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298: Canada’s New Budget | The Hidden Debt Crisis · Wealth On Main Street

• 0:00
  Speaker A: Foreign.
• 0:11
  Speaker B: Welcome to wealth on Main street, where conversations about growing your wealth are fun and entertaining. Wealth isn't just about money. It's the skills and the knowledge that we develop to pass on to future generations. Tune in each week to grow your mindset and your net worth at the same time. So what is the deal with this Canadian federal budget? What's really happening? Is it good? Is it bad? Should we know? Should we understand? What do you know about it? We're going to unpack that a little bit. We are joined by an incredible individual making his second appearance on the program today. We've got Kim Moody, who is the founder of Moody's Private Client. He's a chartered accountant. He is an amazing individual. He's also one of my colleagues from the Strategic Coach Organization. We love having great conversations with Kim because he brings so much value to the table with his knowledge. If you haven't done so already, we'd recommend you connect with him on LinkedIn. He does produce a lot of great content on there, and he regularly writes articles for a lot of publications in Canada. So, Kim, welcome back to the program today.
• 1:20
  Speaker A: Thanks, Richard. Very kind. Appreciate it.
• 1:23
  Speaker B: Now, I was really excited about having this conversation with you for a number of reasons. Obviously, so many great things that we can talk about, but we have a lot of recent news happening in Canada. Of course, the news cycle is something that never stops. How good or what quality of news maybe is being produced. We could debate that a little bit. Perhaps that's a discussion for another day. But specifically around the financial category, last time we had you on was released, I believe, very early in the year of 2020. So here we're getting closer to the end of the year. And we were having our previous discussion prior to the election. So since then we've had an election. It didn't necessarily go maybe the way that we had anticipated in our previous discussion. And we found ourselves with eight months of, let's call it, uncertainty that's maybe developed since that timeframe. So I'd love you to maybe walk us through number one, why is it we had to wait so long to get a budget? Because that seems a little bit odd on its own from a federal standpoint. And what should Canadians be making of what they've heard about this budget so far?
• 2:29
  Speaker A: Thanks, Richard. There's lots to unpack there. You know what, why did we have a delayed budget? You know, the stuff that's been put forward by certainly friendly media and friendly people to the government, which I'm certainly not one of them, is Is that, you know, they needed to take their time after an election. You know, they, they had to assess. That's total. The. There's lots of history in our. Our country was born in 1867 and we've had a budget every single year since 1867. Now, just to be clear, and I put this in my writings about it because I've written about this delayed budget stuff or you know, quite a few articles in the Financial Post, but. But we've had a budget every single year since 1867, with the exception of 2020, which was a disgrace in and of itself. 2020, as a reminder is the COVID year when the government was shoveling money out the door with no accountability. And to me that's no excuse for not having a budget. That was an absolute disgrace. And you know, when you think about our history from 1867, I mean, there's been a lot of disruption. You know, like you said, the news cycle. Well, the news cycle has been going on since time began, right. It's just the different forms of news that we get now is just relentless, right? Social media, 24 hour news channels. But news happens all the time. And some big events in history have been World War I, you know, that lasted for four years. That was pretty disruptive. But we had a budget every single year of that. You know, we had the Great Depression, which started in 1929. We had budgets every single year. We had World War II that started in 1939 and ended in 1945. We had budgets every single year of that. We had the Korean War, you know, we've, we had budgets all the way through that too. We had the Cuban missile crisis in the early 1960s, you know, we had gas shortages, you know, in 1970 and inflation like crazy, you know, it goes on. And we had financial crisis, world financial crisis in 2000, crisis in 2008, still had a budget. And so I mean, to use Covid as, as an excuse to not provide a budget was disgraceful, unfortunately. But you know, the general public bought it for the most part. Oh, oh man, they, you know, they're going through a crisis. Shut up. As if. And then, you know, and then to marry that up with, well, we have a new government, you know, we have a new leader, he needs to take his time. That was an absolute disgrace.
• 5:19
  Speaker B: Some would say that is a crisis in itself there, depending on what side of the fence you might be on.
• 5:24
  Speaker A: Yeah, well, we could talk about that for sure. So do I think, you know, it was 567 days since we had a budget from April, April 16, 2024 was the last one. And then November 4th of, you know, just a few weeks, a couple weeks ago. That is an astonishment. It's a, it's a disgrace and it should never happen. And as I wrote about one of my articles recently, I'm shocked, still shocked that the average Canadian thinks that that's acceptable. It should not be and it is not. So that's, that's kind of my buildup to, you know, my, my short comments on what do I think of a delayed budget. I don't know if you have any comments on that, but I could certainly go into what I think about the budget now if you want.
