Canada’s Finance Minister, Chrystia Freeland wants to stimulate the Canadian economy by encouraging/forcing Canadians with savings to spend some of those savings. Right wing twitter is convinced that she’s prepping us for a “bail-in” where the government just comes in and takes a chunk of the money you have saved. Which may very well be true but that is not actually what she is presently saying.
She asked for ideas so here are a few:
- Registered Recreation account. Modelled on the other registered vehicles, the RRA would allow individuals and families to deduct the costs of recreational activities from their taxable income to a certain limit each year. Essentially, keep the receipts from restaurant meals and take out, (when restaurants are open), hotel stays for non-business purposes, whale watching, ski passes, rec center memberships, sporting equipment. End of the year, tote up the receipts and enter it as a non-refundable credit. The RRA would target many of the businesses hardest hit by the lockdowns.
- Small Business Bond: At the moment, the savings of Canadians are locked up in accounts which pay, at most, 1.5% interest. We’d all like to do better. Why not create a backed by the Government of Canada “bond scheme” which pays and interest rate of 5% and which lends working capital to small business at, say, 7% on easy terms. Flexible denominations starting at, say, $100 with an individual limit of, say $100,000. This would be the middle class helping out the middle class.
- The First Nations Water Bond: Many Canadians are ashamed that the Government of Canada can’t “fix” the crisis of bad water on hundreds of reserves in Canada. Promises are made and broken. OK, let’s try a different approach. Let’s offer 5%, tax-free, bonds to fund a serious private/public/FN approach to real solutions here. Do 20 year bonds but spend the money in the first two years.
- A Travel Tax Credit: Go see Canada! Reconnect with Family and Friends. Basically allow individuals and families to take a non-refundable credit for any plane or rail trip to another province where you stay for at least three nights. (And yes, you can “double dip” with the RRA…we’d like you to.)
- The Original Art/Performance Credit: Buy a Canadian Painting, go to a Canadian play or musical performance. Keep the receipt and you get a non-refundable tax credit.
- Shop Canada! Get a $100 non-refundable tax credit for every $500 spent when you buy from Canadian owned retailers. Must be cash or debit – no credit cards. Cumulative monthly.
Mobilizing Canadian savings is not rocket science: offer a decent rate of return, a tax nudge and the guarantee of the Government that the funds will be returned and money will flow. Give people non-refundable tax credits and they will hit the stores.
None of this needs to cost much. The non-refundable tax credits are tax expenditures but they should have a ripple effect which will offset those expenditures. The Small Business Bonds and the FN Water Bonds would be a charge on the Treasury but the Business bonds would be paid back and the Water Bonds would fund something the Government should be doing in any event.
What Freeland is actually talking about is accelerating the velocity of money in the Canadian economy. You can print as much money as you want but, if no one is spending it or spending it on inert assets like houses, it does very little economic good. There is an old saying that money is like manure, it does the most good when it is spread around. Get spreading Chrystia!