The Liberals Unveil Their Budget 2022!
Welcome, everyone, to our first annual Budget Day celebrations! At precisely 4:10pm on April 7th, Deputy Prime Minister and Finance Minister Chrystia Freeland unveiled the Liberal government’s budget for 2022-23. You can find the 2022 Budget Document in its entirety here. Without further ado, let’s explore what’s in it:
Economic Context
Minister Freeland cited job recovery (112% of jobs recovered since onset of pandemic), real GDP growth (6.7%), and fiscal guardrail recovery (unemployment rate, employment rate, actual hours worked) as indicators that Canada is performing on par or better than it’s fellow G7 members.
Predictions that Canada’s role as commodity producer and relative minor trade relations with Russia will prevent Canada from feeling the full effects of any financial crunches emanating from the war in Ukraine. Canada’s ability to produce commodities that are in short supply could benefit Canada.
Inflation isn’t going anywhere anytime soon. Higher prices for food, energy, and other commodities driven by Russia’s invasion and a resurgence of Covid in China that has caused lockdowns and another disruption of global manufacturing supply chains have ensured that any definitive outlooks on inflation probably shouldn’t be trusted. It could be a while.
The federal government’s Covid supports have done their job, and it’s time to pivot. Broad measures are so last year, and instead, the government will focus on targeted investments to build economic capacity, prosperity, security, and resilience. These include investing in areas that could provide long-term growth and reviewing government spending to see if any funds can be saved or reallocated to be more efficient. I won’t lie, it’s nice to hear a government plan for success in a time where they may not be able to take credit for it. In my humble opinion, that’s what government is all about.
The Real Nitty Gritty:
-
• Finance Canada and the Canada Mortgage and Housing Corporation estimate Canada needs to build 3.5 million homes by 2031 to fill in the current gap and keep up with the needs of the population.
• Canada constructs roughly 200,000 housing units in a year (standalone houses, individual condos, etc.). In order to meet demand, that needs to be doubled (400,000 per year) over the next decade.
• Need a comprehensive plan that includes provincial, territorial, and municipal partnerships.
• Continuing initiatives through the National Housing Strategy.
• Incentivize cities and towns to build more houses. Committing $4 billion over five years to the Canada Mortgage and Housing Corporation to launch a brand-new Housing Accelerator Fund. The Fund will be available to towns and municipalities and will be flexible to their needs while targeting the building of 100,00 new housing units over the next five years.
• $750 million dollars in funding for municipal public transit. This funding is conditional on provincial and territorial governments matching it and accelerating their work with municipal governments to build more homes.
• Extending the Rapid Housing Initiative for a third time. Committing $1.5 billion over two years. Expected to build 6,000 new affordable housing units.
• Advance $2.9 billion dollars in funding for the National Housing Co-Investment Fund. This will speed up the creation of 4,300 new units and the repairing of up to 17,800 units for the most vulnerable Canadians.
• Reform the Rental Construction Financing Initiative’s affordability and energy efficiency requirements. The RCFI will target having at least 40% of the units provide rent equal to or lower than 80% of the average market rent in their community.
• $475 million dollars to provide a one-time $500 dollar payment to people facing housing affordability challenges. Not exactly the most practical form of help for homebuyers but more specifics are coming later. Hopefully?
• Working with partners across Yukon, the Northwest Territories, and Nunavut to provide $150 million dollars over two years to support affordable housing and related infrastructure in the North. ($60 million dollars for Nunavut, $60 million dollars for the Northwest Territories, and $30 million dollars for the Yukon territories.)
• $150 million over five years for Natural Resources Canada to develop the Canada Green Buildings Strategy. The Strategy will include initiatives to further drive building code reform, accelerating the implementation of performance-based national building codes, promoting the use of lower carbon construction materials, and increasing the climate resilience of existing buildings. An additional $200 million over five years for Natural Resources Canada to create the Deep Retrofit Accelerator Initiative in order to provide support for retrofit audits and project management for large projects to accelerate the pace of deep retrofits in Canada, with a focus on low-income affordable housing.
• It’s pretty clear that the government is placing an emphasis on enlarging the country’s housing supply while ensuring that doing so is also environmentally efficient.
