By Andy Wei | Markville Secondary School
Extravagant spending promises. Looming structural deficits. Drastic intergenerational inequity.
Unfortunately, these have all become accepted and practiced as fundamental, inherent aspects of how the Canadian government operates at all levels— and it’s time for someone to stand up for what’s right. Youth across Canada need to hold the government accountable for their unchecked fiscal irresponsibility and protect themselves from unscrupulous intergenerational theft.
Canada’s shifting demographics—particularly the declining birth rate, increasing lifespans, and an aging population—are projected to manifest a precarious fiscal reality in the near future.
According to research from the C.D. Howe Institute, the remaining lifetime net tax burdens (the difference between taxes paid and transfers received) for anyone born before 1957 is negative. As baby boomers age, the demand for age-sensitive services, like healthcare and Old Age Security, will increase exponentially. At the same time, their retirement engenders a shrinking taxable population, putting a further fiscal strain on a speculative government. Someone born in 1947 is estimated to have a remaining lifetime net tax burden of negative $148,100 under the baseline scenario or negative $208 700 if health spending increases at its historical rate (Mahboubi, 2019).
In light of this, Canadian governments have continued to blindly and unwaveringly pursue an agenda of increasingly excessive program spending, “expanding self-serving entitlements and not bothering to pay for it” (My Tax Burden, n.d.). As federal government revenue climbed from $279 billion to $332 billion from 2015 to 2019, federal government expenditures have increased even more from $256 billion to $323 billion.
To “pay” for these expanding services, the federal government has run structural budget deficits every year since 2008 (Department of Finance Canada, 2019) and plans to continue this trend until at least 2040, with the conservative assumption of no new services (Press, 2018). The outcome of this “spend and borrow spree” is the relentless growth of Canada’s public debt, which currently towers at $2.7 trillion compared to $837 billion in 2008. In 2019, $23 billion taxpayer (and borrowed) dollars, or 7% of government revenues, were lost just to service the federal debt (Department of Finance Canada, 2019).
Adding to the public debt is an unethical method for politicians to finance expensive promises beyond their means by deferring the costs to future generations, quashing intergenerational fairness and equity. The federal government foots the bill for current services to Canada’s youth and future generations— those under- or un-represented in the voting populace. In essence, Canada’s nascent and unborn generations are facing “taxation without representation,” forced to shoulder an overbearing fiscal burden. Future generations must pay for the costs of services they did not receive and ever-larger interest payments, which cut into their transfers. Under the baseline scenario, the lifetime net tax burden of someone born in 2017 is $736,919 compared to merely $27,805 for someone born in 1977.
The lifetime net tax burdens of newborn and future generations are projected to be “higher than that of any living generations,” indicating severe unsustainability (Mahboubi, 2019).
History has proven that the most effective method to reduce debt starts with eliminating deficits through decreased and constrained program spending. When Jean Chrétien was elected in 1993, federal finances were so dismal that “almost one in every three dollars collected by the federal government was spent on interest costs.” Upon closer examination, the large deficits, debt, and interest payments are strikingly similar to Canada’s current reality. By reducing program spending by 10% over two years and constraining program spending for the following three years, the Chrétien government ran budget surpluses that drastically reduced federal debt. “This combination of balanced budgets, declining debt, smarter and smaller government spending, and competitive taxes, (…) laid the foundation for more than a decade of economic prosperity” (Clemens et al., 2018). Today, Chrétien has cemented himself in Canada’s history for the largest inflation-adjusted percentage decrease in debt per-person over a Prime Ministerial tenure without a world war or economic downturn (Lammam et al., 2019).
Now more than ever, reducing and constraining program spending, especially on age-sensitive services, will be key to maintaining control of government debt. Under the baseline scenario, the per capita lifetime tax burden discrepancy between newborn and future generations is $103,000 in favour of future generations. However, if healthcare spending grows at the historical rate of 3.3%, future generations will shoulder the increased taxes without seeing improvements in services, illustrated by a massive $2.7 million lifetime tax burden discrepancy in favour of newborns (Mahboubi, 2019).
During periods of economic growth, it makes economic sense for the government to constrain or reduce spending, running a budget surplus to pay for previous deficits. However, Canada’s government relentlessly continues to run budget deficits for personal political gain at the expense of young and future Canadians. Although politically unpopular, the federal government should switch to a cyclically balanced budget; failure to do so has worsened Canada’s economic outlook. The major credit rating agency Fitch has warned Ottawa that sustained deficits and debt are exceptionally high, nearing “a level that is incompatible with ‘AAA’ status” (Gibillini, 2019). Even without cuts in spending, Canada’s federal government can still run surpluses as long as it slows the growth rate in spending (Smith, 2019). With budget surpluses, Canada’s governments can repay debt and reduce interest costs, sustainably increase long-term program spending, and sustainably enact tax relief (Clemens et al., 2018).
Furthermore, enlarging the employed population through policies that foster higher immigration rates, longer working lives, greater participation rates, and improved job outcomes for youth, women, and immigrants will foster a larger taxable population that reduces the average lifetime net tax burden for all Canadians. Under a medium-growth population model, the combined lifetime net tax burden of a newborn and future Canadian is only $1.1 million compared to $1.4 million in the baseline scenario (Mahboubi, 2019). The median age of Canadian immigrants who arrived between 2011 to 2016 is 32.5 (Statistics Canada, 2019), which means they have positive remaining lifetime net tax burdens (Mahboubi, 2019).
It’s time to put an end to the irresponsible and unaccountable government. Young Canadians must stand up for themselves and future Canadians to protect their fundamental right to intergenerational fairness; governments of all levels should return to cyclically balanced budgets, establish concrete plans to reduce public debt, and put an end to their reckless fiscal behaviours.
Through effective fiscal, immigration, labour, and other policies, Canada’s governments can ensure a sustainable and equitable Canada for generations to come.
Written and submitted by Andy Wei from Markville Secondary School
Winner of the MyTaxBurden Student Essay Contest (Highschool)