One Comment About Taxation – The ‘Groceries and Essentials Benefit’ Won’t Fix Affordability — It’s Politics, Not Policy

Like most Canadians, I regularly visit the grocery store to pick up some essentials. After every visit, I’m astonished – not just by the price tag, but by how few staples that price actually buys. I often wonder how the average Canadian is supposed to cope.

 

Cost of living increases are everywhere and have been the norm since outrageous COVID-era government spending fueled inflation, a basic economic principle that arises when the money supply exceeds the amount of goods that are available. In other words, when governments inject unprecedented amounts of money into the economy while productive capacity is constrained, prices don’t just rise – they become embedded. With eye-popping government deficits continuing to be the norm, prices for groceries increased at a faster pace in 2025 (+3.5%) than in 2024 (+2.2%) on an annual average basis.

 

Unsurprisingly, affordability has become a central political issue. If Canadians are suffering, what should government do? Most certainly they shouldn’t look at the root cause of affordability matters and adjust course. Oh no, that would make way too much sense.  Instead, they should just hand out money to buy votes and entrench the welfare state. Yeah, with a PhD economist at the helm, that makes perfect sense.

 

Against that background, should anyone be surprised by last week’s announcement that the federal government would expand the GST credit by increasing the quarterly credit amount by 25% for 2026–2030, and pay a one-time “top-up” payment in mid-2026 equal to 50% of the recipient’s 2025–26 credit amount? Both measures, which will cost the government $12.4 billion over the next six years according to the Parliamentary Budget Officer, are income-tested and use existing eligibility rules. And, of course, a well-thought-out taxation policy must come with a cutesy new name – the “Canada Groceries and Essentials Benefit”.

 

Sarcasm aside, this announcement is yet another example of how Canada’s taxation system is being driven more by politics than sound policy. What was once a well-designed and efficient tax has become a political prop. Tying the GST Credit to “groceries and essentials” through its rebranding is rhetorically clever – but entirely misleading. It does nothing to reduce grocery prices, nor does it address the underlying drivers of inflation or affordability. What it does do is hand out cash to low-and modest-income Canadians, with no clear fiscal anchor to pay for it.

 

To further explain, let’s provide some historical context.

 

Canada’s GST was introduced on January 1, 1991, by then PM Brian Mulroney’s government. It replaced the inefficient Manufacturers’ Sales Tax (MST) first introduced in 1924. Prior to being scrapped, the MST was a hidden 13.5% tax applied at the manufacturing level to a narrow base of goods, which led to many economic inefficiencies. It was replaced by the GST to create a more transparent, broad-based value-added tax to a wide range of goods and services, which eliminated tax-on-tax effects, and better supported exports and economic growth.

 

Importantly – to address the inherently regressive nature of consumption taxes which can hit lower-income households harder – the GST included carefully crafted exemptions and zero-rated items for basic living essentials such as groceries, residential rents, health and dental, financial services and other amounts. That helped, but to go further, the government introduced the GST Credit: a refundable, income-tested benefit for low and modest-income Canadians to reduce the net impact of the tax.

 

As a package, the GST was well-structured, fair, and relatively efficient. Yes, the carve-outs created complexity but overall the GST remains a much more efficient tax than the income tax. In my view, there should be an expanded role for the GST.

 

However, it’s been politically toxic from day one. Shortly after the introduction of the GST, the Conservatives were punished at the ballot box in 1993 – badly. The 1993 Chrétien Liberals famously campaigned on a promise to scrap the GST entirely, only to reverse course once in government. Stephen Harper’s Conservatives later reduced the GST rate from 7% to 5% – because it was politically popular.

 

The Trudeau Liberals joined the party during COVID by paying out numerous one-time “GST top-up” payments and, more recently, tried their hand at retail populism by implementing a GST “holiday” on certain items between December 2024 and February 2025 – a policy that had all the sophistication of a grocery flyer.

 

And now the latest installment: the rebranding of the GST Credit – a core measure to reduce the regressiveness of the tax – into the “Canada Groceries and Essentials Benefit”. Let’s be clear: this is not a tax policy improvement. It’s politics, plain and simple.

 

So, how is this being paid for? As economist Jack Mintz wrote last week, either increased taxes, reduced government spending or increased government debt will be needed to pay for this political promise. With warnings from the Parliamentary Budget Officer that federal finances are on an unsustainable path, tacking on another $12.4 billion of debt is irresponsible.

 

It’s unfortunate that a well-designed tax like the GST – with its neutral base, targeted exemptions, and income-tested credits – gets hijacked for political ends. First, we slash the rate to curry favor. Then we pile on rebates during crises. And add populist “holidays”.  A year later, that holiday is repackaged as cash handouts and a rebranding to make them sound like gifts.