• Implementing a Tax-Free First Home Savings Account that would function like RRSPs and TFSAs. Canadians could save up to $40,000 with contributions being tax-deductible. Withdrawals for the purpose of buying a first home would be tax-exempt.
• Double the First-Time Home Buyers’ Tax Credit from $5,000 to $10,000. Would be applied retroactively to January 1, 2022, and would provide up to $1,500 in direct support to home buyers.
• Investing in Rent-to-Own Projects by dedicating $200 million dollars under the Affordable Housing Innovation Fund. Includes $100 million dollars to support non-profit organizations, co-ops, developers, and rent-to-own companies that are building new rent-to-own units.
• Establishing a Home Buyers’ Bill of Rights in consultation with provinces and territories over the next year. This will involve ending blind bidding practices, ensuring a legal right to a home inspection, and ensuring transparency on sales prices history on title searches.
• New rules for property flippers. Anyone who sells property they have held for less than 12 months is to be considered “property flippers and will be expected to their full share of taxes on business income. There would be exemptions to protect Canadians in unique circumstances and would kick in at the start of next year.
-
• Hope to lure companies in the clean energy sector through the low corporate income tax rate. The federal-provincial-territorial tax rate for clean energy sector companies currently sits at 17.9%, the lowest in the G7.
• It estimates that to achieve a net-zero economy by 2050, Canada will need to invest between $125 million and $140 million dollars per year. That would be a 5-6x increase from our current yearly investments, or, in other words, impossible. By establishing a Canada Growth Fund, the government hopes to attract private investment to help reduce emissions and help achieve the set-out climate goals, diversify the economy and boost exports, and help restructure supply chains. The Fund will function at arms-length from the government and will be capitalized at $15 billion dollars over the initial next five years. Its goal will be to attract at least $3 dollars of private capital for every $1 dollar it invests itself.
• Creation of a federal innovation and investment agency that will be supported by $1 billion dollars over five years. More details to come after consultation throughout this year.
• Current federal tax rate for small business is 9% of their first $500,000 dollars of taxable income, compared to the general corporate tax rate of 15%. Once a business’ Canadian capital reaches $15 million, their tax rate jumps to the general rate. To make the transition easier for small businesses, the government proposes to make the phase out more gradual with the general rate being imposed once a business reaches $50 million dollars in taxable capital.
• Supporting critical minerals projects in Canada by devoting $1.5 billion dollars over seven years, beginning next year, for infrastructure investments that would help develop the necessary supply chains for critical minerals projects. Committing $79.2 million dollars over five years beginning this year for Natural Resources Canada to provide public access to data that informs critical mineral exploration and development. The government also proposes the introduction of a 30% Critical Mineral Exploration Tax Credit for specific mineral exploration expenses incurred in Canada. The tax credit would apply to exploration expenses targeted at nickel, lithium, cobalt, graphite, copper, rare earths elements, vanadium, tellurium, gallium, scandium, titanium, magnesium, zinc, platinum group metals, and uranium.
• The government hopes to make Canada’s supply chains more resilient. By committing $603.2 million dollars over five years to Transport Canada the government hopes to support supply chain projects through the National Trade Corridors Fund which is designed to ease the movement of goods across Canada’s transportation networks ($450 million over five years), develop industry-driven solutions that are data-driven to make our supply chains more efficient ($136.3 million over five years), and continue to make Canada’s supply chains competitive by eliminating unnecessary bureaucracy involved ($16.9 million over five years).
• Improve Canada’s semiconductor industry to try and avoid, or lessen the impacts of, any supply chain disruptions in this field.
• Introduce amendments that would modernize the Competition Act by closing loopholes, targeting practices that are harmful to workers and consumers, modernizing access to justice and penalties, and adapting the law to fit today’s digital reality.
