The holidays are around the corner, which usually means that young people can look forward to presents from their elders.
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This year, Premier Doug Ford and Prime Minister Justin Trudeau have flipped this dynamic on its head.
These two leaders have announced one-time “tax rebates” which combined will add up to $450 in the pockets of most Ontarians.
This is a bad idea for many reasons, one of which is that both governments are currently running deficits, which means they will have to borrow the money that they intend to send to Ontarians.
It’s easy to see why people enjoy receiving a cheque in the mail from the government.
However, the appeal will wear off for many when they consider that the burden of paying for these sorts of gimmicks is ultimately passed along to younger Ontarians.
Let’s start by looking at the price tag for the tax rebates now under consideration.
The Ford government’s commitment to send $200 to every Ontarian is estimated to cost $3 billion next year.
The Trudeau government is planning to send an additional $250 to all Canadian adults earning less than $150,000.
The federal cheques alone are projected to cost $4.7 billion.
All of this money won’t come out of thin air.
Instead, since both the Ford and Trudeau governments are now in deficit positions, the money will have to be borrowed.
The resulting debt will either have to be paid back or serviced in perpetuity by not only people paying taxes today, but also their children and future generations of Ontarians who are not directly benefitting from the proposed one-time payments.
Unfortunately, accumulating debt without adequate consideration of the burden being placed on future generations is nothing new for either Ford or Trudeau.
Both governments have run large deficits throughout most of their time in office, causing the debt burden to grow and debt service costs to climb.
For instance, federal debt interest costs have nearly tripled from $20.4 billion in 2020 to a projected $54.1 billion in 2024.
Young Canadians already face a lot of economic obstacles.
Youth employment rates are depressed, and a housing crisis continues to make home ownership out of reach even for many of those who are gainfully employed.
High schoolers and college students can look forward to graduating into an economy that has seen meagre economic growth for over 15 years.
What’s more, young Canadians will be on the hook for debt service payments for governments today that can’t seem to resist populist gimmicks like the planned rebates.
Instead of debt-financed, one-time tax rebates, governments across Canada would better serve young Canadians by bringing spending down to align with revenues and reducing economically harmful taxes.
This will help promote growth and increase the chances young Canadians will inherit a growing, prosperous economy that is creating high-income jobs.
The holiday season is supposed to be characterized by generosity towards young people.
The Trudeau and Ford government’s planned one-time tax rebates fly directly in the face of that spirit as it takes money away from future taxpayers and hands it over to current ones.
Young Canadians deserve something better in their stockings this year than a bill obligating them to pay the interest on one-time gimmicks that will do nothing to help create a stronger economy in the future.
— Ben Eisen and Jake Fuss are economists with the Fraser Institute