One Comment About Taxation – The Federal Government’s GST / HST Holiday, Cash Handouts and the Recurrence of “Tax Planning” Articles at This Time of Year Emphasize the Need For Improved Financial Literacy

 

As 2024 winds to a close and the Christmas spirit fills the air, the federal government has left a few ‘gifts’ under the tree. But before we unwrap them, we should ask: are these truly presents to celebrate, or merely expensive ornaments designed to dazzle while adding to our country’s burdens? And while tax planning often takes center stage at year-end, shouldn’t our focus on understanding and managing taxes extend throughout the year, rather than just during this season of reflection and resolution?

 

Let’s talk first about “gifts”.  Take the much-publicized GST/HST “holiday.” For two months, Canadians can enjoy a temporary tax reprieve on a curated list of items. Add to that a promised cash rebate for certain Canadians next spring. On the surface, it sounds generous—until you realize this $6 billion ‘gift’ is funded by borrowed money, with interest costs that all Canadians will shoulder. Instead of meaningful relief, it is a vote-buying gimmick wrapped in shiny paper.  Maddening.

 

Our government wasted no time patting itself on the back for its so-called ‘tax gifts’.  The opposition parties – and most people that I have talked to recently – rightly saw through it, rejecting the measure outright. Yet, like clockwork, the Liberals and NDP spun their opposition into a political attack, accusing critics of indifference toward struggling Canadians. It’s an all-too-familiar script in today’s era of ‘gotcha’ politics, where meaningful discourse gets drowned out by partisan noise. 

 

This is not new, however.  The Liberals – and virtually all governing parties – use our tax system to try to score political points.  However, this version of the Liberals, has taken it to the extreme and are famous for using our tax system as a political wedge. For example, earlier this year, they introduced capital gains inclusion rate increases.  The messaging coming from the Liberals was that any political party that disagreed with such a proposal apparently did not care about lower income Canadians, income inequality and intergenerational fairness.  Again, political nonsense in this era of “gotcha” politics.

 

Turning now to “tax planning”.  At this time of year (and in February to the end of April during tax filing time), “tax planning” articles, courses and other content are religiously pumped out like clockwork.  Yes, there are some interesting tidbits in some of the pieces but overall, such material is shallow.

 

Why?  Well, tax planning is a year-round and lifetime exercise.  As The Fraser Instituterightly points out, the average Canadian family spends more of its income on taxes, 43% (which includes not just personal income tax – which accounts for about 32% of the total taxes – but also includes payroll taxes, sales taxes, carbon taxes, property taxes, etc), than the basic necessities of life combined, 35.6%.  Accordingly, over one’s lifetime, taxes are usually the largest expenditure – or “investment” if you like that term better – one will make.

 

Does this mean that the average Canadian should spend money to hire expensive advisors, like me, to help plan their affairs better?  No, it does not. Most Canadians do not need specialized tax advice.

 

Instead, the key is to become more financially literate.  In my view, in order for Canada to have long-term stability and success, we all should improve our level of financial literacy.  Ideally, such level of training would be taught in grade school to our kids in much better depth than it is today.

 

As part of this, it is my dream that most Canadians would invest the time to understand why a proper functioning taxation system is important to their individual success and to the country they live in. And how their taxation dollars are withheld / paid.  And what those dollars are used for.  Unfortunately, however, it’s easy for the why, how and what to be tainted by simple partisan politics and by dopamine-inducing social media.

 

Understanding the basics of taxation – which is a critical function of becoming more financially literate – is more than just a clockwork cycle of “tax planning” lists pumped out by the usual suspects. If you’re the type of person who is always in search of “great tax planning” tips, then perhaps it’s time to have some self-reflection that the “gotcha politics” equivalent in tax planning is usually not all that valuable.

 

Instead, like most things in life, becoming financially literate requires a true investment in time and energy to try and educate oneself on this important topic. As the old saying goes, short term pain for long term gain.  

 

There are many great books and courses on tax and financial literacy.  Instead of relying on year-end / tax filing deadline “tax planning” articles or content, I’d encourage Canadians to be more proactive and seek out better content.

