The Decibel - What the GST break means for you

Episode Date: November 25, 2024

Last Thursday, the Liberals announced a multibillion-dollar plan to help improve the cost of living. It includes a 2-month break from GST on dozens of products and services – from restaurant meals and liquor, to children’s toys and diapers – and a one-time $250 cheque for working Canadians.But it’s unclear exactly how these measures will get through the House of Commons, which has been the site of a months-long stalemate.Today, the Globe’s senior political reporter, Marieke Walsh, is here to explain what’s included in this tax break, the impact these changes could have on household expenses, and the politics at play.Questions? Comments? Ideas? E-mail us at [e-mail]

Last week, Prime Minister Justin Trudeau announced a multi-billion dollar plan to help improve the cost of living. Our government can't set prices at checkout, but we can put more money in people's pockets. The plan includes a two-month break from the GST, the goods and services tax, on dozens of things. And a one-time $250 check for working Canadians. As we get into the new year, these are things that recognize that people are squeezed and we're there to help. Many people will welcome the financial assistance,

especially during the holiday season. But it's still unclear exactly how these measures will get through the House of Commons. So The Globe's senior political reporter Marika Walsh is here. She'll explain what's included in this tax break, the impact these changes could have on household expenses, and the politics at play. I'm Mainika Raman-Welms, and this is The Decibel from The Globe and Mail. Marika, thanks so much for being here. Thanks for having me. So last week, the liberals announced two measures that are meant to help with affordability.

Can you just walk us through what they are, Marika? Yeah. So two really big and very expensive measures, Manika. The first is what everyone has called a GST holiday. It comes in right before Christmas. So if you're a last minute shopper like me, you're in luck because I haven't bought my Christmas gifts yet. Now I can wait another two weeks to make the most of my pennies. So that's a GST holiday that's being applied across the country. It's going to be applied to things like Christmas trees, doesn't discriminate between real or artificial. So that debate can keep raging. And as well as, you know, kids' toys, puzzles, even game consoles, video games, books, kids' clothing, kids' diapers. And then for the adults

in the room, restaurant meals, beer, wine, and some mixed drinks. So a real whole gamut. And so that will be in place for two months. So from December 14th to like- February 15th. So we sneak in Valentine's and then the fun's over. And then on the flip side, there is also, once the GST fund is over, two months later, the government says they'll be sending every Canadian who nets their income at $150,000 or less a $250 check in April. Okay. Okay. And if it sounds familiar, it's because it is familiar because it's similar to what we've

seen Doug Ford do in Ontario. And so what that net income means is that it's before taxes, but after things like union dues, RRSP contributions, all that kind of thing. So it's setting a pretty high bar for what it views to be the middle class and working class Canadians. And by doing so, they are really reaching a huge number of people. They say they expect that the checks will go to about 18.7 million Canadians, and it will cost the Treasury more than $4 billion with a B dollars to fund it. Can we break down, I guess, first, how much do they think the tax breaks are actually going to help Canadians? The $250 check is kind of a bonus. But when much do they think the tax breaks are actually going to help Canadians?

The $250 check is kind of a bonus. But when we're looking at the tax breaks, how is that actually supposed to help people? Well, the idea is that even though inflation has eased, prices are still balancing off or leveling off at a high level. And retailers and Canadians are doing the math and buying less or spending less. And so the thinking from the government, as the Prime Minister explained it last week, was that they can't set prices, but they can help make it easier to pay to meet them. So if you're not paying GST on a however much a game console costs, you know, maybe that's worth it or a book at $25, $30, you're not going to pay that GST. And so bank economists have already weighed in saying that in the short term, they think this

stimulus is going to spur the economy. They do think people will buy more things because it will cost less to buy those things. But they say that stimulus will be short-lived for the economy. And it is coming at a high cost for the Treasury. And interestingly, also for some provinces, because as we're sort of learning more about this, how it will work, provinces where there's HST, where there's a harmonized sales tax, the feds have decided they're going to lift the whole thing. So that means provinces also, so far at least, appear to not be getting a refund from Ottawa for that lost provincial sales tax revenue for that share they get from

the harmonized sales tax. So if you're in Atlantic Canada and Ontario, you're getting a bit more off your tax bill. But some of those provincial treasuries are now scratching their head, wondering how they're going to make ends meet. Of course, politically, it's very challenging to say they wouldn't agree to that. And that's what the prime minister on Friday was talking about, that he expects that everybody's going to want to help people in their pocketbooks heading to the holidays. Yeah. Okay. So this is a really interesting distinction then, Marika, because of course the GST is what they're taking off these goods and that's the federal tax. But in provinces where we have the harmonized sales tax, which is kind of the merged provincial and federal tax, they're just going to get rid of the whole HST. So then provinces aren't actually going to get any revenue during that time either for those

