It was first expected: By 2025, Canadian households on incomes less than $90,000 per year will be able to afford free dental care. The scheme will start this year with children under the age of 12. Individuals who earn less than $70,000 per year are not required to pay a co-payment, that is, what is not reimbursed on the dental bill.
The move, heavily inspired by the New Democratic Party’s program, will cost the Canadian state $5.3 billion over the next five years and a recurring expenditure of $1.7 billion thereafter.
It is the only major new health measure in the budget entitled Plan to grow our economy and make life more affordable† Nothing, again, regarding the counties’ request to increase transfers to increase Ottawa’s share of health care costs from 22% to 35%.
Need for 3.5 million new homes
Canada is struggling with a dire housing shortage and young buyers are knocking on the door of the real estate market. The government offers them various instruments to support them in buying a first home.
Among other things, Ottawa will create a tax-free savings account especially for them, the deposit of which is tax-deductible and the withdrawals tax-free.
At the same time, a one-time payment of $500 is offered to those who are struggling to find affordable housing.
But most of all, it is necessary to build housing, and the government has set itself the goal of doubling the number of new homes in the next decade, despite the explosion in material prices.
For example, four billion dollars will go to a fund of the Canada Mortgage and Housing Corporation (CMHC) to support the construction of new homes.
It will take many years of strong supply growth to address the very real problems of affordable housing facing Canadians in many regionswe can read in the budget.
No plan to return to balanced budgets
The country’s economy is doing so well that the government will reassess previously announced spending aimed at economic recovery. For example, up to $3 billion could be allocated to other budget items.
The COVID economic crisis is over, Minister Freeland said when she submitted her second budget. This really is the time for a responsible approach.
† This responsible approach is more important today than ever due to global economic uncertainty and high inflation. †
The deficit on the budget balance for 2021-2022 has also fallen sharply from USD 144.5 billion to USD 113.8 billion. It will reach 52.8 billion this year and will gradually decrease to 8.4 billion in five years. Ms Freeland does not provide a horizon for a balanced budget, but if the trend continues, it could be reached in 2027-2028.
Excluding the new spending, the fiscal position improved by $15.6 billion last year. Economic growth in combination with rising prices, especially of oil, is pushing up government revenues.
Federal debt now stands at $1,213.7 billion, as the pandemic nearly doubled it, and has fallen slightly as a percentage of gross domestic product from 46.5 to 45.1 percent, the lowest of the G7 countries.
However, the Treasury Department expects real GDP, after recovering from 4.6% in 2021, to increase by 3.9% this year, compared to a 4.2% forecast in the December economic update.
† Canadians face a higher-than-expected cost of living, which puts pressure on family finances across the country and could, in the long run, dampen economic activity and undermine confidence. †
Supply chains for the environment
The inflation of 5.7% year-on-year in February is partly due to disruptions in supply chains. The government is providing $3 billion by 2026-2027 to develop a Canadian strategy for critical minerals, improve Canada’s freight infrastructure and strengthen the semiconductor industry.
A $15 billion growth fund will also be established to attract private investment to reduce greenhouse gas emissions, diversify the economy and restructure supply chains.
Overall, Chrystia Freeland makes little room for the environment in its budget plan, other than the move to electric vehicles, which her government promises to support, and subsidies to the fossil fuel sector, which it wants to end, while keeping the 37.5 up to 60% tax reduction for carbon capture and storage.
However, growing small businesses will benefit from a reduced tax rate on the first $500,000 in income until they reach $50 million in taxable capital.
Banks taxed more
The budget does announce a 1.5 percentage point increase in the tax rate for banks and life insurance companies, half of the election promise made by federal liberals last summer.
That said, financial institutions will also have to pay a one-time tax of 15% on taxable income of more than $1 billion for the year 2021.
So the federal government expects to receive an additional $6.1 billion in revenue over the next five years and $445 million annually thereafter.
Wealthy Canadians who fail to pay their fair share of taxes will be the next to be targeted by Ottawa, which makes a commitment in its budget plan to explore a new minimum tax system.
$7.2 billion for the military
Over the next five years, the Department of National Defense will see its treasury replenished by $7.2 billion to
meet defense priorities, including continental defense and commitments to Canada’s allies†
The money will primarily be used to invest in equipment to bolster the capabilities of the Canadian Forces. A total of 875 million will be used to better manage cyber threats.
These billions are still a long way from NATO’s target of spending 2% of GDP on military spending. This amount would be equivalent to increasing the country’s military budget by an additional $16 billion a year.
The invasion of Ukraine by Russia has also put more pressure on Canada in this case. It will set aside at least $500 million to provide additional military aid to the Ukrainians, as well as $1 billion in loan opportunities.