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Sean Speer: Young Canadians are stuck. Here’s a simple way to kickstart their lives


Erfan Nouraee is pictured in the family home he shares with his mother in Toronto on Thursday, January 20, 2022. Chris Young/The Canadian Press.

A majority of Canadians think that Canada is broken after years of stagnant incomes, affordability challenges, rising crime, government failures on basic functions like healthcare and immigration, and a deepening cultural malaise. But decline is a choice, and better public policies are needed to overcome Canada’s many challenges. Kickstart Canada brings together leading voices in academia, think tanks, and business to lay out an optimistic vision for Canada’s future, providing the policy ideas that governments need to ensure a bright future for all Canadians.

Although the Trudeau government’s 2024 budget purported to be about “generational fairness,” it was heavier on rhetoric than substance. Its signature measure—an increase to the capital gains tax rate—will harm those with assets but do nothing for those who aspire to accumulate them. It amounts to an act of class warfare masquerading as a solution for generational fairness.

A real generational fairness agenda would aim to help young Canadians purchase a home, start a business, invest in markets, and ultimately build wealth for themselves and their families.

The biggest impediment to these goals is they cannot afford to. They cannot get ahead. They’re graduating university with student debt and then struggling to find jobs that match their credentials, cover exorbitant rental prices, and still save for the future. One estimate is that it now takes 25 years for the median earner to save for a downpayment on a representative home in the City of Toronto.

The result is a “failure to launch.” Young Canadians are living with their parents longer, delaying getting married until later, and starting families at ages that preclude them from having as many children as they tell pollsters they want. One consequence is that they’re growing increasingly discouraged about the future and the country.

Reversing these trends won’t come from tinkering on the margins or taxing older Canadians. There’s a need for a more radical policy to help young people save and invest—to “kickstart” their family and professional lives.

One idea would be to extend the principle of the lifetime capital gains exemption to income taxes. The government could shield from taxation some percentage of one’s lifetime earnings as a recognition that we have a collective interest in people successfully transitioning from education into employment and starting to build wealth for themselves and their families.

One option would be to set the threshold for the exemption at one’s first $250,000 in income—which is a bit more than the minimum downpayment for the average home in the City of Toronto. The amount is scalable—it could be set higher or lower depending on different factors, including revenue loss.

Such a measure wouldn’t necessarily be regressive because those with high incomes would exhaust their lifetime exemption much faster than those with lower incomes. The median income for those aged between 25 and 34 years old in 2022 was $48,100, so the median earner would exhaust his or her exemption within roughly five years.

This wouldn’t be a policy alternative to the basic personal exemption designed to recognize the costs of meeting one’s basic needs in any given year. As one exhausted his or her lifetime exemption and started to be subject to income taxes, they would still have basic expenses that the tax system ought to account for.

Although a lifetime exemption would in theory create a high marginal effective tax rate (i.e. as it was exhausted, tax filers would face a steep tax increase on their incomes), the incentive effects strike me as pretty low. For low-income earners, they’ll still need the employment income to meet their basic needs even after an exemption is eventually exhausted, so it’s unlikely that it creates a big work disincentive. High-income earners will exhaust the exemption in short order and go on to earn more. There could be some households where the second earner may stay in the labour market long enough to maximize the lifetime exemption and then exit to raise children or volunteer or whatever. The numbers would likely be small enough that there would be no significant macroeconomic effect.

One policy consideration that would require some attention is the transition. Whenever a policy like this is enacted, there will be some who find themselves on the wrong side of the start date. Policymakers would need transitional measures for those who’ve been earning income for some period prior to the implementation date but haven’t yet hit the income cutoff.

Revenue loss estimates are beyond my capacity. The lifetime capital gains exemption is claimed by 55,000 per year and costs roughly $2 billion in annual revenues. A lifetime income tax exemption would presumably cost more.

According to Statistics Canada, there were just over 5 million tax filers between the ages of 25 and 34 who reported income in 2022. Some share of this group would no longer be eligible because they’ve already earned income. Suppose one-third of these tax filers were eligible and earned the median income of $48,100, then my back-of-the-envelope estimate is that it could cost the federal government about $7.5 billion per year. To the extent that this estimate is directionally correct, it’s roughly the equivalent of two-thirds the cost of a one-percentage-point cut to the HST/GST.

