One Comment About Taxation – Canada’s Budget Process is Not Cool

 

There’s a scene in the 1988 comedy The Naked Gun where Leslie Nielsen’s Lt. Frank Drebin waves his arms in front of a fireworks factory that has just exploded and calmly tells the horrified crowd: “Nothing to see here, please disperse.”

 

I’ve often thought about that scene as I’ve watched the Carney government handle the federal budget process. Behind Drebin, chaos. In front of him, reassurances. The gap between the two is the joke. Here’s some quick evidence.

 

During the coronation of Carney as the leader of the Liberal Party in early 2025, he promised that if he was elected, he would separate the budget into two – an “operating” budget and a “capital” budget, a deceptive practice with a long history of failure. Such a practice lets the government reclassify routine expenditures as “capital” and crow that the “operating deficit” has shrunk. While the financially literate – like bondholders – are not fooled, many people are.

 

Then, after getting elected, his new Finance Minister announced in early May 2025 that there would not be a federal budget for 2025. After significant backlash, he reversed course and promised a budget in the fall.

 

On October 6, 2025, the Department of Finance followed up on Carney’s promise to separate the budget into “operating and capital” and provided its definition of “capital”. As expected, the definition of capital was ridiculously broad. It also announced that it was moving the budget cycle from spring to fall. It did this with no parliamentary study and debate conveniently ignoring the history on this very topic. This was accompanied by tidy International Monetary Fund (“IMF”) comments crowing the so-called positives of these moves.

 

The disastrous November 4, 2025 budget was then released with a new fiscal anchor: balance the “operating budget” within 3 years. Given the broad definition of capital, it might as well have declared victory on November 4 especially since the Parliamentary Budget Officer (PBO) released a report calling the government’s definition of capital investment “overly expansive” and concluding that under an independent definition, capital investments would be roughly 30 per cent — or $94 billion — lower than Budget 2025 claimed.

 

Under that same narrower definition, the “day-to-day operating balance” would remain in deficit every year through 2029-30. The PBO also pegged the probability that Carney’s deficit-to-GDP anchor holds at just 7.5 per cent. That isn’t a fiscal anchor. It’s a fiscal wish.  Nothing to see here. But, alas, the IMF was impressed and provided the government with support that, of course, was passed along to Canadians via a glowing report.

 

And, finally, last week it was announced that we will have a “Spring Economic Update” on April 28, 2026 that cheerfully repeats the government’s all-purpose incantation: “building the strongest economy in the G7.” And, right on cue, the IMF provided more praise and another tidy quote of support for the Carney government describing Canada’s fiscal position as “the cleanest dirty shirt”. Three quotes of IMF praise in 6 months. I’m expecting a fourth one on April 29, 2026. The fireworks should be great!

 

It’s worth noting that April 28 is two days before the personal tax filing deadline. Tax accountants – professionals who read and interpret federal fiscal policy – will be heads-down and buried through that entire week. You could not design worse timing.

 

With respect to moving the timing of the budget to the fall accompanied by a “Spring Update”, Canadians should appreciate this better. The fiscal year of the federal government starts on April 1. Accordingly, early spring budgets have historically been presented to project the upcoming year.  Having an earlier budget release is fine by me but the question is how much earlier? By definition, “fall” can be anywhere from late September to late December or 4-6 months before the start of the government’s fiscal year. A lot can happen during that time.

 

There indeed have been fall budgets during our country’s history. Jean Chrétien tabled his first budget in November 1978. John Crosbie presented the December 11, 1979 budget that, two days later, brought down Joe Clark’s government. Allan MacEachen tabled the October 28, 1980 budget. Fall budgets were briefly the pattern. They stopped because they didn’t work.

 

Michael Wilson’s Department of Finance explained why in a May 1985 paper that considered – openly, transparently – exactly the question Carney has decided without consultation. Wilson concluded mid-January to mid-February was optimal, naming the fatal flaw of fall budgets plainly: “a fall budget forecast is likely to be less reliable” because it is prepared too many months in advance of the fiscal year. Wilson then formally referred his paper to both House and Senate committees for scrutiny. That is how you handle a major change to the budgetary process. You don’t announce it on a Monday and quote the IMF on a Tuesday.

 

And on forecast reliability, consider what’s happened since November 4, 2025. The U.S.-Iran conflict. The Strait of Hormuz blockade. Regime change in Venezuela. None of it could have been forecast. The November 2025 budget forecasts are likely out-of-date.

 

So, are we really building the strongest economy in the G7? Well, RBC released a report last week finding that between 2015 and 2024, Canada saw a net capital outflow of more than $1 trillion – the largest capital exodus in Canadian history. For every dollar in, two dollars left. Canada ranked last in the G7 for capital investment. Concerning indeed with no real plan to reverse course.

 

Which brings us back to Lt. Drebin.

 

Operating and capital split? Nothing to see here. Budget cycle adjusted without parliamentary study? Please disperse. Fiscal anchor with a 7.5 per cent probability of holding? Move along. A trillion dollars of capital gone, and an IMF blessing with fireworks rolled out eleven days before the Spring Update? Nothing to see here. The government is waving its arms and telling Canadians not to look.

 

The difference between The Naked Gun and the Carney fiscal strategy is that one of them is knowingly funny.

 

One Comment About Leadership – Is Fear-Stoking a Sign of a Good Leader?

 

Short answer: no.

 

Fear is a powerful motivator. And it has a long history as a tool of manipulation. It grabs attention, creates urgency and can quickly rally people. But it’s a terrible foundation for leadership.

 

Leaders who rely on fear – and use phrases like “crisis,” “the stakes couldn’t be higher,” “this is a rupture” or constant worst-case scenarios – may get short-term compliance and followers, but they rarely earn long-term trust.