• Build up Canada’s intellectual property regime. This will be done by providing $96.6 million over five years and $22.9 million each year after in order to: launch a new national lab-to-market platform to help grad students/researchers take their work to market through Innovation, Science, and Economic Development Canada ($47.8 million over five years; $20.1 million each year after); help Canadian businesses secure intellectual property in foreign markets through the CanExport program by Global Affairs Canada ($35 million over five years); launch a survey to assess the previous investments in science and research through Innovation, Science, and Economic Development Canada ($10.6 million over five years); expand the use of ExploreIP, Canada’s intellectual property marketplace, so more public sector intellectual property can be used to help Canadian businesses through Innovation, Science, and Economic Development Canada ($2.4 million over five years; $0.6 million every year after); and expand the Intellectual Property Legal Clinics Program through Innovation, Science, and Economic Development Canada to make it easier to access basic intellectual property services ($0.8 million over five years; $0.2 million every year after).
• The government also hopes to hire more leading researchers by boosting grant funding, expand our presence in space, continue to engage the cannabis sector, develop a high frequency rail between Toronto and Quebec City, assist the Prince Edward Island potato industry in their recovery from the spread of potato wart, support Canada’s tourism sector, and provide more funding to rural communities.
-
• Reduce emissions from on-road transportation. Introduce a sales mandate that would require 20% of new light-duty vehicle sales be zero-emission vehicles (ZEVs) by 2026, 60% by 2030, and 100% by 2035. A similar mandate would apply to medium- and heavy-duty vehicles (35% by 2030).
• They also hope to make switching to ZEVs more affordable by providing $1.7 billion dollars over five years to Transport Canada to extend the Incentives for Zero-Emission Vehicles that provide up-to-$5,000-dollar purchase incentives for ZEVs. They will also expand eligibility for the program to include vans, trucks, and SUVs. More details expected from Transport Canada soon.
• Building a stronger ZEV charging network. The Canada Infrastructure Bank will invest $500 million dollars into building large-scale urban and commercial ZEV charging and refuelling infrastructure. By giving $400 million over five years to Natural Resources Canada, the government hopes to fund the deployment of ZEV charging infrastructure in sub-urban and remote communities. Natural Resources Canada will receive a further $2.2 million dollars to renew the Greening Government Operations Fleet Program in order to continue to assess the readiness of federal buildings to facilitate the transition of the federal vehicle fleet to ZEVs.
• Providing funding for businesses to switch their commercial fleets to ZEVs and to help make Canadian agriculture environmentally sustainable.
• Creating a refundable investment tax credit for businesses that incur carbon capture, utilization, or storage (CCUS) expenses that meet a certain eligibility. The rate would be 60% for investments in equipment to capture CO2 in direct air capture projects, 50% for investment in equipment to capture CO2 in all other CCUS projects, and 37.5% for investment in equipment for transportation, storage, and use. These rates will be halved between 2031 and 2040 in an attempt to spur the industry to move quickly in lowering emissions.
• Provide funding to continue to develop clean energy sources.
• There are lots more interesting proposals included in the section of the budget, but I only included the ones that seemed the most eye-catching. I encourage anyone who’s read this far to also read the full chapter 3 from the budget document linked at the beginning of this article.
-
• Continuing with childcare. Affordable childcare will grow the economy, allow more women to enter the workforce, and give every Canadian child a great start in life. The federal government has signed deals with all territories and provinces on $10-a-day childcare and will continue to provide $625 million dollars over four years to Employment and Social Development Canada for an Early Learning and Child Care Infrastructure Fund that will enable provinces and territories to make other childcare investments such as building new facilities.
• $2.1 billion dollars over five years and $317.6 million each year after for Canada’s Immigration Levels Plan.
• Providing funding to make Canada’s immigration system more efficient and supportive, consult unions and trade associations, and continuing to transition workers towards a green economy.
• Expand the Foreign Credential Recognition Program to help up to 11,000 internationally trained health care professionals per year get their credentials recognized and find work in their field at a cost of $115 million over five years and $30 million each year after.
• Improve the Temporary Foreign Worker Program, review the Employment Equity Act in the coming months with a final report scheduled for fall 2022, and extend supports for seasonal workers.
-
• $8 billion dollars in new funding over the next five years for national defense to supplement already-enacted increases through Strong, Secure, Engaged.
