One Comment About Taxation – Canada’s Federal Spending is Out of Control and It’s Only a Matter of Time Before There’s New Taxes

 

Canada’s population has grown from 35,871,484 at the end of Q1 2016 to 41,528,680 at the end of Q1 2025.  That’s an increase in population of 5,657,196 – 15.8% – during that 9-year period.  Given that, one would expect the federal government expenditures to increase over that time period as well.  Although population growth is not perfectly correlated to expenditure growth (political ideology / spending commitments, rising interest rates, inflation and public sector wages are better correlated) it’s a decent metric to start.  So, when the federal government’s 2025-2026 Expenditure Plan was released last week, I had a peek at the growth of such expenditures over the last 9 years and the estimated year to come.

 

Ten years ago, federal government expenditures were $250.1 billion.  It’s increased dramatically and is estimated to be $486.9 billion for the 2025-26 year; an increase of $236.8 billion or a 94.7% increase in 10 years.  And 8.4% growth from 2024-2025.  That is incredible growth that has far exceeded population growth and once again shown that other factors – such as political ideology – have a far greater influence on government expenditure growth. Our federal government has long had an infatuation with spending.

 

The 2025-2026 Expenditure estimates are a bit of a dense read with few details provided.  And the accounting methodologies deployed are not obvious.

 

For example, when I read the estimates, it appeared as if the Canada Revenue Agency was going to have a $10.38 billion decrease in its current budget or a 50% decrease from the prior year.  “Wow, finally a step in the right direction”, I thought.  “Perhaps the government is finally going to reduce some of the obvious bloat”.  But I was suspicious.  There was no way the CRA would have a 50% budget reduction.  With the help of some excellent colleagues, we discovered that the CRA’s budget numbers include the amounts distributed as rebates for the consumer carbon tax.  With the carbon tax now at 0%, such amounts will not be applicable for the upcoming year.  When those amounts are removed from the CRA’s budget amounts, it turns out that the CRA’s actual budget for the current fiscal year is pretty much the same as the previous year.  Why the rebates are part of the CRA’s budget amounts is puzzling to me.

 

The message here is that you can’t accept presented numbers as gospel truth since there are many instances when what you see is not reality. Thus, the importance of presenting a full budget. It is critically important for transparency and accountability.  The same applies to the plan by the Carney government to separate the “operating budget” from the “capital budget”.  Such separation might present some useful information but that kind of exercise is an old accounting trick deployed by many governments historically to mask overall spending.

 

The growth in federal revenues has not kept pace with our country’s growing federal expenditures, including debt charges on our growing federal debt.  When such expenditures exceed revenues, there is a deficit.  Any deficit increases our overall debt.  And with increasing debt comes increased public debt charges.  It’s simple mathematics.

 

Using a simple analogy, if your household expenditures exceed your income sources, then you are going to have to borrow money to pay for such expenditures.  If your borrowing source is, say, your credit card, then your balance continue to grow.  And your interest charges on the credit card debt continues to grow as well. Not a pretty picture.  When the credit card debt eventually gets to be too much to handle, then you will need to cut household expenditures or increase income sources to pay down the debt.  Likely you’ll need to do both.  With governments, situations need to become pretty dire for governments to take action since they are often worried about the political risks associated with expenditure cuts and / or tax increases.  In the meantime, they’ll use many comparative figures, often comparing such figures with other countries, to justify their growing debt.

 

When government spending is structurally misaligned with revenues, it’s only a matter of time before taxation policy will be asked to play a greater role.  And in this context, I mean the introduction of new taxes. This could be a number of initiatives including increased personal and corporate tax rates (which would be a disaster and would add to an already highly uncompetitive landscape on this front), increased GST / HST, new carbon taxes, the introduction of a wealth tax, a home equity tax, taxation on unrealized capital gains or a number of other more targeted ideas (excess profits taxes on certain industries, increased taxation on capital gains notwithstanding this 2024 proposal was recently abandoned, etc).

 

What we need – as many including me, have asked for – is comprehensive tax reform.  Not just an “expert review” of the corporate tax system that the Liberal Party promised during the late stages of the recent election campaign.  With all the chaos that our country is facing, it is critically important that our country’s finances are managed appropriately.  Combine tax reform with significant and meaningful expenditure cuts, a commitment to increased transparency and accountability (which a budget is a must for this) and measures to unleash the power of our country’s resources and entrepreneurs and that’s a good recipe.

 

Former U.S. Treasury Secretary William Simon once said, “The nation should have a tax system that looks like someone designed it on purpose.” That quote resonates deeply in today’s environment. Canada doesn’t just need marginal tax rate tweaks or partisan half-measures. We need a purposeful, principled overhaul of our tax system – grounded in simplicity, competitiveness, and fairness – paired with meaningful spending restraint / cuts and full transparency. Combine that with a renewed confidence in our nation’s entrepreneurs and resource builders, and we can finally plant the acorns of good policy – ones that will grow into the oak tree of a proud, prosperous, and sustainable country.

