It has been described as one of the most bitterly fought elections in Canadian history. In the end, Prime Minister Justin Trudeau’s Liberals survived – winning a minority government in what many observers saw as battle that highlighted personal attacks over policy.
Major issues remain outstanding
With the invective behind us, a number of issues and policies stand out that will be the focus of debate in the coming months.
Key among these is the future of the long-delayed Trans Mountain Pipeline, which could be caught up in the machinations of a minority government. Due to pipeline constraints, Canadian oil trades at a sharp discount to international benchmark prices. As a result, the Alberta economy has struggled and governments are losing billions of dollars in tax revenue.
During the election, NDP Leader Jagmeet Singh made it clear he was opposed to the pipeline. Now, what he demands in the way of support, could no doubt occupy the government’s near-term agenda.
As well, NAFTA morphed into the USMCA and it will likely land back in the House of Commons for ratification before spring. There is little doubt that the Liberals and Conservatives will support it. However, the NDP may delay the whole process by fighting hard to make amendments.
A collision course on the budget
Federal budget motions are confidence votes, which could bring down a minority government. To stay in power, Trudeau will have to negotiate with the Tories, NDP and the Bloc. While the Bloc has yet to reveal what it wants, the NDP arrived in Ottawa under its new leader with a long list of expensive programs. Trudeau will likely turn to the NDP for support. And he may have little choice but to agree to at least one, such as a national pharmacare program. And that has already raised concerns that we could see even higher deficit spending in the future.
Negotiating tax cuts and hikes
The Liberals and NDP both have tax policies that they will have to negotiate before the next federal budget, expected in the spring.
- Liberals want to place a $200,000 limit on certain stock option deductions offered by large public firms. However, the NDP wants to eliminate the deductions altogether.
- The Liberals want to increase the basic personal exemption to $15,000 over four years. But any increase would be clawed back on individuals starting on incomes of $147,000.
- The NDP would raise the inclusion rate on capital gains from 50% to 75%.
- The NDP would raise the top federal marginal tax to 35% from 33%.
- NDP would introduce a 1% annual wealth tax on people with assets above $20 million.
- Liberals would hit drivers of luxury cars worth more than $100,000 with a 10% luxury tax.
- Liberals want to help cut greenhouse gas emissions by cutting the corporate tax rate by 50% on companies developing zero-emission technologies.
- The NDP would increase the general corporate tax rates from 15% to 18%, but maintain small business tax rates at their current level.
- The NDP would eliminate the 50% deduction for meals and entertainment for corporations with more $500,000 in revenue.
What’s in the Liberal win for individuals
The 2019 election also saw a number of proposals that affect individuals.
Here are just a few:
- The Canada Child Benefit increases 15% for parents with a child under one.
- Parents who adopt can take a 15-week leave from work.
- If buying a house worth less than $750,000, a first-time homebuyer could receive a subsidy.
- The child disability benefit may be doubled.
This commentary contains information in summary form for your convenience, published by Sun Life Global Investments (Canada) Inc. Although this commentary has been prepared from sources believed to be reliable, Sun Life Global Investments (Canada) Inc. cannot guarantee its accuracy or completeness and is intended to provide you with general information and should not be construed as providing specific individual financial, investment, tax, or legal advice. The views expressed are those of the author and not necessarily the opinions of Sun Life Global Investments (Canada) Inc. Please note, any future or forward looking statements contained in this commentary are speculative in nature and cannot be relied upon. There is no guarantee that these events will occur or in the manner speculated. Please speak with your professional advisors before acting on any information contained in this commentary.
© Sun Life Global Investments (Canada) Inc., 2019. Sun Life Global Investments (Canada) Inc. is a member of the Sun Life Financial group of companies