• Implementing a defense policy review that would allow the government to update the existing Strong, Secure, Engaged policy by focusing on the size and capabilities of Canada’s Armed Forces, their roles and responsibilities, and ensuring they have the necessary resources to protect Canadians and contribute to global operations.
• Modernizing NORAD by investing $252.2 million dollars over five years with a focus on Arctic defense capabilities.
• Increasing spending to meet NATO commitments, attempting to make the culture within the Armed Forces more inclusive, and enhancing cyber security.
-
• Support during the pandemic.
• A national dental care program! $5.3 billion dollars over five years and $1.7 billion every year after to provide dental care through Health Canada for under-12s before expanding it to under-18s, seniors, and persons living with a disability in 2023. It will be implemented fully by 2025 and would be restricted to families with a yearly income less than $90,000 with families making under $70,000 not being required to co-pay.
• Investing at the federal level to help reduce the backlog of surgeries and procedures caused by the pandemic, loan forgiveness for doctors and nurses in rural and remote communities, and researching the long-term impacts of COVID-19.
• Maintaining the National Emergency Strategic Stockpile, launching a pilot Menstrual Equity Fund, and providing tax credits for people trying to become parents.
-
• Jordan’s Principle to continue to support First nations children.
• Indigenous child welfare legislation.
• Addressing the harms caused by residential schools.
• $268 million dollar investment to provide high-quality health care for First Nations living on remote and isolated communities on-reserve and an additional $190.5 million dollars for the Indigenous Community Support Fund through Indigenous Services Canada to help mitigate the impacts of the pandemic on Indigenous communities and organizations.
• Funding to help support First Nations educational outcomes.
• Continuing and improving funding for clean water.
• Investing in housing supports for Indigenous communities
• Implementing the United Nations Declaration on the Rights of Indigenous Peoples Act and making legislative changes to support Indigenous self-determination.
• Incorporating Indigenous leadership on climate policies and sharing economic participation through the Trans Mountain pipeline.
-
• Funding for LGBTQ2 Action Plan, fighting systemic racism, discrimination, and hate, support to counter religious discrimination, and Holocaust education.
• Supports for local and diverse journalism including $15 million in 2023-2024 for Canadian heritage to continue the Local Journalism Initiative that helps produce local journalism for underserved communities ($10 million) and to launch a new Changing Narratives Fund that will aim to break down systemic barriers in media and cultural sectors for racialized and religious minority journalists, creators, and organizations.
• Establishing a National School Food Policy to ensure school kids are not going hungry.
• Developing an assault weapon buy-back program and continuing to work with provinces, territories, stakeholders, and Indigenous partners to implement the yet-to-be-announced National Action Plan to End Gender-Based Violence.
-
• Continuing to strengthen the Canadian Revenue Agency.
• Taxing the major financial institutions in Canada. Life insurance companies and banks will pay a one-time 15% tax on taxable income above $1 billion for the 2021 tax year. The government also hopes to permanently increase the corporate income tax rate by 1.5% on taxable income from banks and life insurance companies above $100 million dollars.
• Closing taxation loopholes for foreign corporations.
• Committing to examine a new minimum tax regime that would target the wealthiest Canadians.
• Implementing the two-pillar plan for international corporate tax reform.
• Addressing digital currency and embracing digital government.
Wow. And that’s it. That’s a streamlined version of Budget 2022. It features, in total, $60 billion In new spending but only $31 billion in net-new spending when the measures designed to generate revenue are considered. The deficit has shrunk, while still remaining high, and all-in-all, the plan seems ambitious and focused on the long-term. It won’t solve everything, especially not overnight, but it seems clear that this government has a feel for what problems are facing Canadians and has mobilized their capabilities to help. Again, time will tell whether this budget is realistic or effective. But for now, it sounds like a lot of pretty good ideas. Cheers to Budget 2022!
Further reading:
https://nationalpost.com/news/politics/tax-federal-budget-2022
https://www.theglobeandmail.com/canada/article-canada-federal-budget-2022-affordable-housing-taxes/
https://www.ctvnews.ca/politics/how-the-2022-federal-budget-impacts-you-1.5852798
https://globalnews.ca/news/8743093/environment-investments-needed-net-zero-budget-2022/