We live in a country with Scandinavian tastes and a North American tax code.
And in case you haven’t noticed, the cost of everything is rising, our social program obligations are growing, the population is aging, our infrastructure is crumbling and public finances are wheezing.
We feel taxed out, but what we pay now will not pay for all of this if we continue to demand all of this. We would need—yes, we would—new taxes at all levels of government. We won’t like it or easily concede it—I definitely don’t and won’t. But we show no signs that our appetite to borrow from tomorrow to finance today will be ending today, tomorrow or any time soon.
Federally, the realities of demographic, economic and policy forces point to a widening gap between revenue and expenditure. Provincially, health care and education demands are ballooning. Municipally, the least empowered element in the fiscal federation is carrying out responsibilities vastly disproportionate to its revenue tools.
The post-pandemic era is marked by record deficits, aging populations, climate adaptation needs, and the end of near-free borrowing costs. We are on a buy-now, pay-later program of public finances for most anything new. The question seems no longer whether taxes will rise, but how, when and for whom.
The gap between public expectations of services and the political reluctance to inconvenience us with a discussion on how to pay for them is bringing us toward a big, hard wall. Sure, we can blurt the necessity to “axe the tax,” but the more plausible path is the need to either “grow the dough” or we will need to “know the blow.”
If we cannot carve a path of prosperity, what might we anticipate?
Nowhere is the mismatch between revenue and responsibility more acute than at the municipal level. Cities are increasingly tasked with managing housing, homelessness, public safety, policing and potholes, transit and wastewater infrastructure, and climate resilience—all without access to income or sales tax revenue.
Property tax, the primary revenue tool, is ill-suited to finance dynamic social services. Major cities like Vancouver and Toronto, even with empty homes taxes and development cost charges, find the funds insufficient to meet structural needs.
More municipalities are now contemplating or requesting new revenue powers. A municipal share of provincial sales taxes, a dedicated city-imposed one, vehicle levies, and even direct user charges for transit and road usage are on the table. Some cities have proposed land value taxes or progressive property surtaxes on luxury real estate. Until provinces grant broader taxing authority, municipalities will remain dependent on grants and one-time transfers—a model ill-equipped to meet long-term demands.
Provinces are constitutionally responsible for the services that consume the largest share of public spending: health care, education and infrastructure. Most are struggling to maintain balanced budgets without increasing their reliance on federal transfers, which are themselves under strain.
Within a decade, one in four Canadians will be over the age of 65. Health care spending per capita on seniors is several times higher than for younger Canadians. At the same time, provinces are trying to fund new housing, mental health services and long-term care expansion—areas long ignored that appear no longer optional.
Some provinces, like British Columbia, have introduced targeted taxes, like the speculation and vacancy tax, as a symbolic and surface-level response to public frustration over housing affordability. Others have hinted at returning to broader base of sales taxes, or implementing new user fees for transportation and congestion.
In time, without real change in our attitudes and practices, provinces may have to revisit the possibility of harmonized sales taxes or even explore new provincial-level surcharges on capital income. Vehicle levies, congestion pricing and wealth taxes would be despised, but the damaging alternatives are further borrowing or cuts to already-stressed services.
The federal government significantly expanded its fiscal footprint in recent years through pandemic support programs, national dental care, pharmacare commitments and climate transition funding to add billions in ongoing liabilities. At the same time, long-term revenue growth is flattening.
The proposed increase to the capital gains inclusion rate—a restored level, actually—broke from previous federal reluctance to raise taxes. It also highlighted a new dynamic: the political calculus had shifted just enough to allow targeted tax increases under the umbrella of equity. But an election loomed, so the idea was rescinded. The new Mark Carney government is indeed cutting more taxes to deal with unaffordability.
Still, can anyone not believe that more measures are likely to follow? Wealth. Consumption. Corporate profit. Inheritance. Every traditional no-go zone is now at least part of the conversation.
The federal debt servicing burden is projected to reach more than $60 billion by 2027. Without new revenue streams, maintaining current commitments—let alone expanding them—will be increasingly untenable.
Eventually, governments will be forced to reconcile rhetoric with reality. Maybe the taxes will be framed with the help of focus groups as “targeted,” “modest” or “time-limited,” presented as fights against “speculators” or the “ultra-wealthy” or “people not paying their fair share,” in order for us to forget that the people getting taxed might actually include them.
Whether through gradual tax reforms—rebalancing income and consumption taxes, incentivizing behaviour shifts, closing loopholes—or more visible measures, new revenue will need to be raised.
Or, then again, if we’re not prepared to pay more, we’ll have to start expecting less.
Kirk LaPointe is a Lodestar Media columnist with an extensive background in journalism. He is vice-president in the office of the chairman at Fulmer & Company.
