Now that there is light at the end of the COVID tunnel, how are we going to pay back this massive debt, the government has incurred?
The good thing is, interest rates are low, and probably will be for quite a while, as the government itself, cannot afford to pay more interest on the money it has borrowed.
I just read a great article, which states the world’s largest economies face 13 trillion dollars of debt. It is so massive there is no one thing that will fix it. We will probably see a plethora of elements added over time, lots of time, probably ten to twenty years, if not longer.
The obvious area where money can be taken is income tax. In Canada however, we are taxed quite high, with the top margin rates at 54%. Raising that rate will be very tough on the economy. The United States pays a lower rate, so they will have room to increase.
Areas where money can be raised are capital gains inclusion rates. Years ago these were set at 75 percent, and then dropped to 50 percent. They can bring them up again, without affecting the average person too much, however it will have a severe impact on investing.
Another cost that can be raised is the GST. I remember when we were paying 15% and it was lowered to 13%. We may see it go up again.
Canadians have had a fantastic plus, for quite a while. There is no tax on a primary residence. As your house price increases, all the proceeds you earn are tax free. In the last decade, a number of people have taken advantage of that, by flipping houses at sizable profits and not paying tax. Perhaps a bit unfair to the rest of us. Maybe it is time to level the playing field. There is, of course, the land transfer tax of 1.5 percent, which is also being looked at as a possible source of more revenue.
Canadians have a giant benefit in inheritance tax. The advantage is, we do not have any, other than a small probate tax. The United States has a substantial inheritance tax, and in Europe it is massive, so be prepared.
Businesses have undergone extremely difficult times, so hopefully the Federal government will not increase the corporate tax rate, and risk companies moving away or shutting down.
Whatever the future holds, now is the time to take stock of your own situation. Talk to an accountant or financial advisor to make sure you can weather the potential storm that lies ahead.
Please be aware the above is based on information available to everyone, and is only opinion, certainly not intended as any advice.
Jonathan van Bilsen is a television host, award winning photographer, published author, columnist and keynote speaker. Watch his show, ‘Jonathan van Bilsen’s photosNtravel’, on Rogers TV, the Standard Website or YouTube.