DAGRES: Examining reasons why Canadians have lost trust in Ottawa

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The vast majority of Canadians say their high tax bill is eroding their quality of life, according to a new Montreal Economic Institute-Ipsos poll. Fully two-thirds (67%) believe they pay too much income tax, while nearly half say they’re getting poor value in return. Clearly, Ottawa’s fiscal path is unacceptable to most of us.
From housing to trade policy, Canadians feel they’re being squeezed by a government that has been living large. More than half say the federal government is spending too much, while a mere 6% think it’s spending too little.
The laundry list of federal spending programs that have been unfruitful (to say the least) is long. Just on corporate subsidies, Canadians have forked over $352 billion between 2007 and 2019 (inflation adjusted, all levels of government). In the 2023-24 fiscal year, Ottawa alone handed out $800 in subsidies per Canadian. Electric vehicle manufacturers in particular have been raking it in over the past few years.
Such profligate spending on subsidies has been accompanied by an explosion of the federal bureaucracy. Since 2015, it has grown by over 110,000 employees. That is three times faster than the population has grown. The cost of Ottawa’s bureaucracy, meanwhile, has nearly doubled from $40.2 billion in 2016 to $69.5 billion today.
A decade of expensive ribbon-cutting policies with meagre results has taught Canadians that the tax man isn’t a fix-all for their problems. In fact, he might just be a wolf in sheep’s clothing.
This disillusionment is a natural consequence of a government that insists it can and should insert itself into every aspect of our lives, from national security to school lunches.
We should be asking ourselves whether the government even has the expertise.
When asked whether taxes contribute to housing unaffordability, 74% of Canadians said yes. Of course, this is absolutely correct. Over the past decade, municipal development fees have shot up by 33%. Today, taxes make up a quarter of the cost of a new home in Toronto. Thanks, tax man.
Canada ranks well behind most Organization for Economic Co-operation and Development (OECD) countries in the time it takes to get a building permit thanks to the tax man’s buddy — the over-regulator. Despite clear evidence that more government means fewer homes and higher prices, Ottawa has chosen to double down, pledging billions to play housing developer.
New Zealand’s government tried a nearly identical program in 2018 and eked out a measly 3% of its 100,000-unit target in nearly seven years.
The more a government overpromises and underdelivers, the less trust its population will have in that government. Only 46% think Ottawa is effectively allocating funds to the country’s most pressing issues.
Worse, the government is also undermining our trust in each other. On housing, politicians are constantly sabotaging the private sector by making it difficult and onerous to build.
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Demonizing the market may be politically useful, but it is misguided. The free market works because both sides benefit from voluntary exchange, and value is created as each party walks away better off. People want homes; developers want to build them. And importantly, they know how.
What fuels human progress is the dispersed knowledge that exists in the market. As Friedrich Hayek, Nobel laureate in economics, wrote: “(T)he knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.”
Think of all of the expertise, the labour and the business relationships that go into making your car, your phone, even your morning cup of coffee. No central planner could replicate that.
So if Canadians feel like they’re getting a raw deal, who can blame them? Governments promise the sun and the moon and when they inevitably fall short, we’re left with a tax bill we can ill afford and not much to show for it.
— Dagres is communications manager at the Montreal Economic Institute.
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