 

Good leaders do the opposite. They provide context, not panic. They acknowledge risks without exaggerating them. And most importantly, they inspire confidence by offering clear, thoughtful paths forward – not just warnings about what might go wrong.

 

In my experience, fear-based leadership often signals one of two things: a lack of better ideas or a reliance on emotion to mask weak substance. Neither is a good look.

 

Yes, there are times when urgency is required. But urgency without clarity is just noise. If you want people to follow you – whether in business, politics or life – don’t try to scare them into action. Give them a reason to believe in the direction you’re taking.

 

That’s good leadership. Fear-stoking isn’t.

 

One Comment About Economics / Politics  – Carney’s Fear-Stoking Economics

 

I watched Mark Carney’s “Forward Guidance” video last Sunday. It was polished, well-produced and ultimately unconvincing. But the bigger issue isn’t the production quality. It’s the substance. The video leans heavily on crisis-driven messaging, ambitious claims, and selective math. That’s not leadership – it’s marketing.

 

Just as concerning was the uncritical amplification by parts of the media, airing a 10-minute political message in full as if it were neutral analysis. However, to be fair, some of that same media enabled the Conservative Party leader – Pierre Poilievre – to air his rebuttal video unfiltered as well – a day later – but not after being roasted by a large number of Canadians for enabling Mr. Carney’s propaganda to air first.

 

If you’ve been watching NHL games streamed on Sportsnet+ lately, you’ve likely seen the same theme repeated in high-production ads. The word of the day: “rupture.” It’s a neat piece of messaging. But it raises a bigger question: is this leadership – or marketing?

 

Before I provide my overall comments below, the ego of Mr. Carney was on full display in the opening parts of his video. He claims to have developed a tool – Forward Guidance – to help navigate through the 2008-2009 financial crisis while he was at the helm of The Bank of Canada. The hubris here should be shocking to most Canadians but unfortunately it won’t be. The “He’s so smart!” crowd will lap that up and believe it without any further thought. A 10 second Google search or ChatGPT question provides the truth: forward guidance was a tool used by the U.S. Fed and New Zealand years before Carney arrived at the Bank of Canada – the embellishment is as loud as the propaganda.

 

With respect to the overall content of the video, it is full of his usual fear-stoking messages, and pats on the back. But here’s where the narrative falls apart:

 

1.  Fear isn’t leadership. 

 

Fear-stoking is a powerful way to manipulate people. Using words like “crisis” or phrases like “stakes could not be higher” is classic fear-stoking. Framing our economic relationship with the U.S. as a “weakness” to be “corrected” may be politically convenient, but it ignores reality. The U.S. is our largest trading partner and a critical driver of our prosperity. That’s not changing anytime soon. Strong leaders manage that relationship – they don’t recast it as a liability to justify policy shifts and score political points.

 

2.  The math doesn’t hold up.

 

We’re told in the video that families will save “over $840” from the 1% tax cut to the lowest marginal personal tax rate. That number appears to double a theoretical maximum. The Parliamentary Budget Officer has calculated that the average savings are closer to ~$190 per person. That’s hardly transformative. Similarly, targeted GST tweaks on housing are unlikely to materially change affordability for most Canadians.

 

3. “Catalyze $1 trillion of investment” needs context.

 

We’re told in the video that the government’s plan is to “catalyze $1 trillion of new investment”. Ambitious soundbites are easy. Reality is harder. Over the past decade, more than $1 trillion in capital has quietly left Canada, the largest capital exodus in Canadian history. Before we celebrate new inflows, we should ask: why did that capital leave in the first place?

 

4. Canada needs “Big Bang” tax reform – not boutique tweaks. 

 

If we’re serious about competitiveness, we need to fix the fundamentals:

 

– Materially lower personal tax rates to remain competitive globally and reduce brain drain

– Encourage reinvestment through smarter corporate taxation (Estonia offers a useful model)

– Eliminate complex, low-impact credits that add cost without improving productivity

 

5. Execution matters more than messaging.

 

Investors don’t deploy capital because of YouTube videos or ad campaigns during hockey games. They invest where there is stability, clarity, and a tax and regulatory system that rewards risk-taking and success.

 

Canada has enormous advantages – resources, geography, talent. But those advantages don’t convert into prosperity without sound policy.

 

We don’t need more messaging about how high the stakes are and fear-stoking. We need leadership that addresses capital flight, restores competitiveness, and focuses on execution over optics.

 

That would be real forward guidance.

 

Bonus Comment – By Hafiz  – 14th Century Persian Poet – About Fear

 

“Fear is the cheapest room in the house. I would like to see you living in better conditions.”

 

Totally agree. Leaders operating out of fear is low-level thinking / leadership. Don’t do it.

 

I hope today’s newsletter has been thought-provoking for you.

 

As many of you know, I’m passionate about helping people make better decisions – whether in tax, leadership, or business. If you’d like to go deeper on those topics, my recently released book, Making Life Less Taxing (Version 2), is now available and expands on many of the practical ideas I’ve written about over the years.

 

I’m also putting the finishing touches on my next book, Leadership Compounds: How Small Decisions Build Culture, Credibility, and Legacy. It explores a simple but powerful idea: leadership isn’t about grand gestures – it’s about the small, consistent decisions that compound over time.

 

For those interested in a more hands-on approach, I’ll soon be announcing a bespoke consulting initiative – The Acorn Growth Program – designed to help leaders and organizations grow intentionally, one small (but important) decision at a time. Feel free to reach out to me directly for more information.

 

And if you’re not already on my mailing list, feel free to sign up for my In the Mood Network newsletters to receive more content. No fluff – just practical insights on tax, leadership, and economic policy.

 

Thanks for reading. As always, I welcome your thoughts and feedback.

 

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