Supporting Growth, Restoring Confidence: A Shadow Federal Budget for 2020

Abstract

Early 2020 presents Canada with two challenges: amenic economic growth, and nervousness about the federal government’s fiscal stewardship. The C.D. Howe Institute’s Shadow Federal Budget for 2020 addresses both. It contains a number of measures to improve the rewards from work, saving and investment – initiatives that will support near-term spending and job creation, and raise Canada's growth prospects and opportunities over time. It also contains measures that will enhance the efficiency of federal revenue collection, control spending, and eliminate federal government borrowing by the end of the projection period – initiatives that will give Canadians confidence in their national finances. Highlights of the 2020 Shadow Budget’s measures to support economic growth are changes to personal and corporate income taxes that will encourage talent and investment, elimination of distorting taxes and border frictions, more focused infrastructure investments, and measures to support Canada’s labour market. The Shadow Budget would foster opportunity and well-being by supporting saving for, and income in, retirement, establishing more generous treatment for medical expenses, supporting charitable giving, and implementing a more growth-friendly strategy to reduce greenhouse gas emissions with a new GST rate on motive fuels. It would further support fiscal sustainability through new regimes for federal estimates, federal employee pensions and compensation, levelling the playing field for taxation of digital services, and rationalizing ineffective tax expenditures. The result is a fiscal framework that will support growth now and in the future, and let Canadians work, save and invest with confidence, knowing that the federal government is dealing successfully with the country's longer-term challenges.