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Queen's profs weigh in on federal budget

Two Queen's University professors question whether the Liberals have thought through the implications of their changes to capital gains taxation

Author: Owen Fullerton

KINGSTON – Last week, Finance Minister Chrystia Freeland tabled the 2024 federal budget - the fourth tabled during her time in the position. 

The budget plans for $52.9 billion in new spending over the next five years, and unsurprisingly focuses on affordability and housing — for which $8.5 billion in new spending is earmarked. 

The government's housing plan aims to "unlock 3.87 million new homes by 2031" with 1.87 million of those already in previous plans. 

Don Drummond, Professor of Policy Studies at Queen's, said for a government who has no issue running deficits, the budget was "not surprising but disappointing," as a number of measures were announced before the full budget was tabled.

While the government has stressed "fairness for every generation", Drummond says it's clear the Liberal government are prioritizing young people in their plans. 

"This is a government that loves to spend and loves to borrow," Drummond said.

"And the irony seems to have escaped them that they say fairness for all generations, but there's no doubt that they put the greatest emphasis on fairness for young people. But as the young people, they're saddled by this big debt burden."

Drummond says some of the housing affordability measures will help young people now, but in the long run this new spending will hurt them as they're forced to deal with a huge debt burden in their later years.

He says while the government gets some credit for recognizing the need for movement on housing supply, the demand still far outpaces supply and that's a problem they've exacerbated through permitting so much immigration when a housing shortage already exists. 

Drummond said the only thing that surprised him from the budget as a whole was the changes to capital gains taxation, increasing from 50% to two thirds of gains over $250,000.

He says it will be more impactful than the government theorizes, and he questions if they thought through its implications. 

"In taxation, one of the principles is you don't want to drive people's decisions and activities on the basis of tax planning, you want tax planning to reflect the logical decisions and this is a case where it's going to drive them," Drummond said.

"If you sold your cottage or you sold a rental property or if you started to liquidate your pension fund, you'd get caught by this thing... This is not just super wealthy people who are going to get caught for this."

The Ontario Medical Association is one organization to raise an alarm about the capital gains taxes, saying that many doctors will have their practices taxed unnecessarily and that it could affect access to physicians or even deter doctors from practising. 

Dr. Kathy Brock, a professor also with Queen's Policy Studies, says it's apparent with the budget as a whole that the Liberal government is trying to reach out to the younger generation, feeling that they've leaked support to the Conservatives from voters in their late 20s and 30s. 

Brock says Poilievre's message has been simple and direct: life is less affordable, and the Liberals don't get it. 

In response she says the government has pitched measures that could be appealing to young people on the surface, but without a solid plan of how to finance those expenditures in the future. 

"What happens with the natural life of a government is when it gets to about year 6, 7, 8, it starts to get a little more distanced from the voter and it can seem to be out of touch," Dr. Brock said.

"Some measures haven't worked, so people are getting dissatisfied... there are some measures that are targeted at that age group, but on the other hand, there's no solid plan for dealing with the debt and deficit down the road."

She says the Liberal government is asking for voters for their trust, and saying they'll take care of things in time. 

Dr. Brock added that she doesn't think the government realized how wide of an impact the changes to capital gains taxes would have, and she wonders if they could choose to delay it to further examine the implications - however it may be difficult to second guess their own decision. 

Ultimately even in the face of so much new spending, she thinks people are disappointed at the lack of changes to things like disability and dental care. 

It could present an interesting and unpredictable scenario for the upcoming election. 

"So I think there's a lot of anger, a lot of dissatisfaction out there right now, a lot of people are really worried about jobs and the economy and it's not clear that this is the budget that was needed at this time," Dr. Brock said.

"You really do see the NDP now looking at the election coming up, they don't want to look like a hand servant to the Liberals...  I would imagine that we will see some more announcements from the Liberals on new programs and how they're going to help Canadians."

The next federal election will take place on or before October 20, 2025. 

Owen Fullerton is a Local Journalism Initiative reporter with YGK News in Kingston, Ontario. Image: Owen Fullerton, LJI reporter, Chrystia Freeland Facebook page.

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