taxes. Yeah, on those items, exactly. And I think this is still to be sorted out. We don't actually know how this will all pan out. We don't know exactly what deal, if any deal at all, the feds will strike with those provinces. And on the flip side, there's a question with Quebec because they also have a harmonized sales tax, but the province collects it, not the federal government. So the province would have to agree to this. So we're deep in the weeds on federal provincial relationships now, but I think fair to say this is something that the Liberals were hoping to help Canadians with, but also to sort of shock the political landscape a bit.

Another bid by them to try and woo back very disgruntled, very angry voters who have really turned their backs on the Liberal Party in the last year and a half, according to public opinion polling. And so we'll see how or if at all this shakes things loose for the liberals who are in a very precarious moment politically. And we're definitely going to get into that because this is an important part of the conversation. Do we know how much this is all going to cost Ottawa? Like missing out on two months of sales tax revenue, how is that going to affect the federal government? Well, it's certainly going to cost a lot. And when we were reporting the story out before we had the details, my sources were describing this as one of the biggest affordability

measures by the government this year. And that's because in total, between the checks and the GST cut, we're looking at about a $6.28 billion hit to the federal treasury. Of that, the GST cut over two months is estimated to cost $1.6 billion in terms of the lost revenue. And then the checks are going to cost Ottawa $4.68 billion to send out. Those are, of course, estimates because it depends for the GST how much people buy in that time, how much it spurs sales. And I think, as I mentioned, because of those questions around the harmonized sales tax, questions about will provinces who lose that be compensated, that could also drive up those costs. Has the business sector weighed in at all, Marika, on this? They're obviously going to be affected by these changes in GST or NHST. So what have they said?

Well, it's a mixed bag for them, right? Because more sales is good news for them. Making items cheaper without them having to reduce their prices is also good news for them. And it would suggest that there would be more sales. Maybe, for example, that drop off in sales that you see in January and February would be less this year. On the flip side, they have a lot of logistical back of the house items now to sort out in their point of sale systems where they need to change all of those calculations for taxes, for what tax supplies where, and they'll have to do it because it's temporary twice. So they need to put that system in place in the next three weeks, and then they need to take it off in two months time.

And it can be a little complicated too, because there's like certain items that are included and other items that aren't included, right? So that has to all be sorted out at the cash register. Yeah. And you have to be very clear on that. So certainly I think more administration is involved. My sense is that the win outweighs that, but I'm not a small business owner. I'm not the one who actually has to do that work. All right. We've talked about what these changes are, but let's look at the reason behind these changes, Marika. What did Prime Minister Trudeau say about why the liberal government is doing this now? Well, it's interesting, right? Because until now, we've been in this affordability crisis for years now. And until now, the government has been very careful to roll out programs that are much more targeted to lower income demographics or specific

groups like people with young kids who need daycare. And they have seemed to sort of turn their nose at the idea of something that would more widely benefit people. In part, in the past, the prime minister has said that's because it would spur inflation, which is correct. He said as recently as the spring that he wouldn't do a broad-based benefit because of that. Of course, inflation had already cooled then, and it remains cool now, and now he's doing those checks. So I think that it is in part an acknowledgement that the average Canadian, the average voter did not feel like despite the last two years of pocketbook pain that they had seen relief from the government because the government's programs were so targeted. So that's sort of the non-cynical take. And the cynical take or the political lens that you could apply to this is that the prime minister has had yet another incredibly rough year. He just survived a revolt on his leadership less than a month ago. And they have struggled to

shake loose or to force any movement in the polls that have seen them at double digits behind the conservatives for more than a year and a half now. And so this is also very political. This is also a move to, I think, get him back in touch with the average voter and connect him more with the average voter in a hope to turn those polls around. And then in terms of just government business, in terms of the Ottawa bubble, it was also a move that the liberals were hoping and expecting would break this logjam, this standoff in the House of Commons and force one of the opposition parties to side with them and to get the business of government moving again.

