Federal Budget 2022
We’ve known for some time that Budget 2022 would stand apart from other budgets, for good or for worse, and it has. Budgets come and go. Few are remembered as turning points, but Budget 2022 is a turning point, no matter your perspective.
Governments use budgets to respond to economic, social, and health and security conditions. We’ve never had ‘conditions’ quite like these ones. Covid-19, the war in Ukraine and geo-political threats, surging inflation and rising interest rates, and the dire consequences of climate change. Seldom have we faced such serious threats to our health, safety, and prosperity, and never have we have faced them all at once. Budget 2022 has responded to those challenges. Whether it addressed them adequately is in the eye of the beholder. It addressed other challenges too.
The Budget also responded to a political imperative. In exchange for support from the NDP on certain confidence votes through to 2025 the governing Liberals have committed to work with the NDP to address climate change, health care spending, reconciliation with Indigenous peoples, economic growth and affordability. At least for now, the NDP seem to be satisfied that their conditions are being met.
Naturally, addressing these challenges is expensive. The CPC opposition wasted no time criticizing the government for extravagant spending and making unaffordable commitments. They argue that the government has confused priorities. They say the government is making matters worse. It will fall to voters to sort that out. But thanks to the deal with the NDP, voters may not get their say for another three years. By then Budget 2022 will be forgotten by most even though the measures it sets in motion could impact Canadian public policy for a generation.
Here are the topline figures and bigger policy priorities announced in Ottawa today:
Public finances:
The deficit for 2021-22 was $113.8 billion.
The deficit for 2022-23 is expected to be $52.8 billion.
By 2026-27, the federal budget will almost balance, with a projected deficit of $8.4 billion.
Healthcare:
$5.3 billion to provide dental care for Canadians with family incomes of less than $90,000 annually, starting with under 12 years-olds in 2022.
Housing and affordability:
$4 billion over five years for a Housing Accelerator Fund. The target is 100,000 new affordable dwellings.
Doubling the First Time Home Buyers’ Tax Credit, from $750 to $1,500.
A new Multigenerational Home Renovation Tax Credit (up to $7,500 in support for constructing a secondary suite).
$475 million this year to provide a one-time, $500 payment to those facing housing affordability challenges.
Establishment of a Tax-Free First Home Savings Account, combining the features of an RRSP and a TFSA.
Two-year ban on foreign commercial enterprises and people who are not Canadian citizens or permanent residents from acquiring nonrecreational, residential property.
Innovation:
$1 billion over five years for the establishment of a Canadian Innovation and Investment Agency.
Industry:
$1.5 billion over seven years, starting in 2023-24, for infrastructure investments that would support the development of the critical minerals supply chains.
A new 30 per cent Critical Mineral Exploration Tax Credit (lithium, cobalt, tellurium, etc.).
Climate change:
Zero-emission vehicle mandated sale requirements of 20%, 60%, 100%. These are to be achieved by 2026, 2030 and 2035 respectively.
$5,000 electric vehicle (EV) subsidy is extended until March 2025.
$547.5 million over four years to launch a new purchase incentive program for medium and heavy-duty EVs.
In 2022, consultations will begin with federally regulated financial institutions on climate disclosure guidelines. Financial institutions will have to publish climate disclosures using a phased approach, starting in 2024.
$150 million over five years to Natural Resources Canada to develop a Canada Green Buildings Strategy.
$200 million over five years for the establishment of the Deep Retrofit Accelerator Initiative. This fund is specifically focused on large-scale projects.
CCUS, Energy and Electricity:
A new investment tax credit of up to 30 per cent, focused on net-zero technologies, battery storage solutions, and clean hydrogen. The design details of the investment tax credit will be provided in fall 2022.
A new CCUS tax credit. Eligible CO2 uses include dedicated geological storage and storage of CO2 in concrete, but does not include enhanced oil recovery. The rates, from 2022 through 2030, would be set at:
60 per cent for investment in equipment to capture CO2 in direct air capture projects;
50 per cent for investment in equipment to capture CO2 in all other CCUS projects; and
37.5 per cent for investment in equipment for transportation, storage and use.
$600 million over seven years starting in 2022-2023 to Natural Resources Canada for the Smart Renewables and Electrification Pathways Program.
$250 million over four years, starting in 2022-23, to Natural Resources Canada to support inter-provincial electricity transmission projects and small modular reactors.
Defence:
The government’s second defence policy review will be launched in 2022.
$6.1 billion over five years, starting in 2022-23 and $1.4 billion ongoing to the Department of National Defence.
Tax changes:
Imposition of a one-time 15% tax on taxable income above $1 billion for the 2021 tax year for banks and life insurer groups.
New corporate tax bracket of 16.5% for income above $100 million for banks and life insurer groups.