Well, after 567 days with no federal budget (I still shake my head that many Canadians think that is ok ), we finally have one. After review, perhaps the government should have taken 568 days to release a better one. Touted as a budget that would provide “

generational investment ” for Canadians, this budget provides generational burdens disguised as “investments.” Calling the out-of-control spending a generational investment is like calling a payday loan a wealth strategy.

But, if you’re a big fan of government spending then this is the budget for you. Ditto if you believe huge government intervention

into the economy is necessary and good: You’ve got the budget of your dreams.

Before I started reviewing the budget documents , I was tempted to play a drinking game by taking a shot of alcohol every time the budget mentions the word “invest” and the vacuous phrase “spend less to invest more.” I thought better of it. And thank goodness I did since I would have been on the floor very quickly, likely only able to get through less than 10 per cent of the 493 page budget document (not including the Notice of Ways and Means Motion).

In the spirit of The Good, the Bad and the Ugly , Sergio Leone’s iconic 1966 spaghetti western, below is a breakdown of the federal budget in that fashion.

The good

  • The repeal of the Underused Housing Tax. That was a debacle and a poor policy decision when it was implemented in 2022;
  • Progress on automatic tax filing. After promises being made in previous budgets, it looks like we’re on the right track to make this happen. I’m an advocate of this and have been calling for automatic filing for years;
  • The repeal of part of the luxury tax for airplanes and boats. However, it is not good that it was retained for automobiles, especially given the struggles that our domestic auto industry has been facing;
  • An explicit statement that the CEI will not move forward. The Canadian Entrepreneur’s Incentive — as originally announced in the 2024 budget — was an overtly political initiative and ridiculous policy;
  • No re-introduction of the 1970s Multi-unit Residential Building tax shelter rules as had been promised by the Liberals in the spring election. Such a ridiculous policy and promise;
  • Some accelerated depreciation initiatives for certain business assets;
  • A commitment to implement the increased capital gains deduction of $1.25 million effective June 25, 2024; and
  • A deferral of “bare trust” reporting until the 2026 filing year for most trusts.

The bad

  • No commitment to long overdue tax reform. The Liberals had promised an “expert review” of the corporate tax system but this is not in the budget;
  • More personal tax credits to clutter the tax system. Promised as the “heroes” tax credit by the Liberals during the election platform, it now shows up as “Personal Support Workers” tax credit. Not needed;
  • The deceptive budgeting technique of separating the “capital expenditures” from the “operating budget” is on full display; and
  • No new personal or corporate tax rate reductions;

The ugly

  • The projected deficit. As has been widely reported, the projected total deficit for the current fiscal year (purposely ignoring the deceptive “capital” versus “operating” budget split) is $78.3 billion slowly decreasing to $57.9 billion for 2028-29. This is beyond reckless and adds about $322 billion to our country’s cumulative debt during that time;
  • Public debt charges. With increased debt comes increased public debt charges. Those charges are expected to increase from $53.4 billion during the current year to $76.1 billion in 2029-30. Wow. That’s a $22.7 billion annual projected increase in five years, or 42.5 per cent. Again, that is reckless. To put this into perspective, by the time 2030 comes around, our country will be spending $1.46 billion per week in debt charges. That’s a lot of hospitals, schools, roads, defence, artificial intelligence build-up and other important infrastructure that could have been built with those wasted funds. Every single Canadian should be extremely concerned about this kind of wasteful spending;
  • Not enough spending cuts. Total spending cuts are apparently going to be $60 billion over the next five years, including public service staff reductions. From the budget: “From a peak of almost 368,000 in 2023-24, the public service population is expected to reach roughly 330,000 by the end of 2028-29 — a decline of about 40,000 positions or 10 per cent.” These are not the deep cuts that many were asking for, especially when you consider the new spending. It’s my opinion that the bloated public service needs to be reduced by a lot more while ensuring critical services are, of course, not compromised; and
  • The spending in this budget is eye-popping: $450 billion, on a cash basis, in overall new spending. Again, if you like government intervention, you’ll love what the government is “investing” in but to suggest the cuts described above are meaningful when you have this kind of spending is like saying you’ve lost weight when you’ve actually gained significantly.

My two cents

The ugly outweighs the good by a significant amount. This budget is a financial disaster. Our youth and future new Canadians will be left to pay off the massive spending spree well past when the authors of this mess are gone. And to pay it off there are really only three paths: significant tax increases to pay down the growing debt and increased debt charges; significant austerity or both.

In the end, this budget isn’t a spaghetti western, it’s a slow-motion fiscal shootout where taxpayers are the ones left holding the smoking gun. The good parts are minor cameos, the bad dominates the middle, and the ugly rides off with our future saddled in debt.

If this is what passes for “generational investment,” future generations may wish they’d been written out of the script.

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Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.