 

I’m not opposed to targeted transfers for those who need help. But if the goal is affordability, we need serious structural solutions, not more political marketing campaigns disguised as good policy that distorts a well-designed system and undermines public confidence in fiscal management.

 

The next time I visit the grocery store, I won’t be thinking about the so-called “Groceries and Essentials Benefit.” Instead, I’ll be thinking about how much damage is done when sound tax design gets hijacked for short-term political gain and a simple marketing ploy – one Canadians will end up paying for in debt, interest costs, distrust, and diminished confidence in tax policy.

 

Yesterday, the Conservatives put forward a motion in Parliament – that was unanimously accepted by all MPs – to fast-track the legislation to enact it. While I appreciate the politics, that doesn’t make anything that I have written above less relevant.

 

Canadians should reject this thinly veiled vote-buying scheme.

 

One Comment About Leadership – Vulnerability Builds Trust

 

Most leaders I know are afraid to be vulnerable – afraid to admit they’re human and struggle with the day-to-day, just like everyone else. For some reason, they believe they need to be “tough” and “strong” to project that they’ve got it all figured out.

 

The reality? None of us have it all figured out. Admitting that – which is a key part of vulnerability – can be a powerful leadership trait.

 

I saw that on full display during Pierre Poilievre’s speech at the Conservative National Convention in Calgary. When he mentioned his autistic daughter speaking for the first time, he choked up mid-speech. It wasn’t scripted. Just a raw, emotional moment. It cut through politics / partisanship. And it was hard not to relate to him and his family.

 

From a leadership perspective, vulnerability is one of the fastest ways to build trust. It shows that you’re relatable. It shows authenticity. And it helps your team see that you’re not hiding behind a title – you’re leading as a human being.

 

Of course, like any trait, it can be overdone. I’ve seen leaders cross the line into oversharing or constant emotional fragility. That’s not what I’m talking about. It’s about balance – being honest, not performative. Real, not reckless.

 

Leaders: drop the crusty, fake veneer. Vulnerability isn’t weakness. It’s a path to trust. And trust is what gets people to go to war with you.

 

One Comment About Economics / Politics  – “Net Investment” By Canadians in the U.S. Remains High

 

An interesting article in the Financial Post earlier this week discussed a report issued by TD Bank that “…Despite trade tensions and the rise of the ‘elbows up’ movement, Canada remained a net lender to the United States for the ninth straight year in 2025.”

 

From the article:

 

“In the third quarter of 2025 (the latest quarter for which data are available), Canadian households, businesses and governments acquired more than $230 billion in U.S. assets. The total for the year is on track to reach roughly $255 billion, or eight per cent of Canada’s nominal gross domestic product (GDP). This is higher than 2024 figures, but lower than peaks hit in 2021 and 2023, when flows surged to about 15.1 and 12.9 per cent of GDP respectively, wrote TD economist Maria Solovieva in the report.

 

Meanwhile, U.S. investment in Canada is expected to total around $150 billion for the year, or just over five per cent of Canada’s GDP — which means Canada has sustained its lopsided financial outflow with its southern trading partner.

 

…

 

Although Canada and the U.S. remain closely intertwined, “we’re probably going to see incremental changes towards diversifying away from the U.S.” said Solovieva. “It does make a lot of sense for us to start building those bridges (with other countries).”

 

There is no doubt Canada should be diversifying its trade with other countries – and we should have been aggressively attempting to do that for years. Having said that, our two countries’ economies are inextricably linked – mostly due to geography, culture, and shared appreciation for the rule of law.

 

Here’s the reality: diversification is sensible – but pretending we can economically ghost the U.S. is delusional.

 

And with such a huge amount of trade going both ways, you can’t simply flip a switch and expect things will magically be better. This is one of the reasons I get frustrated with the “elbows up” crowd or those who think they’re punishing the U.S. by not buying American products or by not traveling there. Or worse yet, spreading nonsense that they are “scared to travel to the U.S. because of what is going on there.”🙄 Give me a break.

 

While I respect such people’s right to protest, the reality is that our economy relies heavily on U.S. trade – and that’s not going away anytime soon. Silly protests or not.

 

Want to help Canada thrive? Skip the silly slogans and buy your neighbor a beer; or a glass of wine. Or maybe even share a bottle of Crown Royal. American made or not.

 

Bonus Comment – Quote From Patrick Lencioni– American Leadership Author – About Trust and Vulnerability

 

“Trust is the foundation of real teamwork. And the key to unlocking trust is vulnerability.”

 

Exactly. Trust and vulnerability are inextricably linked. Leaders, understand that.

 

Hope you enjoyed this edition of 1-1-1. If you’re not already part of the In the Mood Network, now’s the time. Please sign-up today.  Whether it’s through consulting, coaching, speaking, or writing, my work is about planting acorns: deliberate, principled actions that challenge the status quo and grow into something far bigger. The goal? Bold reform. Stronger foundations. And a country that values hard work and common sense.