Canadian Legislative Issues
Federal Budget a Wait-and-See Affair
Even in the run-up to what is normally a marquee policy-unveiling event for the federal government, expectations had been ratcheted down as the Finance Minister crafted a largely stay-the-course budget document. Predicted large-scale personal and business tax changes were nowhere to be found in the government’s second fiscal plan, as Minister Bill Morneau adopted a wait-and-see attitude given the high degree of policy uncertainty coming from south of the border.
On taxes, a high-profile review of so-called "tax expenditures" yielded very little in the way of policy movements in this budget. These expenditures are the deductions available to individuals and businesses that riddle the tax code with complexity and together cost the federal treasury, by some estimates, up to $100 billion per year. Each deduction has a targeted constituency of beneficiaries, though taken together they cost the taxpayer billions and provide lifelong employment for accountants and lawyers. It was expected the government would take an ax to many such deductions, but in the end, the Minister wielded a scalpel, making tiny and highly technical changes to taxes. These small changes won't be noticed by 99 percent of taxpayers, and therefore will create minimal political blowback.
On spending, the document offered little more than a re-announcement of the government’s 2016 budget, with very little in the way of new program spending. And the government offered fewer details than anticipated on its flagship $100 billion infrastructure plan over the next decade, as it struggles to get promised money out the door on high-profile building projects.
In Ottawa, caution is the order of the day as the Trudeau government holds its fire while it awaits some form of policy direction from Washington. Recent weeks have cast a pall even on that conservative strategy, as the still-new President struggles to enact his own agenda. All Canadian governments make policy with one eye on Washington, but in today’s context, this is truer than ever.
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