NDP projects $33B deficit, draws on decades-old revenue measure to meet new investments
OTTAWA -- The New Democrats released their fully costed campaign plan on Friday morning, turning the clock back to what they say was a more fair and progressive tax system to help mitigate a deficit of $32.7 billion.
The plan’s top revenue generator, to support big-ticket items like pharmacare and affordable housing, is increasing the capital gains taxation rate from 50 per cent to 75 per cent – a level it was at two decades ago when former Liberal prime minister Jean Chretien was running the country.
As it stands today, 50 per cent of capital gains are subjected to income tax, but under the NDP plan, it would increase to 75 per cent. In year one, the party expects to raise just over $8 billion from that source, which is projected to increase to just over $9 billion in year four.
Critics of the NDP’s election promises thus far say the plan is ambitious at best, and at worst, irresponsible.
Along with the Liberals and the Greens, they’ve pledged to implement a single-payer universal pharmacare strategy if elected, which they’ve budgeted $10 billion for in year one, increasing to just over $11 billion in year four.
Singh has also prioritized new affordable housing this election – a feature of the Liberals’ 2015 plan that Singh said was left in the dust – committing $5 billion in year one to build 500,000 new units and decreasing to $3 billion in year four.
Their climate action plan will also cost a whopping $15 billion over four years, which includes provisions like a “climate forestry fund” and “zero-emissions vehicle rebates and charging stations.”
Added together, along with other relatively smaller commitments like removing interest on student loans and enhancing public infrastructure projects, they’re on a path to spend more than any other party.
But as the party’s top economists stated in the media lock-up on Friday morning, they’re drawing on revenue streams that haven’t been touched before by previous Conservative and Liberal governments.
"As New Democrats we really believe in being prudent with our fiscal commitments and that’s why we’re not just talking about investing in people, we’re also having the courage to talk about increased revenues, something Liberals and Conservatives aren’t willing to talk about," said NDP Leader Jagmeet Singh in a subsequent press conference with journalists.
He said the trend over the past several decades to “balance the books” has been to decrease social spending, without looking to other revenue sources.
Singh, for his part, doesn’t have a firm date on when those books will come out fiscally flat and there are a few reasons for choosing not to prioritize this.
"I believe very strongly in investing in people, and I don’t believe you build a better society or better country by cutting services. So, I’m firmly opposed to austerity," he said. "I’m confident these investments also support economic development."
According to the Parliamentary Budget Officer’s 2018 Fiscal Sustainability Report, the federal government could "…permanently increase spending or reduce taxes by 1.4 per cent of GDP while maintaining net debt at its current 2017 level of 31.1 per cent of GDP over the long term."
In other words, as Singh’s economic advisors reinforced today, experts have warranted increased spending without major economic pitfalls – even without additional revenue sources pumping into the economy.
His party would run a nearly $33 billion deficit in 2020-21, which, according to their projections and taking into consideration the Parliamentary Budget Officer’s baseline budgetary balance, would decrease to just over $16 billion in 2023-24.
This bucket of debt includes a "Contingency Fund" that Singh said is pooled into the estimate to account for fluctuation in the Canadian economy, which as it stands today is exceedingly stable.
Other revenue streams
The only new revenue source proposed by the party is a "Super Wealth Tax" for those Canadians worth over $20 million, which will require an amendment to the Canadian tax code. Wealth over that amount will be taxed at one per cent.
It’s a proposition that’s been circulating south of the boarder by Democratic presidential candidate Elizabeth Warren, who was alluded to by Singh’s economic advisors.
This is projected to raise over $5 billion in year one and increase to nearly $7 billion in year four.
When pressed by reporters on whether he’s considered the loopholes that the super-rich could take advantage of, diverting their assets to family members for instance, Singh said "that’s a real fear."
"We were very strategic about our choice of one per cent. The advice we received was that it would cost more to try to hide money than to just pay the one per cent."
He added that the party would also seek to improve enforcement mechanisms to prevent tax gaps. One of their central revenue pillars includes enhancing the Canadian Revenue Agency’s enforcement capabilities, something that was cut by the former Conservative government under Stephen Harper.
To the party's surprise, as one policy advisor said Friday, this draws in over $130 million, increasing to over $460 million after four years.
They’ll also crack down on major tax havens, whereby corporate entities and the super-rich shift profits to foreign jurisdictions, thus avoiding Canadian tax law.
Other investment priorities fall under seven buckets: making life more affordable, climate action plan, an economy that works for everyone, taking better care of people, Indigenous reconciliation, stronger communities, and making the right choices. These were all announced in June, when the party rolled out a "commitment document" titled A New Deal for People.
Beyond the heftiest expenses, the NDP are also devoting a good chunk of funds to creating universal dental care which is accompanied by a $1.9 billion price tag that will fall to $833 million after four years.
"Our vision is always going to be head-to-toe health care. We know that with some of these investments, we're hoping and we've seen that there's been a realization of savings as well," Singh said.
They’ve also committed to provide clean drinking water to all First Nations communities, at $1.8 billion, increasing to $2 billion, and installing a clean transit and transportation system which will stay steady at nearly $1.5 billion.
The NDP is projecting to go into 2020 top-heavy with regards to spending. Right off the bat, they’re pledging to compensate First Nations children subjected to the federal government’s flawed welfare system the $2 billion recommended in the Human Rights Tribunal ruling. The removal of interest on student loans will also be a top priority, as well as dental coverage, and an initial investment in clean infrastructure and renewable energy.
"I’m not looking for a title, but I’m very proud that I’m not working for the wealthiest and the most powerful, I’m working for people and I want to make sure their lives are better," said Singh before departing to his next stop on the campaign trail.
The NDP’s revenue proposals have been sifted through by the PBO, Yves Giroux, and the entire plan was also analyzed by former parliamentary budget officer Kevin Page at the Institute of Fiscal Studies and Democracy (IFSD).
Unlike the failing grade he initially gave to the Green Party’s platform, Page bestowed a passing assessment to the NDP with all principles but “transparency” getting the green light.
“From a transparency perspective, IFSD wishes to note that the NDP costed platform should have been released earlier in the campaign – before the commissioned debates and well before the start of advanced polling (not the day advanced polling begins,” the assessment states.