One Comment About Taxation – Canadians Need Improved Financial Literacy Skills

 

One of the most important bodies of knowledge and skills that people will need to learn to make basic life decisions is the material that encompasses financial literacy.  What is financial literacy?  The government of Canada states that financial literacy is having the knowledge, skills and confidence to make responsible financial decisions. I think that’s a decent general definition. 

 

While the government of Canada, and other countries around the world, state that financial literacy is critical to the prosperity and financial well-being of its citizens, in practice not much has been done to ensure that the average Canadian is well informed and educated about financial matters or to help improve their skills.  

 

For example, our primary K-12 schooling pays lip service, in my opinion, to helping youngsters improve their basic financial knowledge and skills.  My four sons, now adults, all went through grade 12 in the last 10 years.  Not one of them was required to take a legitimate financial literacy course that taught them the basics of economics, finance, taxation, the power of savings, the “rule of 72”, how governments create spending laws that directly affects their pocketbooks, what inflation is and the causes of it, etc.  

 

Post-secondary education is also poor at providing financial literacy education.  I’ve often stated that many of the professional programs outside of accounting and finance (which indeed provide decent courses and training) such as medicine, law, engineering, nursing and all of the trades should have mandatory financial literacy training as part of their programs.  

 

Before some eager readers write to me and disagree with me that their sons / daughters took such courses, I’m not talking about the lame “career and life management” courses that are offered throughout high school in Alberta and other provinces.  I’m talking about rigorous courses that provide hands-on tools and skills that can last a lifetime to assist such youngsters to make good and informed financial choices.  And to assist them with assessing how their governments (all levels – federal, provincial and municipal) and elected officials are spending the taxation dollars taken out of their paycheques so as to help make better and more informed choices when showing up at the ballot box instead of simply relying on “feelings” or what the media is shoving down their throats.  

 

For example, our current federal government has been running deficits ever since it took office.  It saw no issues in doing so.  During the COVID years, such spending and deficits dramatically increased.  When questioned about how such increased spending might affect future carrying costs on the increased debt, our PM responded to the reporter’s question by saying “…interest rates are at a historic low, Glen”. A shallow and poor response.  However, many Canadians – especially partisan political ones – cheered on such a response by the PM.  Well, four years later, such reporter’s concern and question (along with a whole bunch of other Canadians) was very well founded. Such concerns have since transmitted into a dramatic cost of living increase felt by most with many of them struggling mightily to make ends meet.

 

Some examples of poor financial literacy show up in our elected officials almost daily.  Famous examples from our Prime Minister include “budgets balance themselves” nonsense and “you’ll forgive me if I don’t think about monetary policy” comments.  Reasonable Canadians should be offended and shocked by displays of poor financial literacy by our head of state.

 

Financial literacy should include a basic understanding of taxation.  Why?  Well, as I’ve written about before, for most, taxes are by far the largest annual expense that they pay. The average Canadian family spends more of its annual income on taxes — 45.3 per cent — than they do on basic necessities such as food, clothing and shelter combined (35.6 per cent), according to a recent Fraser Institute study.  

 

Last week, the federal Minister of Justice and the Attorney General of Canada, Arif Virani, released a video about the capital gains inclusion rate proposal.  It was embarrassing.  In the video, the Minister displayed a shocking misunderstanding of his government’s proposal.  In the video he stated that there was no capital gains realized if cottage properties are transferred within a person’s family.  That is simply false.  There were a number of other errors in the video such as miscalculations and inappropriate comparisons to how certain U.S. States tax capital gains.  

 

While I’m sure there were no ill intentions with the video, it is outright embarrassing that one of the most senior members of our federal government – who has had 3 full months to absorb the capital gains proposal since its release – would produce a video with such falsehoods.  There was a day and age where displaying such lack of knowledge would be highly embarrassing and may have even led to a resignation of such an important office but today such videos are simply taken down – which this one indeed was – with the hope that it will soon be forgotten.  

 

Unfortunately, the average Canadian cannot simply forget about how to pay for basic necessities when such costs continue to escalate.  Instead, a good path forward for all Canadians and its related institutions is to improve their financial literacy.  

 

As the early 20th century economist and entrepreneur, Roger Babson once stated: “More people should learn to tell their dollars where to go instead of asking them where they went”.  

