On April 16, 2024, the Honorable Chrystia Freeland presented Canada’s Federal Budget for 2024, aiming to tackle a variety of economic challenges while driving forward significant fiscal policies affecting sectors ranging from housing to healthcare, military spending, and technological innovation.
Economic and Fiscal Overview
Despite previous predictions of an economic downturn, the labour market remains robust with 1.1 million more Canadians employed compared to pre-pandemic levels. The GDP grew by 1.1% in 2023, and inflation rates have reduced significantly from their peak in June 2022. Nonetheless, the government anticipates running deficits for the next five years, projecting a debt-to-GDP ratio of 39.0% by 2028/29.
Key Fiscal Measures
The budget highlights a significant shift in the capital gains tax structure, with the inclusion rate increasing from 50% to 66.7% for gains exceeding $250,000, effective June 25, 2024. This adjustment aims to generate substantial tax revenue while impacting only a small fraction of Canadians and corporations. Meanwhile, the Lifetime Capital Gains Exemption (LCGE) has been increased to $1.25 million to mitigate the impact on smaller gains.
Housing and Infrastructure Initiatives
The government has allocated considerable resources towards enhancing housing affordability and infrastructure:
- $15 billion in loans for rental construction and $600 million for expedited home building.
- $6 billion to bolster housing-related infrastructure, requiring provincial adjustments in zoning and renter protections.
- $1.5 billion in loans and $470 million in grants to non-profits for acquiring affordable rental properties.
Healthcare and Pharmaceuticals
A national pharmacare program introduced in February will significantly cover prescription contraceptives and diabetes medications, marking a progressive step in Canada's healthcare provision.
Military and Defense Spending
Over the next two decades, $73 billion will be allocated to the Canadian Armed Forces, focusing on infrastructure, equipment, and personnel services, though this still falls below the NATO expenditure target.
Technological Advancements and AI Investment
An investment of $2.4 billion is directed towards accelerating Canada's AI sector, enhancing technological infrastructure access and supporting AI startups.
Environmental and Business Adjustments
To support environmental initiatives and small businesses, the budget includes:
- $2.5 billion in carbon-price rebates for small businesses.
- Enhanced incentives for clean energy projects and the introduction of a refundable tax credit for investments in low-emission electricity generation.
Tax Policy Adjustments
New tax measures have been introduced to increase compliance and deter avoidance:
- Increased scrutiny and penalties for non-compliance with CRA information requests.
- Strengthening rules to prevent the transfer of tax debts to non-arms-length entities.
Homebuyers and Personal Investment
- The Home Buyers' Plan now allows withdrawals up to $60,000 from RRSPs, providing significant relief to first-time homebuyers.
- Introductions of new programs like the Secondary Suite Loan Program to encourage the creation of additional living units.
The Federal Budget 2024 aims to navigate through economic complexities by implementing policies that promote growth, sustainability, and fiscal responsibility. While addressing immediate economic challenges, the budget also lays the groundwork for long-term infrastructural and technological advancements, balancing between boosting economic activity and maintaining fiscal prudence.