There aren’t, to my knowledge, other jurisdictions that have adopted such a policy. Others have exemptions for certain types of incomes (similar to Canada’s capital gains exemption) or socio-economic circumstances such as Hungary’s pro-natal exemption on mothers with more than four children.

It has however been the subject of some academic analysis and debate. Roger Martin, the former dean of the University of Toronto Rotman School of Management, and Herwig Schlunk, a law professor at Vanderbilt University, have both published articles broadly in favour of lifetime income taxation.

The proposal outlined here comes with a strong Canadian conservative pedigree. A similar version was put forward by Tony Clement in the Conservative Party of Canada’s 2004 leadership election which he lost to Stephen Harper—though he made it revenue neutral by fundamentally reorienting the tax system over one’s lifetime such that it was offset by tax increases as his or her income grew. Clement called it his “jump start proposal” at the time.

My proposal doesn’t envision changing the base of taxation or the time horizon at which it’s applied. It would simply establish a new lifetime income tax exemption on say one’s first $250,000 in income. It doesn’t set out broader structural changes—though of course a government would be free to enact them in parallel with what’s proposed above.

Roughly twenty years after Clement helped to introduce the notion of lifetime income taxation into our politics, the case for such a reform has only grown stronger. Canadians are struggling. They’re stuck. And they’re growing increasingly pessimistic about their own futures and the future of the country itself. We don’t need to resign ourselves to this state of affairs. There are ways to help them get ahead and reward work, savings, and investment.

If we’re generally committed to generational fairness—that we have a collective interest in the ability of young Canadians to save and invest more–then shielding their early income from taxation is one simple way to kickstart a better future for them, their families, and the country as a whole.

Alicia Planincic: Yes, it’s an emergency—Canada’s productivity record lagging other wealthy countries


Senior Deputy Governor of the Bank of Canada Carolyn Rogers during a news conference in Ottawa, May 9, 2024. Justin Tang/The Canadian Press.

In March, the Bank of Canada declared that Canada’s productivity problem is an emergency. And that improving it “needs to be a priority for everyone.”

Productivity is the amount of goods and services produced for a given amount of “input,” often measured by GDP per hour worked. Importantly, a more productive economy is the only thing that leads to sustained wage growth without feeding inflation.

Canada’s productivity is not only low but has failed to show strong progress for decades.

As of 1985, Canadian workers produced $37 of value per hour worked compared to $43 in the U.S.—around 87 percent of U.S. levels. By 2022, productivity had reached $53 per hour worked in Canada but $74 in the U.S., leaving us at just 72 percent of U.S. levels (all figures in USD).

It’s not just that we’re falling behind the U.S., either. Relative to a dozen other comparably rich countries, Canada saw the least growth of any assessed, except Italy. Countries like Germany, France, and Sweden that used to be on relatively equal footing with Canada have all left us in the dust. Meanwhile, many countries that used to trail Canada (like Australia, the U.K., Finland, and Iceland) now boast a productivity advantage. Overall, Canada’s ranking has fallen from 8th to 12th.

Graphic credit: Janice Nelson. 

Canada’s low and sluggish productivity isn’t a matter of Canadians not working hard enough. Productivity is high when workers have what they need—the tools, skills, and technologies—to do good work most efficiently. Think of a lumberjack cutting down trees; having a chainsaw allows them to cut far more, and more quickly, than with an axe. Canada’s poor performance suggests our economy is running on old tools and technologies with limited investment—all of which, it turns out, are true.

There is no shortage of explanations for why that is. But improving Canada’s productivity may not require that we settle on its precise cause(s) to get to reasonable solutions. To reverse the trend that is otherwise set to continue, Canada will need to figure out how to best incentivize investment in the kinds of things required—e.g., research, technology, and innovation—to enhance productivity; and more critically assess the kinds of policies that will stymie it.

This post was originally published by the Business Council of Alberta at