 

I agree.  Improved financial literacy is a key to improving Canada’s future.  It starts with every single Canadian…young and old.  Such improved education will lead to better overall choices including our country’s taxation and economic policies since the average Canadian will be in a much better position to assess the appropriateness of the policies being put forward and how it will ultimately impact them and their children’s futures.  

 

It’s time for significant improvement in making financial literacy a core component of our country’s education systems.  

 

One Comment About Leadership – Good Leaders Are Optimistic

 

Have you ever known a person who is “glass half-empty” rather than “glass half-full”?  And are such persons in a position of leadership?  I’ve known many over the years.  They often consider themselves “realists”.  In other words, they often think they are being realistic about a situation which, in their opinion, is better than being too optimistic or naïve. 

 

I agree that leaders need to be realistic about the challenges they face.  But that doesn’t mean they need to constantly be negative about it.  I find dealing with such people exhausting and draining. In other words, I get no energy from being around such people and instead am often finding ways to distance myself from them quickly.  

 

Instead, I prefer to hang around leaders – and be that leader – that is always finding opportunity in challenges, being optimistic about such challenges (but also realistic) and looking for creative alternatives.  There IS that balance.  

 

Being an optimistic leader provides hope and energy to those you lead and who look up to you to provide mentorship and roadmaps. Be that leader. 

 

One Comment About Economics: What Does the Picture Look Like For Canada’s Economic Future?

 

Do you ever get confused by the flurry of conflicting economic predictions for the future?  I certainly do.  

 

Just this last week, for example, there was a newspaper report about Canada’s sagging economy due to consumers holding the line on spending because of high interest rates and inflation.  And there was another report issued by The Fraser Institute earlier this year that showed that “Canadians have been getting poorer relative to residents of other countries in the OECD. From 2002 to 2014, Canadian income growth as measured by GDP per capita roughly kept pace with the rest of the OECD. From 2014 to 2022, however, Canada’s position declined sharply, ranking third- lowest among 30 countries for average growth over the period”.  The Fraser Institute report goes on to predict that Canada’s average annual growth rate for GDP per capita (0.78%) will be the lowest among 30 OECD countries for the next 36 years to 2060.  And, of course, there was the Bank of Canada’s blunt comments about Canada’s significant productivity problem in March of this year.  Overall, not good.

 

And then last week, there were newspaper reports about the International Monetary Fund issuing a report that predicts Canada will be the fastest growing economy among the G7 in 2025.  The IMF predicts real GDP growth for Canada at 1.3% for 2024 and 2.4% for 2025.  This had many Liberal Party government MPs and their partisan supporters crowing that their economic “plans” are working! 

 

So, who do you believe?  You have a number of bodies that show historical data about Canada’s poor economic performance and poor predictions for the future.  And then you have the IMF that boldly predicts that Canada will somehow be a top performer in the world?  

 

Frankly, I hope the IMF is right.  But, sadly, I don’t hold such reports in high regard notwithstanding that I’m not an economist nor a statistician nor am I very good at predicting the future.  My crystal ball skills are still pretty fuzzy.  

 

What I am good at, however, is reading the room.  In Canada’s “room”, here’s what I’m seeing:

• A lot of successful Canadians leaving Canada;
• A lot of average Canadians struggling to pay their bills;
• Many Canadians worrying about their pending mortgage renewal; and
• Extreme frustration amongst average Canadians about high tax rates and a proliferation of income redistribution schemes over the years.

 

Again, while I truly hope the IMF is right about their predictions, their report seems rather optimistic and unrealistic given Canadians’ struggles and huge increases in population (in other words, I’d like to understand if their GDP growth predictions are adjusted for population growth…it doesn’t appear so but I’m happy to be corrected).

 

In any event, if you’re like me, be wary of outlier reports that tend to go against the predictive norm.  Statistics and predictions can easily be manipulated and it’s up to all of us to be skeptical and realistic.  

 

Bonus Comment – Quote From Nicholas M Butler – American Philosopher, Diplomat and Educator – About Optimism

 

“Optimism is the foundation of courage”.

 

Absolutely.  Without courage, leaders don’t exist.  And it starts with optimism.  Leaders, are you doing your best to be optimistic?

 

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