Freeland's new federal budget hikes taxes on the rich to cover billions in new spending

HIGHLIGHTS:

Finance Minister Chrystia Freeland's fourth budget delivers a big-ticket housing program for millennials and Generation Z voters — a multi-billion dollar commitment to be paid for in part with a tax hike on the rich and corporate Canada.

Freeland's document calls for about $52.9 billion in new spending over the next five years — a significant jump over what Ottawa had said it would spend in the fall economic statement released just a few months ago.

To offset some of that new spending, Freeland is pitching policy changes the government says will generate roughly $21.9 billion in new revenue. That money is to come in part from higher capital gains taxes and a hike to excise taxes on cigarettes and vaping products.

"We are making Canada's tax system more fair by ensuring that the very wealthiest pay their fair share," Freeland said Tuesday after tabling her budget in Parliament.

"We are doing this because a fair chance to build a good, middle class life — to do as well as your parents, and grandparents, or better — has always been the promise of Canada."

The result is a projected budget deficit of about $40 billion in the 2024-25 fiscal year — roughly what Freeland had predicted.

While the government is spending more overall, it says that better-than-expected economic growth and higher taxes will keep the deficit under control.

The Liberal government's preferred "fiscal anchor" — the budget benchmark that guides its decisions — has long been to keep the net debt-to-GDP ratio on a declining trend, with debt levels closely tracking the overall size of the economy.

The budget document says the government must meet that benchmark in the years ahead to retain Canada's triple-A credit rating.

Deficits eventually roll over into long-term debt. The cost to finance Canada's growing debt pile — which has more than doubled over the last nine years to $1.4 trillion — is eating up more and more taxpayer dollars as the government is forced to refinance its borrowing at higher rates.

Public debt charges will cost $2 billion more this year than the forecast in November as the Bank of Canada keeps rates relatively high to tame inflation — which has shown signs of slowing down.

With interest rates at a 20-year high, Ottawa's cost to borrow has spiked from $20.3 billion in 2020-21 to $54.1 billion in 2024-25.

That means Ottawa will spend more to service its debt than it will on health care this year — and the debt charges will march even higher in the years ahead.