Maybe President Trump had a point when he blasted his Canadian counterpart, Justin Trudeau, for being “very dishonest and weak.”
Canadian Prime Minister Justin Trudeau, who earlier this year survived an embarrassing #MeToo scandal when a woman accused him of groping her at a party, is once again following President Trump’s lead by imposing business-friendly tax cuts meant to spur economic growth and investment instead of using it to cut Canada’s budget deficit. The tax cuts, according to Trudeau’s government, are intended to help drive business and economic growth over the long term (sound familiar?).
Trudeau’s finance minister, Bill Morneau, introduced the corporate tax breaks – which will be worth some C$14 billion ($10.5 billion) over the next six years – in a fiscal update released Wednesday in Ottawa. According to Bloomberg, the cuts represent the Trudeau government’s biggest gift to Canadian businesses since taking power.
Here’s how they will work: By allowing businesses to write off capital investments more quickly (particularly in manufacturing), businesses will be further incentivized to invest in expansion, which in turn should help improve competitiveness, as worries about Canadian businesses’ ability to compete with the US (thanks largely to Trump’s pro-growth policies) have intensified.
“This incentive will encourage more businesses to invest in assets that will help drive business growth over the long term,” Morneau said, according to prepared remarks. “Because our economy is doing well, we also have the fiscal room to follow through on the commitments we made.”
Notably, the government chose to impose across-the-board cuts instead of targeting Alberta’s struggling energy sector…
…Which is reeling as the price of Canadian oil has tumbled back below $20 a barrel amid a worsening supply glut.
The tax cuts are being implemented as government revenues are rising. But the country’s budget deficit is rising as well – something that could become an issue for Trudeau during budget season next spring. He will also be running for reelection in 2019, and unless Canada’s legal pot sales can plug the entire hole, his ability to chart a path back toward fiscal restraint could become an issue.