Canada's economy faces a significant productivity and investment crisis that has persisted since the global commodity price collapse in late 2014, creating an urgent need for innovative solutions.
The Federal Spending Problem
Recent federal budget promises of higher government spending won't solve these fundamental economic challenges. The federal government has already allocated tens of billions toward industrial policies aimed at job creation and economic growth. However, economist John Lester's research from last year revealed that 80 percent of these expenditures actually harmed the economy.
The federal Liberals' spring platform detailed economic multiplier effects from new infrastructure spending, but these positive effects would only materialize during a severe recession. Since Budget 2025 doesn't project such a downturn, these multiplier effects become economic dividers in our slowly growing economy.
Without widespread unemployment, government-funded job creation simply shuffles already-employed workers into different positions using debt and taxes, providing no net economic benefit.
The Tax Complexity Challenge
The core issue behind Canada's lagging growth lies in our tax system's complexity and inefficiency. According to KPMG research, 91 percent of Canadian business leaders identified tax code simplification as a critical priority.
While the federal budget made some progress by offering accelerated write-offs for certain capital expenditures, these incremental changes fail to address the scale of our current investment and productivity crisis. Small adjustments to tax codes actually compound complexity over time, weakening the intended benefits of accelerated depreciation and tax credits.
A Provincial Opportunity
Economist Jack Mintz has proposed a revolutionary approach: instead of our current corporate tax system that discourages capital retention by taxing reinvested profits the same as distributions, we should only tax distributions while leaving all reinvested earnings untaxed.
This system not only attracts capital spending but also eliminates the need for complex arrays of credits and depreciation schedules that have expanded our tax code by thousands of pages.
The federal government shows no inclination toward pursuing such substantive tax reform, but this creates a unique opportunity for Saskatchewan. Mintz suggests that provinces with their own tax collection agencies should implement this policy first to demonstrate its merits. Saskatchewan is currently developing its own corporate tax collection system, making it one of only three provinces capable of implementing this innovative approach independently.
This positions Saskatchewan to potentially lead the nation in tax innovation while addressing Canada's broader economic challenges from the provincial level.
