Canada's fiscal trajectory is on an unsustainable path, and taxpayers may be forced to shoulder the burden for generations unless political leaders confront economic reality, warns a prominent tax expert. Kim Moody, analyzing the recently released Public Accounts of Canada for the fiscal year ending March 31, 2025, argues that the federal government's budgetary practices are misleading the public and setting the stage for potential future tax increases.
Deceptive Budgeting Masks True Spending
Moody highlights a critical discrepancy in how the government reports its finances. While the Public Accounts are prepared using standardized Public Sector Accounting Standards (PSAS), the federal budget employs a different, and in his view, deceptive methodology. The budget artificially separates the operating budget from the capital budget using an "excessively broad definition of capital."
This tactic, he explains, allows the government to reclassify day-to-day operational expenses as capital investments. The result is a misleading portrait of fiscal prudence, making it appear as though the government is investing for the future while technically reducing its reported operating deficit. Moody asserts this approach is designed to appeal to financially illiterate voters but does not fool sophisticated financial observers like creditors and bond-rating agencies.
The Stark Numbers from the 2025 Public Accounts
Peeling back the layers of budgetary presentation reveals the raw financial data. According to the official 2025 Public Accounts of Canada:
Total federal revenues climbed to $510.95 billion, marking an 11.2% increase from the previous year's $459.5 billion. The composition of this revenue remains heavily reliant on personal income tax, which contributed $234.32 billion, or 45.9% of the total.
On the spending side, total government expenditures reached $547.3 billion, a $25.9 billion (5%) rise from 2024. Key expenditure drivers include public debt charges, which consumed $53.4 billion, and Old Age Security payments (including GIS), which totaled $79.5 billion. Canada Health Transfers to provinces amounted to $52.07 billion.
The Path Forward: Confronting Scarcity or Facing Consequences
The core of Moody's argument centers on the "economics of scarcity," a fundamental principle that resources are limited. He contends that by ignoring this reality through accounting gimmicks and persistent spending growth, the government is deferring difficult choices. The inevitable consequence, he warns, is that future taxpayers will be left to pay the price, potentially through higher taxes.
For Canada to regain its fiscal footing and aspire to lead the G7 in economic growth, Moody insists that genuine tax reform and transparent accounting are not just options but necessities. The alternative is a continued erosion of fiscal health, where the cost of political convenience today becomes a multi-generational financial burden.
The disconnect between the budget's optimistic narrative and the harder numbers in the Public Accounts serves as a red flag. Moody's analysis suggests that without a serious course correction, the debate may soon shift from how to manage spending to how to extract more revenue from an already heavily taxed Canadian public.
