The rhythmic thud of Ottawa’s spending hammer has grown louder with each passing year, sending reverberations through Canada’s economic foundation. Federal government expenditures have swollen to unprecedented levels, ballooning from $332.2 billion in 2019-20 to a staggering $462.5 billion in 2022-23—a breathtaking 39.2% increase in just three years.
These aren’t just abstract numbers on a budget sheet. For everyday Canadians, this spending trajectory points to an unavoidable fiscal reality: higher taxes are coming. The mathematics of government finance leaves little room for interpretation.
“When government spending increases at this rate, it creates significant pressure on revenue generation,” explains Dr. Mikal Anderson, senior economist at the Canadian Fiscal Policy Institute. “The federal debt has crossed $1.2 trillion, and servicing that debt alone costs taxpayers nearly $44 billion annually—almost equivalent to our national defense budget.”
The spending surge began as an emergency response to the COVID-19 pandemic, but unlike the virus, government expenditures haven’t receded. Instead, they’ve become structurally embedded in federal operations, with new permanent programs and expanded bureaucracy requiring sustained funding.
Parliamentary Budget Officer Yves Giroux recently warned that this spending path is “unsustainable without significant revenue measures”—bureaucratic language for tax increases. His office projects a structural deficit of approximately $18-20 billion annually even after pandemic-related spending ends completely.
Tax policy experts point to several likely targets for increased taxation. Capital gains inclusion rates could rise from the current 50% to 66% or even 75%, a move that would significantly impact investors and business owners. Corporate tax rates, currently at 15% federally, may climb back toward pre-2010 levels of 18-21%.
For high-income earners, the writing appears to be on the wall. The government has already implemented a luxury tax on vehicles, aircraft, and boats, signaling comfort with targeting affluent Canadians. New tax brackets for those earning above $250,000 annually remain a distinct possibility.
“The recent introduction of the Tax-Free First Home Savings Account and other targeted tax credits suggests the government’s approach will be to give with one hand while taking more with the other,” notes Samantha Chen, tax strategist at Westport Financial. “Canadians should prepare for a more complex tax environment where broad-based increases are paired with specific carve-outs for preferred policy objectives.”
International comparison adds further context to Canada’s fiscal situation. While our federal debt-to-GDP ratio of approximately 42% remains below some G7 peers, our combined federal-provincial debt burden pushes well above 100% of GDP—territory that historically triggers significant tax policy adjustments.
For ordinary Canadians, the implications extend beyond abstract policy discussions. A family earning $120,000 could face an additional $3,000-5,000 in annual taxes if proposed changes materialize. Small business owners might see effective tax rates climb by 5-8 percentage points through combined corporate and personal tax adjustments.
Financial advisors increasingly recommend tax-optimization strategies, including maximizing RRSP and TFSA contributions, accelerating discretionary income into current tax years, and reconsidering investment vehicles that may face less favorable treatment under new tax regimes.
The pressure on government finances shows no signs of abating. Healthcare transfer payments to provinces are projected to increase substantially to address our aging population’s needs. Climate change initiatives require billions in new spending. And infrastructure requirements across the country’s aging transportation networks, energy systems, and public facilities demand significant capital investment.
Without dramatic expenditure reductions—which appear politically unfeasible given current commitments—the tax burden on Canadians will inevitably rise. The only questions remaining are how much, how soon, and who will bear the heaviest load.
As taxpayers navigate this shifting landscape, one certainty emerges: the bill for Canada’s expanded federal government is coming due, and it will be paid from the pockets of its citizens.
