In their election-year budget, the federal Liberals should set the stage for a return to balanced budgets in the next Parliament, the C.D. Howe Institute says.
The think tank’s annual shadow budget released Thursday says the federal government could be back in the black by 2023-24 if it would adopt “greener, more growth-friendly taxes” and contain federal operating costs.
The key recommendations include:
– Enhanced security for Canadian seniors: The shadow budget proposes raising tax-deferred savings limits and eliminating mandatory withdrawals from registered retirement income funds. It also proposes support for longevity insurance, and for making the Pension Income Tax Credit and pension income splitting available more widely.
– Improved tax competitiveness: Higher thresholds for personal income taxes and lower corporate income tax rates would make the system more competitive, the report says. C.D. Howe also suggests the government require all sellers of digital goods and services in Canada to pay tax, regardless of where they’re headquartered.
– Fostering growth: The budget says the government can reduce border frictions through higher thresholds for taxes and the phasing-out of import tariffs. C.D. Howe says the government should prioritize direct funding for infrastructure projects that fall under federal government control. The institute also says the feds should promote better job opportunities and education, particularly for Indigenous Canadians.
– Return to surplus: The feds should reduce carbon emissions by raising the GST on transportation fuels to 15%, “instead of leaving all of Canada’s carbon reduction eggs in an unpredictable carbon tax basket.” The government should rationalize tax credits and cut federal employment costs by giving managers latitude to reward high performers while reducing the number of less valuable positions, C.D. Howe says.
No date has been set for the federal budget, which is often tabled in March.
Read the full C.D. Howe report here.