Trudeau’s $250 Rebates and Tax Holiday: Help or Hype?
(Image courtesy Sean Brocklehurst/CBC)
The federal government has unveiled a new suite of tax measures aimed at easing financial strain on Canadians, but critics are questioning whether the initiatives will offer relief or further weaken an already sluggish economy.
Prime Minister Justin Trudeau announced the measures Thursday, including a two-month GST/HST holiday starting December 14 and a $250 rebate for Canadians who earned less than $150,000 in 2023. The government says these steps will help Canadians afford daily essentials, strengthen purchasing power, and provide “real relief” during the holiday season.
“We can’t set prices at the checkout, but we can give Canadians more money in their pockets,” Trudeau said in a statement.
‘Relief’ Measures
The two-month GST/HST holiday will exempt a range of goods from tax, including prepared foods, restaurant meals, children's clothing, toys, and Christmas trees. Meanwhile, the "Working Canadians Rebate" will provide one-time payments of $250 to approximately 18.7 million eligible Canadians, starting in spring 2025.
These measures will cost $1.6 billion in tax revenue and an additional $4.7 billion for the rebates.
Finance Minister Chrystia Freeland characterized the initiatives as timely and necessary, arguing that they would not exacerbate inflation. However, concerns are mounting about the effectiveness of such short-term measures.
‘Grab bag of bad ideas’
The Fraser Institute, a self-proclaimed non-partisan think tank, has criticized the measures, calling them "a grab bag of bad ideas." The organization argues that the GST holiday targets one of the least economically harmful taxes and will likely shift consumption rather than stimulate real growth. Research has shown that temporary tax holidays often encourage people to stockpile goods during the relief period, leading to minimal long-term economic benefits.
The Institute also took aim at the $250 rebate, arguing that one-time payments do little to incentivize work or investment.
“When you cut income tax rates, you improve incentives for people to work and invest because they get to keep a larger share of their earnings,” the Institute said in a statement.
While often highlighting important issues, the Institute has been criticized in the past for using methodologies that inflate figures and distort conclusions.
Broader Fiscal Implications
Economists and opposition parties alike have raised concerns about the broader fiscal implications of the government's affordability measures. With the federal budget already running a significant deficit, the new spending will likely be financed through additional borrowing, adding to the burden on future taxpayers. Critics argue that such measures amount to borrowing from tomorrow to pay for today.
Conservative Leader Pierre Poilievre described the initiatives as "a temporary trick," while pointing to rising housing costs and the looming carbon tax increase as ongoing challenges for Canadians. Green Party Leader Elizabeth May questioned why vulnerable groups, such as Canadians with disabilities who are unable to work, were excluded from the rebate program.
Further, Canadian seniors say they're feeling abandoned by the Liberal government's measure after learning they don't qualify for it.
Trudeau defended the measures, emphasizing that the government’s focus was on affordability for the middle class. “It’s time for people to get a bit of a break,” he said.
The announcement also comes at a tough time for the Liberals, who are trailing the Conservatives in the polls by double digits. Recent byelection losses have highlighted voter dissatisfaction, particularly over the cost of living.
While the measures might provide some small, short-term relief to some Canadians, they fall short of addressing deeper economic challenges. Notably, the rebates are ultimately funded by taxpayers themselves.
