By Allan Lanthier

When he launched the federal election, Liberal Leader Mark Carney said, “We are facing the most significant crisis of our lifetimes,” a sentiment apparently shared by Conservative Leader Pierre Poilievre. Thus far however, their campaign proposals have been more reminiscent of old-style pork barrelling: there has been little effort to address Canada’s existential economic threats.

Carney’s first proposal was a personal tax cut of about $570 per person — a one-percentage point decrease in the lowest personal income tax bracket, from 15 to 14 per cent. Hardly a bold new economic plan, the rate cut would give a bit more money to people who already have taxable income, rather than encouraging them to work, save or invest. And the cut benefits all taxpayers, because the lowest tax bracket applies to everyone, including the very wealthy.

In short, it is an expensive giveaway — $6 billion a year — financed with borrowed money. The federal deficit is already $50 billion a year and we have committed to spending two per cent of GDP on national defence, which will cost about $20 billion a year above current spending.

Not to be outdone, Poilievre upped the ante, promising to drop the rate even further — to 12.75 per cent — meaning most individuals would save about $1,290 a year. The annual cost? About $14 billion.

The freebies keep coming. Both leaders have promised a GST exemption for first-time buyers of new homes. Poilievre says working seniors can now earn up to $10,000 tax-free, and people can contribute more to their TFSAs. And last Sunday, Poilievre proposed a “reinvestment tax cut,” under which payment of capital gains tax would be deferred if taxpayers use the proceeds from a sale of property to reinvest in Canada — including in Canadian stocks — until they “cash out for good.”.

Is this what to expect for the next four weeks? A stream of special, one-off tax breaks, instead of a serious plan to address our economic challenges?

Canada’s economy has been lacklustre for years. Business investment is poor, as is productivity, and per capita GDP is falling: the Trump tariff war was the last nail in the coffin. We need a new economic plan that includes fundamental tax changes, not giveaways.

First, to retain and attract capital investment and make Canadian business as internationally competitive as possible, our corporate tax rate should be reduced.

Our combined federal-provincial rate is about 26.5 per cent, compared with an average rate for OECD countries of below 24 per cent. While our rate is close to the average U.S. federal-state tax rate of 26 per cent, we need a competitive advantage against our new rival, not parity: not to mention that Trump has proposed a six-percentage point reduction for corporations that make their products in the U.S.

Second, to keep our best and brightest in Canada and encourage risk taking, the rate in the highest personal tax bracket — for those with annual income above $253,000 — should be reduced to below the psychological barrier of 50 per cent. Canada has one of the highest top personal tax rates in the world: in 2022, the average for OECD countries was only 42.5 per cent.

Third, to help pay for these corporate and personal rate reductions, the GST should be raised by at least two percentage points — to seven per cent, where it was before Stephen Harper lowered it in 2008. Economists say consumption taxes cause less economic harm than income taxes, yet Canada relies on them much less than most other developed countries.

Finally, we need major tax reform, both to simplify our tax code and to eliminate special deals and preferences. The lower corporate tax rate on small and medium-sized businesses is much too generous and should increase. The exemption from tax for capital gains on a principal residence should be capped. And many other deductions and credits should be repealed or simplified. The new government, whoever forms it, should strike a tax reform committee, with instructions to report its findings and recommendations within six months.

Is this a platform an old-style politician would embrace in the middle of an election? No, but old-style is no longer acceptable: the world economic order has changed.

Before the election was called, Canadians were united and had grand visions. We would build pipelines, eliminate interprovincial trade barriers and extract and process critical minerals. We would seek out new foreign markets. And we would become entrepreneurial, and reward risk-takers and job-creators.

Then Messrs. Carney and Poilievre took over, and mediocrity returned. Thus far, they have offered us handouts, because “every little bit helps.” In the most important election of our lives, that is not nearly good enough.

Allan Lanthier, a retired partner of an international accounting firm, has been an adviser to both the Department of Finance and the Canada Revenue Agency.

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