Just this afternoon, Canada's Deputy Prime Minister and Finance Minister Huilan Fang announced the 2024-2025 federal budget. In fact, every year before the Budget, the federal government discloses information about individual cases to the public through various channels, and this year is no exception.
For the 2024-2025 fiscal year, Canada's federal budget priorities include housing construction, school food programs, child care programs, national defense, and the much-talked-about "tax on the rich."
Over the next five fiscal years, Canada's total federal spending will be $52.9 billion more than planned, a record high. In fiscal year 2024~2025, Canada is expected to have a fiscal deficit of $39.8 billion, slightly lower than in fiscal year 2023-2024.
The projected fiscal deficit for the coming years shows a downward trend year over year, with the fiscal deficit by fiscal year 2028-2029 being about half that of fiscal year 2023-2024.
Canada is always at risk of a continued downgrade of its credit rating, so it must be on the "right path" to reduce its deficit as much as possible to maintain its AAA credit rating.
Capital gains tax on the wealthy has been raised
This is the highlight of the federal budget: Fong said that an additional capital gains tax will be imposed on Canada's wealthy and some large businesses. Originally, 50% of the investment profits were included in the current year's income for tax, but now the rich need to include 66.6% of the investment profits in the current year's income for tax.
This tax rate applies to all capital gains of individuals, companies or trusts with capital gains of more than $250,000, including the sale of other property such as stocks in addition to the sale of a home. Through this policy change, the federal government will receive an additional $18 billion in tax revenue over the next six years.
As a simple example, a taxpayer who sold a house or stock that year was 300,000 yuan higher than when he bought it, and the total amount that he needed to file a tax return was 150,000 yuan, but now it is 200,000 yuan.
It doesn't seem like much, but for the "super-rich class", the amount of extra tax paid is considerable. Because according to statistics, people at the top of the Canadian income pyramid have an average annual income of 1.4 million, and the value of real estate investment and financial management is even more expensive.
As previously specified, the policy does not apply to capital gains from the sale of owner-occupied homes, nor to investment income earned through RRSPs and TFSAs.
However, only about 40,000 people meet the new rules, accounting for only 0.13% of the total population. Fong has repeatedly stressed that the so-called tax on the wealthy will only affect a very small number of Canadians, and that the federal government will not put additional pressure on the middle class.
In response to the possible grievances of the wealthy, Fong explained that "the richest people need to pay their fair share, so that the Canadian tax system is fairer and thus allows all classes to achieve a good and decent life." ”
The plan has also received rare popularity from other parties, such as New Democracy leader Manmohan Singh, who said: "The rich and corporations deserve to bear more of the country's taxes, which is a sign of national fairness." ”
Deloitte economist Jimmy Jean warns: "The rich are smart, and they can move assets and lower incomes in a variety of ways." ”
In addition, when heavy taxes are imposed on the rich, more wealthy people will leave Canada, leaving Canada facing a brain drain. This would also be a double-edged sword, but in the eyes of the federal government, the benefits must outweigh the disadvantages.
"Smashed" 3.9 million housing units
It's no secret that this year's federal budget is the first to be revealed, which simply means that 3.9 million homes will be built nationwide by 2031, with details including:
An additional $15 billion will be used for the apartment construction loan program and $6 billion will be invested in the construction of housing infrastructure in Canada;
$1 billion in loans and $470 million in grants for new tenant protection funds, an additional $400 million to the federal Rental Accelerator Fund, and $600 million for innovative housing design;
In the housing sector as a whole, the investment in this fiscal year will reach 23 billion, of which 8 billion will be direct investment and 15 billion will be in the form of loans.
Ensuring equity for every generation
The situation of young Canadians today is well known, and when the federal budget was announced, Fang Huilan specifically emphasized that "we need to ensure fairness for each generation, and we need to reduce the cost of living quickly so that young people want to continue to live in Canada." ”
Making it easier for young people to buy a home is a top priority. The federal government said it would extend the loan amortization period from the traditional 25 years to 30 years and raise the limit for withdrawals through the RRSP homebuyer program from $35,000 to $60,000.
The other is the Tenant Rights Act previously revealed by Trudeau, which requires landlords to disclose the rent history of the property to better protect tenants from unfair rent increases and being asked to move out in the name of renovation and other reasons.
As mentioned above, the additional capital gains tax on the wealthy was also bluntly stated: "This is to make a better life for millions of young Canadians." ”
$2.5 billion for young people
The federal government is not only considering young homebuyers and young renters, but also investing $2.5 billion in other areas for young people, such as improved food programs, mental health counseling, etc., including:
Invest 1 billion yuan in the national school food program to provide meals for an additional 400,000 children in five years, and invest 500 million yuan in the Youth Mental Health Fund to provide more intimate support;
$48 million to extend student loan forgiveness for early childhood educators to encourage students to enter early childhood education, and $60 million in funding and $1 billion in loans for new nurseries to meet the needs of more parents.
The investment in national defense has exceeded 10 billion
Most countries in the world spend heavily on defense, and Canada is no different: $8.1 billion over five years as part of a long-term defense policy aimed at increasing military spending to 1.76% of GDP by 2030;
The federal government has pledged to build 1,400 new military homes and renovate 2,500 military homes in the future to address the affordability crisis that some military personnel have to live in their cars.
In addition, 2.4 billion yuan will be invested in the construction of artificial intelligence-related fields, which can not only cooperate with infrastructure construction, but also cooperate with research and development in related defense fields.
Other areas of investment include further encouraging the purchase of new energy vehicles, providing carbon rebates for small businesses, and launching 6 billion Canadian disability benefits.