Prime Minister Mark Carney then presented his new government’s first federal budget early this week. The budget is a mix of large, regressive tax measures, large cuts to public services, and large investments in industry. Next year’s budget is projecting a shocking $78 billion shortfall. Unfortunately, these changes have raised deep concerns among stakeholders, particularly about their potential effect on affordability and access to public services.
Perhaps the most shocking item in the budget is elimination of the luxury tax on private jets. Moreover, the luxury tax on yachts has been repealed as well. Until now, the Trudeau-era regulations levied a carbon penalty on newly purchased vehicles and aircraft priced above $100,000. They not just taxed millionaires’ boats, they taxed boats over $250,000. This tax is meant to be the lesser of two evils. It will be 10 percent of the value of the whole or 20 percent of the value over those thresholds. By getting rid of this tax, the federal government all but guarantees an estimated revenue loss of $135 million over the next five years.
The luxury tax — enacted in September 2022 — immediately drew fire from industry stakeholders. They cautioned it would result in crippling employment layoffs and loss of sales for Canada’s proposed marine sector. The National Marine Manufacturers Association of Canada congratulated the industry stakeholders who pushed for the removal of this tax through their efforts. It was their sustained advocacy that really did the trick.
“When the luxury tax was first implemented in September 2022, Canada’s marine industry leaders were quick to point out the impending losses of middle-class jobs, government tax revenues and sales declines. The removal of this failed tax was the direct result of sustained advocacy,” – National Marine Manufacturers Association of Canada
While there is certainly support for the government’s decision, critics have been quick to express their frustration with the budget’s priorities. For National Post, Armine Yalnizyan described as “lousy” the main feature of the report—its lack of specific measures to improve affordability, including reforming Canada’s Employment Insurance (EI) program.
Environmental and social justice advocacy organizations, including Fighting Age Poverty and Move All Seattle Sustainability, showed their displeasure with the budget’s priorities. Équiterre, an independent non-profit organisation in Quebec, is now pushing back against the move to scrap the luxury tax. They say it’s the wrong move at a time when Canada needs to be strengthened.
“I don’t see how eliminating the luxury tax on private jets and yachts could possibly help build a stronger Canada,” – Équiterre
Even conservative MPs were skeptical after the budget. Andrew Scheer was right to condemn the government for giving priority to luxury tax breaks instead of healthcare services.
“The Prime Minister heard the cries of working Canadians and what did he do? He scrapped the luxury tax on private jets and yachts,” – Andrew Scheer
The budget debate is really just beginning. The overall ramifications of these tax hikes will certainly be closely watched by proponents and opponents. The government faces increasing pressure to demonstrate how its financial decisions will benefit all Canadians, especially those struggling with affordability issues.
“Budgets are about priorities. Could the honourable member tell me why the priority of the budget is tax breaks for luxury jets and yachts but tax cuts and less money for clean water in Ontario?” – Jacob Mantle
As discussions around the budget continue, the implications of these tax changes will likely remain a focal point for both supporters and critics. The government faces increasing pressure to demonstrate how its financial decisions will benefit all Canadians, especially those struggling with affordability issues.
