Canada: Sabrina Maddeaux: Inflation tax pays for big Liberal government while regular Canadians fall behind

COMMENTARY: The danger of the fading middle-class dream

  COMMENTARY: The danger of the fading middle-class dream For too many Canadians who followed the rules and got life right, the middle-class dream is dying, Darrell Bricker and Mike Colledge write. How did it all go so wrong? The middle-class dream. We believe it’s what you get when you follow the rules and get life right. Doing this, we were told by our parents, our teachers and all those who claimed to know what was good for us, will provide a stable, successful career running through to a comfortable retirement. It would also give us the feature asset of any middle-class dream: owning your own middle-class home. Not just any home.

On first glance, for the average Canadian worker, last week’s 2022 federal budget looks pretty innocuous — perhaps even like a good deal. There are no new income taxes for anyone but the wealthiest Canadians, or plans to tax the sale of principal residences. There’s no new sales tax or gas tax.

Regular Canadians have been hit with an inflation that helps to pay for big government, but leaves them behind. © Provided by National Post Regular Canadians have been hit with an inflation that helps to pay for big government, but leaves them behind.

In fact, there are an abundance of tax exemptions and credits for everything from buying a first home, to renovating a home and surrogacy. In addition, there are big new programs on the horizon, like cheap childcare and means-tested dental care.

COMMENTARY: The danger of the fading middle-class dream

  COMMENTARY: The danger of the fading middle-class dream Mushrooms are capable of talking to each other and even have a language that is more complex than English.

However, the 2022 budget contains a de facto hidden tax on working Canadians: inflation. The Liberals’ choice to mostly ignore inflation — and perhaps make it worse via big spending — will not only cancel out any savings average Canadians see from tax credits or big public programs, but actively make life in this country more unaffordable for everyone but the richest of the rich.

The message Justin Trudeau’s Liberals want Canadians to hear is this: we care about affordability. Moreover, they want voters to believe they’re concerned about skyrocketing wealth inequality.

The budget has an entire section on tax fairness that begins by saying, “An economy that works for everyone is an economy where everyone plays by the same set of rules.” In it are plans for a minimum tax on the wealthiest one per cent, to close tax loopholes and to improve the CRA’s ability to investigate high-net-worth individuals.

Kris Jenner shows off stunning new hairstyle after years of sporting pixie cut

  Kris Jenner shows off stunning new hairstyle after years of sporting pixie cut Kris Jenner shows off stunning new hairstyle after years of sporting pixie cut

As long as inflation continues to accelerate, these measures will have approximately zero impact on wealth inequality. A minimum income tax on the one per cent is a joke when the government knows the wealthiest Canadians don’t make most of their money from income.

They earn it from assets –– assets that are appreciating at a wild rate thanks to unchecked asset inflation. Ensuring they pay a minimum 15 per cent tax instead of 10 per cent, or even five per cent, won’t do much when assets like real estate are seeing double-digit gains each year. Likewise, allowing average workers to save a tax-free $8,000 a year or sending renters a one-time $500 cheque is laughable as asset inflation renders affordable housing a relic of the past.

We were assured that consumer price inflation, which Canadians deal with day-to-day on food, power, shelter, furniture and transportation, was “transitory,” but it’s now clearly here to stay awhile and will continue to devalue salaries and savings. With consumer inflation now exceeding five per cent, a worker who receives a five per cent pay raise this year will in effect be getting a pay cut.

John Ivison: What's the difference between a Liberal and a New Democrat these days? Accountability

  John Ivison: What's the difference between a Liberal and a New Democrat these days? Accountability Question Period in the House of Commons is the longest running farce in Canadian history but the slapstick hit new highs this week when NDP Leader Jagmeet Singh questioned Prime Minister Justin Trudeau on the contents of the impending budget. Will the government commit to the housing and dental-care policies the NDP has been championing, Singh asked, wide-eyed. In characteristic fashion, Trudeau didn’t answer, beyond the usual blather about “having Canadians’ backs.” But he didn’t need to. Singh knew the answers because, as he revealed at his press conference earlier in the day, he’d already been briefed about much of the budget’s contents.

Yet the Liberals have no clear answer for either asset or consumer inflation. Rather, they continue to pump fresh spending into an already overheated economy, which could make things much worse, for much longer, even as the Bank of Canada is expected to announce an aggressive interest rate hike Wednesday.

The great irony is that much of this new spending is funded by inflation itself. The federal government had a revenue windfall thanks to rising oil prices, along with increased tax income from rising consumer prices and corporate profits. The government also has an easier time paying back its debt when inflation soars and interest rates remain low, because they pay their debts back in dollars worth less than the dollars they originally borrowed.

Meanwhile, average Canadians will pay a higher portion of their real income in taxes. Your $50,000 salary now may only be worth $47,000 in today’s dollars, but you will still pay the same taxes as your quality of life and purchasing power deteriorates. You will also pay more sales tax to government coffers on account of higher consumer prices.

This is why inflation can be just as detrimental to a worker’s wallet as a significant income or sales tax hike. It also puts Canadians at serious economic risk. Historically, runaway inflation has always been followed by a recession, if not a depression. The bubble always bursts.

While big companies tend to get bailouts, it’s average workers who lose their jobs en masse and default on loans. This is true when either consumer inflation or asset inflation exists on its own, but, when combined, the potential downside becomes even more dangerous. This is what occurred with the Great Inflation of the 70s, followed by the devastating early 80s recession.

Every economy has winners and losers. In an inflationary environment, governments and the wealthy win, while average people lose. The 2022 budget is cloaked in the language of affordability and equality, but its reality positions Canadian workers to not only be transitory losers, but permanent ones.

Roughly one-third of Liberal cabinet ministers own rental, investment real estate: records .
While fully legal, real estate experts say the holdings reflect the degree to which Canadians increasingly view real estate as a financial asset, rather than a place to live. It also comes as recent data from Canadian financial institutions has demonstrated the growing role of investors in fuelling price growth — a trend Deputy Prime Minister and Finance Minister Chrystia Freeland billed this week as an issue of "intergenerational injustice.

See also