That is not as straightforward, I think, as the liberals who I was talking out to before the announcement last week were hoping would be. It seems that the NDP are not willing to play ball to the extent that the liberals were hoping, at least so far. Yeah. And we're going to get into the logjam kind of in depth because this is an important aspect of what's happening here. But I just want to stay on this idea of the liberal strategy here for another minute, Marika, because this is a really interesting kind of calculation that's happening then on their part. And of course, we know we are headed into a federal election

sometime. We have to have one before next fall. So how is this tax break and these checks that they're going to be sending out? How does this fit into the liberal strategy at this time to kind of, I guess, win back support? Well, it's interesting, right, because it's staggered, which means it's ruling out over a very long period of time, which means they can also talk about it for a very long period of time, right? And we saw this strategy from the liberals in the spring ahead of the budget, where they had a very concerted rollout in advance to try and be talking about these policies, try and really be pushing, making sure what they were doing broke through with the public, which is very hard in this sort of polarized and fractured media landscape. And in this case, what's interesting is the timing, not just with

the political cycle, as you mentioned, we could be in an election anytime now, but at the very latest next fall, but the GST relief ends, and then there's about a month break. And then at the same time as the carbon price is scheduled to increase on April 1st, the government will be able to talk about these checks rolling out to most Canadians also in April. So I think it's a bit of counter-programming that they are setting up for themselves. The carbon price is not popular. It is not something that has helped the Liberals with the electorate. It is something that the Conservatives have really focused on to actually make gains against the liberals. I also think in terms of questions about Justin Trudeau's future, this policy is another confirmation, another sort of

like tick in the he's staying column versus he's leaving column because it is so expensive and it is something you do when you are trying to win. It's not something you do when you're in legacy building mode and just thinking about your exit. Interesting. Yeah. How have the other political parties responded to this, Marika? So the opposition conservatives and the NDP, I guess, in particular, the Bloc Québécois too, but how have they responded to these announcements? Yeah, I think it's certainly caught some of the opposition parties off guard, because it's very challenging to be the one saying you don't support a tax break for Canadians, especially given the affordability focus that people like Pierre Polyev have put on the last few years. So the NDP

have said they support it, in part because they suggested it a few weeks earlier. And we fought for this. We said this is important. And the liberals informed us that they had caved to our demands. But they included a liberal letdown. This is temporary. And it doesn't include the monthly bills. The NDP had proposed a permanent GST lifting on essentials like kids' clothing and diapers, but also household bills like internet bills, like cell phone bills and home heating bills. And so they say, while this is a good step, it's not enough. We will support it. And then if we form government, we will make it permanent.

And then on the flip side, the conservatives are dismissing it as a trick or a tactic, which is kind of funny because for most of the last year, the liberals have been dismissing the conservative policies as gimmicks. That sounds like a trick. A trick. Are you fooled? So we see a little bit of like, they're each talking on their own lanes and not seeing the similarities between the two. And Pierre Polyev, very interestingly, would not say last week whether he will or won't support the policy. He said he wants to see the actual legislation and the details and won't decide how they will go based on a press release, which that makes sense. It's buying a bit of time for him politically, but also we don't know what shape this bill and proposal will come in. Will it come

as a single bill or will the liberals try to make it their entire fall economic statement that includes this, which of course you could then imagine the conservatives would be less interested in supporting. And then finally, the Bloc Quebecois had a bit of a similar approach. They said they would debrief and decide whether they would support it, but they also dismissed it as an attempt to buy votes. We'll be back in a moment. OK, there's so much to talk about here, so let's get into the House of Commons drama now, because we've laid out what these proposals are going to do, Mariko. We've kind of talked about the political response. But what actually has to happen for these changes to get through the House of Commons now?

The million dollar question, Manika. And it's so funny because I don't think we're used to in Canada talking about how policies that governments announce actually get passed because we're so used to sort of the House just functioning, in part because the liberals have had such a strong minority government. It's been a long time since we were in these moments where you need to negotiate support for every move. And it's much more complicated now because the House is essentially frozen in time, stuck on this one debate on the government's refusal to release documents related to a green technology fund scandal. And in doing so, nothing else materially is happening in the House of Commons. This is the logjam you were mentioning earlier. The logjam, exactly. The logjam I mentioned earlier is this standoff in which the conservatives are leading the filibuster in the

House of Commons, but the Bloc Québécois and the NDP are not trying to shut down the filibuster. The NDP in particular are trying to act like Switzerland, like they're neutral territory, who aren't getting involved. They say the liberals should be releasing the documents, but they also say the conservatives are acting like children. And so in this environment, the liberals do not have the support they need to either end this filibuster or ensure their agenda gets passed. So they either need the NDP or the bloc or the conservatives, some other party to vote with them, and that's not happening. Exactly.

