our force posture and readiness commitments in 2024 and beyond” and that “the air force and the army are facing similar challenges.”

And Canada’s passport offices continue to be in a state of disarray and the federal government has missed its own deadline for allowing Canadians to renew passports online.

Polling data show Canadians believe they pay too much tax. No one should be surprised. The Trudeau government’s new and higher taxes have contributed significantly to the country’s stagnating economy and declining business confidence, and have been accompanied by deteriorating government services across the board. Raising taxes won’t make things any better. Cutting taxes would.

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