By the end of this year, if the worldwide vaccination rollout proceeds on schedule, economies should start to emerge from the crippling effects of the pandemic. Unfortunately, the ongoing economic fallout is difficult to predict.
Runaway inflation? Surging interest rates? Wild fluctuations in currency values? Economists seem to have no better clues than usual, but after such a monumental worldwide catastrophe, it’s natural to worry and wonder. Amidst the uncertainty, one ramification seems likely — onerous new taxes.
Government debt is exploding, federally and provincially, and is now in the unconscionable $2 trillion range. If interest rates rise even nominally, servicing that debt is going to take a major chunk of government revenue.
COVID support was certainly needed as businesses were forced to shutter and pivot and as jobs disappeared, but many programs were not well targeted. In many cases, employees and businesses have ended up in a better financial position than if the pandemic had never happened.
Some economists believe paying off government debt need not be a priority. Assume the continuance of low interest rates and just carry the debt, they argue. As the economy grows, the debt gradually becomes a smaller and smaller proportion of the nation’s gross domestic product.
That concept seems potentially plausible when a plan exists to reduce annual deficits. Sadly, that isn’t the case federally. If anything, new spending priorities for programs like pharma-care and childcare will push the country even further into debt.
Long-term senior housing deserves more resources. Medical care grows more expensive each year. The addiction crisis needs attention. The country now realizes we need a lot more domestic vaccine research and manufacturing capacity. On top of this, billions will be flowing to green the economy.
Governments unable or unwilling to cut spending will look for new revenue sources and taxing the wealthy is always a popular mantra. As farmers, we may not consider ourselves rich, but many producers are wealthy, particularly if you consider net worth inflated by ever-rising land values. The average farmer has a much higher net worth than the average Canadian.
In the last Saskatchewan election, one of the planks in the NDP platform was a wealth tax on assets. Specifics were vague, but it’s a concept that should worry farmers. At the federal level, one of the worries is the fate of the capital gains tax.
Fifty percent of a capital gain has long been taxable with farmers relying heavily on a $1 million lifetime capital gains exemption to limit their exposure when the time comes to transition out of the business.
Making 60, 70 or 75 percent of a capital gain taxable would be a straightforward method for the federal government to generate a great deal more revenue. Farmers and other business owners would oppose this vehemently, but it would have limited impact on the average wage earner or voter.
The lifetime capital grains exemption could also be reduced or restructured. Or a dozen other revenue generation measures could be considered in a tax system that is already bizarrely complicated.
Predicting the future of the economy is dicey, but it’s easy to imagine an economic future with more tax pressure on farmers.
Kevin Hursh PAg is an agricultural journalist, consultant and farmer. He can be reached by e-mail at firstname.lastname@example.org.