And I think before the details of this came out and before we saw the NDP response, the liberals were under the impression that the NDP would help them end the filibuster to get bills like this through. But interestingly, the NDP said, we will just give you a break from the filibuster. We won't vote to end it. And we'll only give you this break for this one day to pass this one bill. Okay. So like a pause, basically, get this one bill through, and then we're going right back to the status quo. Yeah, like a recess, you know? So the honest truth is we don't actually know right now how this will pass the House of Commons. We don't know what procedural negotiations and shenanigans are going on behind the scenes. There's a new

wrinkle in this that our colleague Bill Curry was reporting on last week about the competing demands and responsibilities of the House of Commons that the Speaker of the House raised in that the House is also responsible for ensuring the government spending and funding gets done and reviewed and passed. And so there is this deadline coming up for December 10th for that work to happen. But the conservative debate on this document is a debate around privilege, which is an issue in the House of Commons that trumps many other issues. And so the speaker was just pointing out to the House of Commons last week that these two different mandates and priorities of MPs privilege and MPs getting to run their own house and their role of overseeing and passing government spending are on a collision course. And so at some point, somebody is going to have to decide which one takes precedence.

And that's not necessarily something that the House has had to contend with yet. Wow. So in a time where there is no political capital for the liberals, where there is very little trust between the parties in House of Commons, if any trust, they're going to have to navigate this very sensitive situation and figure out a way through it. And it's not clear yet what that will look like. Okay. So it sounds like there's departments that basically need funding to be voted on by December 10th. Otherwise, they're essentially going to run out of money. And right now, if this filibuster continues, it looks like that's a possibility. Yeah. And it's also possible,

you know, the liberals are talking about running out of money. It's also possible that is part of their, you know, PR campaign public facing, right? The main estimates were already passed in the spring. So there is money, but obviously not all the money that they want to get all their programs done. And so it is going to be a question of how they choose to deal with this. And it's also a question of this GST cut and these checks. Because if the NDP want it as a standalone bill, but the liberals want it to be their fall economic statement that includes all the other things that they want to get done, it's not yet clear if they have support for that and which one kind of wins out in this negotiation. We're all becoming procedural experts or trying to very quickly. We all have to know exactly how this works. Because, yeah, if they were to make this GST and the checks part of their fall economic

statement, which would be like a big bill, which would have other spending and things in it, and if they don't have support to pass that, that could mean we're in election territory, right? Because the government could fall over that. It could, except this is where the NDP are getting a bit cornered because everybody knows the NDP don't want an election. And so the thinking is like, what is the actual power dynamic here? Because the NDP don't want an election, and NDP MPs have openly talked about supporting the government into the next budget, as long as they like what's in it. So we know they're a willing partner. We just don't know how willing, and we don't know at what cost. But you can imagine that if it ends up being that the

government only gets one day reprieve from this standoff in the House of Commons to pass $6.3 billion in new spending, that's a very expensive day. That's a very expensive reprieve to just go back to a filibuster debate. So just lastly here, Marika, there's a couple of weeks left in the fall session. Obviously, there's a whole bunch of things that could happen with the issues we were just discussing. What are you going to be watching for getting done in the next few weeks?

I think it's really about watching what the NDP and the liberals are doing. The NDP were the only ones last week to come out and say, we support this measure on the GST cut and the $250 checks. So they are already the most natural negotiating partner or dance partner for the liberals. So we know what the NDP wanted. They wanted this to just be a one-day decision to pause the filibuster, pass this bill, but then go back to the filibuster. The NDP do not want to be seen to be aiding the liberals in a failure to be transparent. And Jagmeet Singh has been very clear on this. He believes the liberals need to follow the will of the House, which was a motion last spring, to have these documents released. And that is what the majority of MPs said was

their wish. That is therefore the wish of the House of Commons. And so for the fact that the liberals have not done this, the NDP have made this an issue of transparency. So if the NDP now let the liberals off the hook, that will make it more politically difficult for the NDP. And so it's really about watching the negotiations and sort of the public comments between the NDP and liberals to see how this plays out. And maybe it's that the liberals end up having to release the documents unredacted as they've resisted. We just don't know where it goes. Marika, this was so interesting. Thank you so much for being here.

Thanks for having me. That's it for today. I'm Mainika Raman-Wellms. Our producers are Madeline White, Michal Stein, and Allie Graham. David Crosby edits the show. Adrienne Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you tomorrow.