In June of this year, our Federal Government will begin a program called “The Canada Groceries and Essentials Benefit.” It is a boost of 25% to the GST rebate for “low to modest income” households from now until the 2030-31 tax year, with an additional 50% added this year.
Right now, the existing benefit maximum is $1,086. This means that for the next five years, those eligible will receive $272 extra, plus $533 extra this year. According to the release from the Feds, approximately 12,000,000 Canadian households will qualify.
Twelve million. Let that sink in.
All told, a household that fully qualifies will receive $1,890 this year (that includes the extra 50%), and then about $1,358 after that, before the program reverts to the normal payouts.
The financial planner in me says “take it!” If the government wants to give you funds, then by all means take the assistance.
But at the same time, I question why it is needed.
Why does a country rich in agriculture and natural resources, a wealthy nation, need to provide almost 1/3 of its citizenry with funds to help with “groceries and essentials”?
You may get answers back like “the income gap,” “wage disparity,” “tax unfairness,” and even punitive polices from the US government.
All malarkey.
Since the election of the Liberals in 2015, taxes on self-employed and high-income Canadians have done nothing but increase.
- The top personal rate went from 46.41% to 53.53%.
- Non-eligible (small business) dividends went from 32.57% to 47.4%.
- Capital gains went from 23.2% to 26.75%.
- Passive corporate income went from 45% to 50.17%.
- Other punitive tax measures such as “Taxation of Split Income (TOSI)” and “Adjust Aggregate Investment Income” rules have raised taxes and eroded savings of the self-employed and small business owners.
The tax base has grown along with the population. Still, our national debt has doubled and affordability is getting worse.
The “Groceries and Essentials Benefit” is an avowal to failure. It is an admission that the last 10 years of poor fiscal management, anti-business tax policies and lack of vision have widened the gap and made life across Canada less affordable.
This benefit will run up our national debt by another $12 billion, which means about another $500,000,000 in interest, forever.
Our nation needs three things, and fast.
- Pro-business tax policies.
- Immigration reform to levels our economy can handle.
- And more than either of those …TAX REFORM.
Without serious tax reform, all other measures just pour money into the same dumpster fire we are dealing with now. I am not talking about tweaking the brackets or handing out another cheque. Canada needs a complete tear-it-down-and-rebuild-it tax regime. We have way more than enough to go around. Way more. What we need is a better way of managing, collecting and redistricting the nation’s wealth.
Let me start with a couple of suggestions.
First, raise the GST back to 7%. This is not a popular idea, but hear me out. I am a fiscal conservative to the core, and as such, liked the Harper administration for its money management. That said, their worst idea needs to be reversed. A cut to the HST is a tax break for the rich dressed up as a populist idea. Raising the HST hits the higher income Canadians on their consumption, where it should. At the same time, increase the number of essential items that are HST- and PST-exempt. Also maintain or even adjust the GST rebate for low-moderate income households.
Next, raise the basic personal exemption to $30,000. This solves a couple of issues. First, it gives tax relief to those who need it most. Second, it simplifies that tax system and ensures that the government doesn’t spend its resources chasing small amounts.
Take note that the CRA has 57,000 employees to administer tax on a population of 41.5 million. By contrast, 342 million Americans are serviced by the IRS with about 100,000 total employees.
Suffice to say: There are a lot of deficiencies and redundancies in our system.
The “Groceries and Essentials Benefit” is not something to cheer about. Yes, it will be a helpful short-term benefit to millions. However, it is ultimately akin to putting out a fire with gasoline.
Sources: Canada.ca, www.irs.gov, The National Post and of course, the late Right Honourable Brian Mulroney for the quote “avowal to failure.”