 

With a better understanding of financial literacy, Canadians will quickly realize that Canada’s future success depends on forward-thinking taxation policy.  It’s a cornerstone to providing economic competitiveness which is critical to support good paying jobs for Canadians and encourage entrepreneurship.

 

For example, with the United States threatening significant tariffs and economic inducing tax changes, Canada will need to think both long-term and short-term in a hurry in order to compete.  Costly and shallow GST / HST holidays and cash handouts are not the answer.  Instead, those types of measures are simple and ugly politics that provide no long-term benefits to Canadians.

 

This Christmas, I mean Tax-mas, let’s give ourselves the gift of knowledge. By committing to financial literacy and demanding better policies, we can ensure that Canada thrives—not just for today, but for the generations yet to come. 

 

Let’s plant those acorns together.

 

One Comment About Leadership – The Importance For Leaders To Plant Acorns

 

In the November 20, 2024 edition of my 1-1-1 Newsletter, I referenced a quote that one of sons pointed out to me: Society grows great when old men plant trees whose shade they know they shall never sit in.

 

I like that saying a lot. I’ve since used a similar analogy in my recent taxation writings about the importance of “planting acorns” when it comes to implementing good taxation policies for our country.  You see, the tiny acorn – given proper growing conditions – can flourish over time into the mighty oak tree.  The oak tree can survive hundreds of years providing great shade and comfort for many other life forms.  It can also produce thousands of acorns which can, over time, produce forests of oak trees.  And when its life is over, its hardwood can be used for many purposes such as building houses or furniture.

 

Combine the “old men” quote and the acorn analogy and I think there is lots there for leaders to think about.  While your day-to-day leadership activities are critically important, like ensuring your organization is profitable, so too are activities that are focused on the long-term success of the organization such as building a positive and sustainable culture and ensuring the vision of the organization is appropriate.

 

In my experience, I find too many leaders that are focused on the short term, like immediate “wins” such as sales and profits.  Again, this is important but sooner or later continued focus on only short term “wins” will come at a longer term cost.  Will the organization survive without you?  If it can’t, it’s time to start planting acorns.

 

Leaders, are you planting acorns?

 

One Comment About Economics: The GST / HST Holiday / Cash Handouts Could Mean Higher Interest Rates for Mortgage Holders

 

An article in the Financial Post last week was a good reminder on how increased government spending – such as the $6 billion GST / HST holiday and proposed cash handouts – can impact everyday Canadians such as mortgage holders.

 

From the article:

 

Regardless, more spending means higher inflation and deficits, other things equal. And that’s not music to the bond market’s ears. It gives investors a little more reason to sell Canadian bonds, which raises interest rates. While we may not see it manifested in bond yields today — given the higher impact catalysts currently weighing on the bonds — rest assured, we’ll see the effects later.

 

The most relevant effect from a mortgage borrower’s perspective is higher rates. If you’re in a variable mortgage, for example, Ottawa’s new handouts could pick your pocket in 2025.

 

“With governments injecting more stimulus, the Bank of Canada can do a little less,” said TD in a report Wednesday. As a result, “We have removed a quarter-point cut from the forecast” for the central bank’s overnight rate, it says. “We are prepared to remove another rate cut from the profile if households spend a greater share of their rebates and tariff threats recede.”

 

That innocent looking quarter-point translates to an extra $700 in yearly interest on an average $300,000 mortgage. So while our government’s playing Robin Hood with borrowed money, homeowners are getting stuck with a bill that makes their stimulus cheque look like dinner money.

 

“We know people are under pressure. This is there to help them,” the Prime Minister argues. But that’s like helping someone put out a fire with gasoline. For Canadians with a mortgage, Trudeau is helping lenders collect extra interest more than he’s helping struggling homeowners. And there’s a long pattern of such backfiring stimulus.

 

Very good points.  Canadians, we need to demand better leadership. Our economic futures depend on it.

 

Bonus Comment – Quote From A Chinese Proverb  –– About Planting Acorns

 

“The best time to plant a tree was 20 years ago. The second-best time is now.”

 

Yep, totally agree.  Leaders, are you planting acorns?

 

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