 

One Comment About Leadership – Leaders, Have the Courage to “Speak Up”

 

I’m the current Chair and a founding board member of the Aristotle Foundation—a Canadian think tank formed four years ago and a registered charity for just over two. It was launched by a group of concerned leaders, led by our energetic and sharp President, Mark Milke, who saw a worrying rise in anti-Canada sentiment.

 

Founded to restore common-sense discourse in Canada, the Foundation delivers its work through books, videos, fact sheets, studies, columns, interviews, and infographics—leveraging every traditional and modern medium available. Our tagline says it all: Championing Reason, Democracy, and Civilization.

 

Some might call the topics we tackle “controversial.” I don’t. To me, and to the Foundation, they’re just common sense. We’re pushing back against the anti-reality narrative that’s become far too dominant in public discourse, particularly among the content our youth consume.

 

It takes courage to push back and speak out. For me, being involved with Aristotle is a natural extension of who I am. Behind my desk hangs a framed reminder of my core leadership DNA:

 

“My unique ability is being a loyal, transparent and honest intellectual rebel who morally does the right thing. My passion to lead, teach and never settle is a powerful combination given my ongoing desire to contribute to the tax landscape and seek/speak the truth. I am an inspirational example for those around me to continuously grow.”

 

If you know me, you know I’m outspoken on topics where I have expertise—or where common sense is being hijacked. I often get private notes saying, “Thanks for speaking out…I wish I could but I can’t.” And in some cases, I get it. The cost of speaking up might be too high.

 

I often get criticized for speaking out and that’s ok too since we should be able to respectfully debate.  If it’s a personal attack, though, I won’t engage. Unfortunately, in this day and age of “keyboard warriors”, there’s no shortage of personal attacks.

 

But for many, especially those in leadership roles, the barrier is simply a lack of courage. And that’s unacceptable. The people you lead want you to stand for something real – not the latest ideological fad like the misguided obsession with “diversity, equity, and inclusion.” They want to know you won’t tolerate abuse, harassment, or hate in any form.

 

So, here’s the message: leaders, grab some courage. Speak out for what is right. Your team – most of them- will thank you for it.

 

In the meantime, check out Aristotle…we’re working hard!

 

One Comment About Economics – Canada’s Projected GDP Growth

 

On Monday, June 2, 2025, the Opposition Parties were able to pass a motion urging the government to present an economic update or budget before Parliament recesses for the summer.  The motion stated the following:

 

“and we urge Your Majesty’s advisors to include a firm commitment to present to Parliament an economic update or budget this spring, before the House adjourns for the summer, that incorporates measures aimed at unleashing Canada’s economic potential, including full accountability of Canada’s finances, with respect for the areas of jurisdiction and the institutions of Quebec and the provinces, as well as Indigenous peoples”.

 

I’m sure the governing Liberal Party was not amused with the above motion passing especially given their first statement was that they would not introduce a budget this year and then later PM backtracked stating that a “comprehensive plan” would be introduced later this fall.

 

While some in the media and Liberal Party are already musing that the motion is not binding, such an immediate statement is disingenuous.  Parliament has spoken. Dismissing this as non-binding undermines democratic accountability. Any attempt to obfuscate Parliament should not be acceptable.

 

The release of a budget should be of prime importance, especially given the poor performance of the Canadian economy for quite some time and the chaos that we’re currently experiencing.  Combine that with an OECD Economic Outlook report just released yesterday that doesn’t bode well for Canada.  The OECD report said the following: “Canadian GDP growth is projected to fall from 1.5% in 2024 to 1.0% in 2025 and 1.1% in 2026. In both economies, a sizeable price level change is projected, with inflation anticipated to spike in mid-2025 before moderating towards target over time.”

 

These projections are worrisome given that Canada is at the bottom of the pack comparatively.  The OECD World average GDP growth for 2025 is 2.9% and the same 2.9% for 2026.

 

While US tariff threats are certainly one of the causes for concern, Canada has long had a GDP problem.  It starts with getting government spending in control and its related debt reduced.  Good taxation policies – vis-à-vis tax reform – would also be very helpful.  And, as stated in the taxation section above, enabling our country’s great entrepreneurs to unleash their power would be awesome.

 

Enough delay.  Canadians deserve a real plan.  Now.

 

Bonus Comment – Quote From Former U.S. Senator – John McCain – About Being Courageous

 

“Courage is not the absence of fear but the capacity for action despite our fears.”

 

Absolutely agree! Leaders, be courageous to do and say the “right thing”!

 

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.