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The Taxation of Capital Income in Canada Part III: Bringing it all Together

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This is the final commentary in a three-part series examining possible reforms to Canada’s approach to taxing capital income. In this third commentary, I bring the material from the first two commentaries together and describe a tax reform package applied to the two sides of the capital market that would make Canada’s income tax system more attractive when viewed through the lens of the equity-efficiency trade-off. Key to the analysis is the decoupling of the supply and demand sides of the market in a small open economy like Canada. Read this articleThe Taxation of Capital Income in Canada Part III: Bringing it all Together→

Overcompensation of Income Losses: A Major Flaw in Canada’s Pandemic Response

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The federal government has overcompensated Canadians for their lockdown-related income losses. The amount of money involved is substantial. Although overcompensation does not seem to have been a policy objective at the outset, it has been embraced. This expensive flaw in Canada’s response to the COVID-19 pandemic compromises fairness and limits options for using fiscal policy to strengthen the recovery. Read this articleOvercompensation of Income Losses: A Major Flaw in Canada’s Pandemic Response→

News about CEWS

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Federal emergency wage subsidies are poorly targeted, resulting in a fiscal cost of about $14,500 for each person-month of employment saved through the program, or $188,000 per job year. Reductions in subsidy rates which began in September had only small impacts on employment, while reducing the fiscal cost of the program substantially. More recently, the government has backed away from those reforms, freezing subsidy rates and extending the program in 2021. The decision to back away from the September reforms was a mistake and a gradual phaseout of subsidies should start again now. Read this articleNews about CEWS→

Canada Should Repeal the Small Business Deduction

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Canadian government support for small and medium-sized businesses includes tax preferences, one of which is the small business deduction. This article argues that there is little evidence supporting the efficacy of the small business deduction, that equivalent benefits are generally not available in other countries, and that the small business rate should therefore be repealed. As a result of the repeal, we could reduce the general corporate tax rate and eliminate some of the distortions and complexities in our dividend gross-up and credit rules. Read this articleCanada Should Repeal the Small Business Deduction→

Tax, Spend, Repeat: 55 Years of Public Finance Data for Canada

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Today, Finances of the Nation releases an updated and expanded version of its Government Revenue, Expenditure, Assets and Liabilities (REAL) data. Covering 55 fiscal years from 1965/66 to 2019/20, the REAL data give a detailed picture of the finances of federal, provincial, and territorial governments in Canada. Read this articleTax, Spend, Repeat: 55 Years of Public Finance Data for Canada→

Fiscal Anchors for Canada’s Post-COVID Economy

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As the Trudeau government prepares its fall fiscal update after months of record spending to address the health and economic crisis of the COVID-19 pandemic, recent progress toward a vaccine should sufficiently mitigate uncertainty to enable a fiscal plan that shows Canadians how Ottawa will achieve its policy goals while maintaining fiscal discipline. Read this articleFiscal Anchors for Canada’s Post-COVID Economy→

The Taxation of Capital Income in Canada Part II: The Corporate Income Tax

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In the first commentary in this three-part series, I discussed the supply side of the capital market in Canada, and the personal taxation of dividends and capital gains. Here, I turn my attention to the demand side, and the corporate income tax. Specifically, I argue that replacing the current CIT with a tax on “economic rents” earned by businesses can make our tax system more efficient and equitable. Read this articleThe Taxation of Capital Income in Canada Part II: The Corporate Income Tax→

Ontario’s Public Finances: Diagnosis and Prescription

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Ontario recently published its 2020 budget, and it contained a lot of bad news. The cash deficit will be around $100 billion over the next three years. This commentary examines options for bringing the province back to sustainability by either reducing spending, raising taxes, or some combination of both. The authors discuss the economic and political consequences of each of the available options, and shows that there are no easy answers for the Ford government. Read this articleOntario’s Public Finances: Diagnosis and Prescription→

The Great Barrington Proposal Won’t Save the Economy

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Recently, a proposal to end essentially all pandemic-related restrictions on the activities of young and healthy people has attracted significant attention and criticism. This commentary presents data which shed light on the question of whether (public health effects set entirely aside) implementing this type of proposal could actually meaningfully boost Canada’s economic performance. It shows that because young people earn only a small overall share of total income in the economy, there are unlikely to be substantial benefits for the overall economy from loosening or eliminating the restrictions on younger Canadians. Read this articleThe Great Barrington Proposal Won’t Save the Economy→