Ahead of this year’s federal budget, the Parliamentary Budget Officer has projected a $17 billion increase in the national deficit. This is an increase from $51.7 billion (1.7 percent of GDP) in 2024-25 to $68.5 billion (2.2 percent of GDP) in 2025-26.
Deficits aren’t inherently good or bad—public investments in health care, education, housing, infrastructure, and other essential services have long helped build the affordable, liveable Canada that previous generations benefited from.
But the government’s approach to this deficit is deeply concerning. While some of their proposed spending could stimulate demand, pairing it with cuts to essential services will only worsen the cost-of-living and inequality crises Canadians are already facing.
Once again, the wealthiest individuals and largest corporations stand to capture the lion’s share of any gains, leaving everyday Canadians—both now and in the future—to shoulder the cost.
The federal government has two ways to cover its expenses: taxes or borrowing. When taxes don’t bring in enough revenue, the government borrows from private lenders, repaying them later with public funds. In other words, the growing deficit ultimately affects all of us.
Borrowing can be a fair trade-off if it expands the economic pie for everyone—building a Canada with more opportunities and support for all—especially when everyone pays their fair share of taxes to create that prosperity. Unfortunately, that is not what’s happening
Instead of investing in services that help Canadian families build prosperity, the Carney government is proposing cuts of over $21 billion. Coupled with a tax system that has grown increasingly regressive over the past two decades, the wealthiest households and most profitable corporations avoid paying their fair share, leaving the rest of us to cover the shortfall from our shrinking slice of the pie.
Fortunately, there is a clear alternative to this pattern of abundance for the ultra-wealthy and austerity for everyone else. In their first few months in office, the government scrapped two measures that would have generated significant revenue from the ultra-wealthy and American digital multinationals.
One of Carney’s first moves in office was to cancel a partial closure of the capital gains loophole, allowing owners of assets like stocks or investment properties to pay less in taxes on their income than workers. This measure was projected to raise over $10 billion in revenue across its first two years, mostly from corporations and individuals among the top one percent of earners.
Then, after assuring Canadians they would have their “elbows up” towards an increasingly aggressive United States, the Carney government cancelled the digital services tax. This tax, which had already been passed into law, would have raised $7.2 billion over its first five years, almost entirely from American multinationals like Google and Facebook that make billions in Canada while paying very little tax. Supposedly, the cancellation was meant to bring the US back to the negotiating table—but three months on, no deal has materialized.
In the coming year alone, $5 billion in revenue could have been raised from large corporations and the ultra-wealthy. With effective measures against tax haven abuse by multinationals, the entire $17 billion increase in the deficit could have been eliminated. These policies are also incredibly popular, with 92 percent of Canadians supporting the closure of tax loopholes used by the wealthy. Beyond reducing the deficit, such measures would help address the crisis of record income inequality.
The scale of the opportunity is staggering. In 2024 alone, Canadian corporations and wealthy individuals held over $680 billion in assets in just 15 known tax haven jurisdictions, a 165 percent increase over the past decade. Much of this wealth is sheltered through loopholes and favourable treaties that allow profits to return to Canada largely untaxed.
If even a fraction of these offshore holdings were brought into the tax system, the revenue could fully fund health care, education, and housing initiatives, without increasing the burden on ordinary Canadians.
The fact that successive governments have not acted, despite decades of warnings and widespread public support, underscores that the crisis is not a technical problem but a political choice. As it stands, the projected deficit and growing inequality harming millions of Canadians are a direct result of failing to tax the ultra-wealthy and multinational corporations appropriately.
With the federal budget just over a month away, the clock is ticking for the government to lift this burden from working Canadians and ensure the wealthy pay their fair share.
Silas Xuereb is a researcher and policy analyst with Canadians for Tax Fairness, an advocacy organization focused on progressive tax issues in Canada.
Jared A. Walker is the executive director of Canadians for Tax Fairness, a non-profit, non-partisan research and advocacy group fighting for fair, progressive taxation.
This article originally appeared in Canadian Dimension.
