The best federal political party for your personal finances is the one with a plan to grow your top line.
That’s biz-speak for revenue or, in this case, your paycheque. We’ve heard so far in the campaign about middle-class income-tax cuts, a capital gains tax deferral and extra contribution room for tax-free savings accounts. All that is fine, but we need a government that delivers prosperity the old-fashioned way: through rising incomes that make people feel they are getting ahead in life.
In the trade war with the United States, we’re on the defensive. This could be the biggest personal finance setback for Canadians since the recessions of the early 1980s and 1990s. Factories could close or be relocated south, jobs lost and incomes cut. Food will cost more, and so will lots of other things you buy regularly.
But in responding to U.S. tariffs, we have a chance to retool the Canadian economy in a way that addresses some key shortcomings. There’s an opening here to diversify our trade, promote corporate investment, boost wages and make life more affordable.
The federal parties have flicked at these issues, notably with their policies on energy. For example, the Conservatives have promised reforms that would promote and expedite oil and gas projects, while the Liberals say they would make Canada a global superpower in conventional and clean energy.
What’s lacking is a storyline on how these and other measures will build a more resilient, productive economy that generates prosperity and addresses the legitimate affordability concerns many people have. Instead, the election campaign has perpetuated the idea that the way to improve the country’s personal finances is by doling out tax cuts.
Some examples from both the Liberals and Conservatives are tax cuts aimed at the middle class and GST waivers on purchases of new homes. The Conservatives have also offered $5,000 in additional TFSA room for investments in Canadian companies, and a capital gains tax deferral for profits reinvested in Canada.
All these measures are about the bottom line – what’s left after taxes. That’s important, but many people are left out. If you’re a low-income individual, a middle-class tax cut doesn’t help much. If you’re one of the multitudes whose annual TFSA contributions come in well below the current $7,000 limit, extra room to invest in Canada is meaningless. As for capital gains taxes, they are the definition of a luxury problem.
Increasing the top line helps everyone – low, middle and high income. It’s the most democratic of economic policies, and also the hardest because of the effort required to develop it and then get buy-in from the electorate.
A full-on effort to drive up wages and living standards via productivity improvements would likely require tax incentives for businesses to invest and hire, and assistance for companies seeking new customers in the world beyond Canada and the United States. Strategic investments might have to be made to get needed infrastructure built quickly enough to offset damage from the trade war – pipelines, for example.
A government focused on top-line growth might not have the resources to cut personal income taxes broadly or forgo taxes on capital gains and extra money sheltered in TFSAs. Can people reasonably be expected to vote for a party that doesn’t hand out tax cuts?
Maybe not in normal times. Today, the country is hungry for fresh thinking, expertise and leadership. There may never be a moment of consensus on the need to do things differently in the economy.
But so far, the Liberals and other parties have been too traditional in how they campaign on economic issues. Don’t settle for that in picking who to support. Hold out for a narrative on how we convert the trade war into an opportunity to raise this country’s top line – which is to say, your salary.
Cutting our way to a better future, through taxes or at home via a rethink on spending, has its place. Increasing the country’s top line is harder, but rewarding for everyone. We need to try.
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