Canada’s slow economic growth is a national emergency, and small tweaks won’t fix it: Hunter Prize 2025

The Hub’s third annual Hunter Prize for Public Policy, generously supported by the Hunter Family Foundation, focused on solving Canada’s stagnant living standards and slow productivity growth. A diverse group of ten finalists has been chosen from nearly 250 entries, with the finalists and winners chosen by an esteemed panel of judges, including Theo Argitis, Hon. Lisa Raitt, Frances Donald, Jack Mintz, and Alicia Planincic. The Hub is pleased to run essays from each finalist this week that lay out their plans to help solve this persistent policy problem. The Hunter Prize is made possible thanks to the support of the Centre for Civic Engagement. Canada’s economy is in a state of structural decline. From 2015 to 2024, our real GDP per capita grew by a dismal 1.4 percent—second lowest in the OECD—while the U.S. achieved 18.2 percent growth. As a result, our living standards gap with the U.S. is widening. Canadian GDP per capita, which once peaked at 94 percent of U.S. levels in 1981, is now at 76 percent and projected to fall to just 70 percent by 2029. The evidence of decline is pervasive. Capital investment per worker has been falling since 2015, and nearly half of our most promising startups are now choosing to headquarter in the U.S. For a G7 nation with immense resources and talent, this isn’t a temporary blip; it’s a structural emergency. Our complex and uncompetitive tax system is choking the very growth we need to reverse this trend. Canada hits its upper earners hard and early. Ontario’s top marginal tax rate is 53.5 percent, the fifth-highest in the OECD. This top rate kicks in federally at $253,000 CAD, while the U.S. top federal rate doesn’t begin until roughly $878,000 CAD. Our average corporate tax rate of 26 percent also exceeds both the U.S. and OECD averages. Canada’s disadvantage widened with the provisions in President Trump’s “One Big Beautiful Bill.” More fundamentally, we’re taxing the wrong things. Personal income taxes account for 37 percent of Canada’s total revenue, 13 points above the OECD average. Meanwhile, consumption taxes make up just 22 percent, well below the 32 percent OECD norm. Yet research consistently shows that taxes on income and profit impose far higher economic costs per dollar raised than taxes on consumption. In short, we’ve built a system that suppresses growth. The answer isn’t tinkering. It’s transformation. Enter Big Bold Tax Reform (BBTR), a comprehensive reimagining of Canada’s tax system inspired by Estonia, which consistently ranks as the most competitive tax system in the OECD. Since its 2000 reforms, Estonia has achieved a remarkable 119 percent real GDP per capita growth compared to Canada’s 27 percent. It leads Europe in startups per capita and venture capital funding, all with a tax system so simple that online filing takes just five minutes. BBTR adapts Estonian principles to Canadian realities. Ottawa acts first with immediate federal reforms, then coordinates with provinces to achieve combined rate targets that would vault Canada into the top five most competitive tax systems in the OECD. At the federal level, Ottawa would introduce a flat 20 percent personal income tax on incomes above $22,500. This significantly raises the income threshold at which Canadians can earn without paying federal personal tax, up from today’s basic personal amount of $16,129. Five brackets ranging from 14 percent to 33 percent become one, creating a powerful incentive for work and entrepreneurship, while disincentivizing brain drain. For businesses, BBTR sets a 12 percent federal corporate rate (down from 15 percent) and allows 100 percent immediate expensing of all capital investments. This eliminates the complex capital cost allowance schedules and creates a near-zero effective tax rate on new investment. The message becomes crystal clear: Invest in Canada. BBTR also eliminates the preferential 9 percent small business rate, which, coupled with preferential provincial rates, creates a “small business trap” that discourages firms from scaling up. The uniform 12 percent federal rate applies to all firms, regardless of size. Capital gains would be fully included in income but taxed at the same 20 percent flat rate, with rollover provisions exempting reinvested gains. This counters the destructive lock-in effect, freeing capital to flow toward its most productive uses. BBTR retains RRSPs, TFSAs, and the Principal Residence Exemption. To fund these reforms, BBTR raises the federal GST from 5 percent to 7 percent, deliberately shifting toward a more growth-friendly tax mix. Crucially, it doubles the GST/HST Credit to help shield low-income households. The Canada Workers Benefit, a wage subsidy program, is retained to provide further support. BBTR also finds new revenue by removing $25 billion in poorly targeted tax expenditures and opens fiscal capacity by scrapping $11 billion in corporate subsidies that distort markets. Stage two requires provincial coordination through a Federal-Provincial Tax Competitiveness Panel. This panel would align provincial rates with national targets: no more than 35 percent combined for personal income and 20 percent for corporate income. The long-run payoff is substantial. With full coordination, BBTR could lift GDP by 4.5 percent to 5.5 percent, boost wages by 2 percent to 2.5 percent, add 240,000 to 280,000 jobs, and grow our capital stock by up to 10 percent. There is a net fiscal cost for Ottawa, but it is manageable. BBTR increases the federal deficit by an estimated $33 billion annually for the first five years. But thanks to dynamic growth effects, it becomes nearly revenue-neutral over time, dropping to just $6.7 billion annually, or 1.7 percent of federal revenue. If the government is going to run deficits, it should do so for proven structural reforms that reverse decline, not for spending that at best only manages it. The geopolitical context makes this urgent. Trump’s tariffs have caused immense trade disruption and uncertainty. His tax reforms have deepened the U.S. advantage. The “giant sucking sound” Ross Perot once warned about is now echoing northward, as talent, capital, and innovation are pulled south. BBTR is a robust response. It positions Canada as a compelling destination for investment. It sends a powerful signal: We are open for business, serious about growth, and ready to compete. Will this face opposition? Absolutely. Special interests will resist losing boutique preferences. Small business lobbies will fight eliminating rate differentials. Progressive activists will cry “tax cuts for the rich.” BBTR requires political courage, but it offers a concrete path to make Canada competitive again. The Carney government has pledged to make Canada the strongest economy in the G7. BBTR can help deliver on that promise. It builds a tax system for the 21st century that rewards work, attracts investment, and fuels innovation. Read the policy paper: