There’s been plenty of discussion and analysis of the Trudeau government’s 2021 budget including its length (700-plus pages), $100 billion-plus stimulus, historic levels of borrowing, national daycare and an extension of several emergency measures linked with COVID. There’s been less discussion, however, of what’s missing from the budget—specifically a plan to balance the budget and a clear long-term commitment to no new taxes. While the Liberals chose not to implement many of the rumoured tax increases in this budget, uncertainty continues and will have major economic consequences.

Borrowing is simply a mechanism to shift taxes into the future. Budget 2021 includes a deficit this year (2021-22) of $154.7 billion and deficits over the next five years totalling $331.9 billion, bringing the total national debt to $1.5 trillion (after adjusting for financial assets). The magnitude of borrowing planned for the next five years creates a clear overhang on the economy in the form of likely tax increases in the future.

Moreover, prior to the spending and borrowing blowout included in this budget, the expectation was that Ottawa would not balance its budget for at least the next 30 years. Budget 2021 increases the level of permanent spending without any meaningful increase in revenues, resulting in larger deficits and more debt accumulation, which means even more pressure on federal finances in the future.

There was much speculation going into the budget about potential tax increases including changing the tax-exemption for principal residences, a new wealth tax and a higher capital gains tax, to name a few. In the end, several targeted tax increases were introduced including limiting interest deductions.

To be clear, this speculation was not just idle rumour. There was good reason to believe the Trudeau government would introduce significant tax increases. The prime minister’s January 15 mandate letter to Finance Minister Chrystia Freeland specifically stated she should investigate ways to “tax extreme wealth inequality.” And one of the themes of Freeland’s book Plutocrats is the need for greater redistribution from the wealthy. The Canada Mortgage and Housing Corporation (CMHC) also commissioned a $250,000 report from researchers at the University of British Columbia to investigate a new tax on home equity.

Again, while none of these tax increases came to fruition in the budget, there was also no emphatic statement made by the finance minister, prime minister or the government more generally that no tax increases would be introduced in the future. This is important given the context. A federal election is either imminent or just around the corner in the fall. The Trudeau Liberals are in a minority position and at some point will seek a majority mandate and go to the polls.

The lingering question for entrepreneurs, investors and businessowners—the people we need to fully engage in the economy to not only foster recovery but more importantly lay the foundation for long-term economic growth—is whether tax increases lay just ahead. The size of planned federal budget deficits and mounting debt, the lack of any clear commitment to no tax increases, and the Trudeau government’s clear proclivity for every-greater spending creates enormous uncertainty.

This uncertainty impedes recovery and longer-term growth by making economic decisions more difficult, if not impossible. For example, how does an entrepreneur, investor or businessowner decide whether to start a new business, expand an existing one or provide financing when they don’t know whether the government will increase the capital gains tax or introduce a new wealth tax, both of which could markedly reduce returns. The answer is they can’t, which is why uncertainty is so damaging to the economy.

While Budget 2021 didn’t include any major damaging tax increases, the uncertainty about future tax increases will slow recovery and impede longer-term economic growth. The country would be well served by the government clarifying its plans for the longer-term.