• 6:10
  Speaker B: But. Well, the thing that comes up for me as you rattle off a number of these well known historical impacts and events that transpired that everyone's familiar about, I mean, granted we, you know, I certainly learned about them in various history texts, certainly a great deal in school. I suspect maybe that's not being taught the same degree in school as it maybe once was. But there is a, in my opinion, some would say, I think a lot of people would agree with me, that in an unprecedented news cycle, world war, global crisis type event, whatever that might look like, however that may present itself in the veil of the news cycle, would indicate a higher need and reason for putting the budget together and releasing it to the general public to create more either confidence or awareness. Because if you don't know what the federal machine is going to be doing or planning to do, in some degree a budget is a plan. Nobody really sticks to the budget. I don't imagine this government will either. But it gives you some varied indication of where they think they're going to be allocating dollars. And so the rest of the world or the nation and its various elements, whether what, you know, if you're in manufacturing, if you're in the financial services business, if you're in whatever format of business you're in, you now can start to plan effectively to some degree relative to what that document says. And until it's released, you're literally sitting in some form of planning limbo about your own life and your own business, because you have no earthly idea what the federal government's going to do. So the need for the budget is amplified in a period of crisis elements not to be delayed to some unreasonable date, some unreasonable timeline that is clearly unprecedented.
• 8:05
  Speaker A: I totally agree. And I think what you're illustrating, and certainly I think where we've got some common ground, would be the average Canadian number one is financially illiterate. You know, and I'm not disparaging Canadians and I, you, I say this in my article, articles all the time. It's just a fact. Most Canadians don't know much about, you know, their own financial affairs or, you know, the financial and economics situation around them, which includes our country, obviously. So when you compound that, you know, lack of financial literacy with constant news cycles, you know that, that are ultimately being bombarded through, know, social media, through television, etc, and you know, in my view it all, it, it becomes dumbing, you know, when you hear billions here, billions there, it's, it's numbing the average Canadian, the average person to not really care anymore. Oh, a billion here, a billion there. Oh, we don't have a budget, you know, it's like, okay, whatever. And some of that I would submit to you, is deliberate. Some of it's just a function of the fact that we have technology that's improved. One might debate whether it's an improvement or not, but we certainly have information being thrown at us at a much rapid pace. And so I think there's a lot of technology, in my view, that is just not good to help with advancement of financial literacy. And, and this is one of them, in my view, social media.
• 9:44
  Speaker B: There's a, you know, a lot of people sometimes struggle with sleep. And so they sell white noise machines or they have apps that produce white noise. And a lot of times people do that because it helps them sleep. And so if that is a product that you can buy, a service that you can pay for if it's being produced, people actually develop and get like, someone came up with the idea, oh, I'm going to, I'm going to record white noise and then release it in some degree. You know, like you could buy. It used to be able to buy CDs that were white noise. So this has been going on for a while. Well, we are kind of in that boiled frog situation where all of that, you know, throwing down $1 billion or $1 trillion as a number has become and developed into some measure of white noise. And white noise tends to put people to sleep. And the whole idea of white noise is that it's some background element that you literally train your brain almost not to pay attention to. And so it's not, it's not like a car alarm that causes alarm and distraction. But if every time that the word billion was thrown around in a government sense, in a budget or trillion, it raised literally the alarm bell sound on the news cycle or on your television or on your phone app, and you had an alarm that went off. Like, you know, you get these emergency alerts when there's a, you know, there's a tornado warning coming out. Well, imagine you got the emergency alert when it says that the government was about to spend a trillion dollars of your taxpayer dollars on something that didn't matter to you, that should send you some kind of an alert notification. And if that was the world that we lived in, maybe people would pay attention a little bit differently.
• 11:18
  Speaker A: Agree. But all you need to do is go to the television, which I don't do anymore. I, I just have stopped watching television news for probably good 15 years now because the quality is so ridiculous and it's propaganda and opinion more than fact. But you know how many people are glued to the bottom screen where it says breaking news? You know, and the breaking news is, you know, Prince Harry stubbed his toe or whatever, you know, I'm making up here. But you know, what's breaking news now? It, the, the threshold is so low, you know, and it's so ridiculous. And, and you know, the advertisers and the media are really trying hard to get that attention. And so, of course, everything is breaking news or the weather. You know, the weather charts are all red because we're boiling up. You know, it's just ridiculous stuff. Right? And if you see that manipulation that happens and the dumbing down and the numbing, overall, it's concerning. And I think that's a message in this budget. You know, bringing it back is, you know, the spending is outrageous, absolutely outrageous. And all the other stuff that's in there, who cares? It's, it's, in my view, it's, you know, as I said in one of my articles, I used, you know, the old Clint Eastwood movie, the Good, the Bad and Ugly. There's some good in there. You know, they eliminated the underused housing tax. Good. Because it had to go. You know, they, they eliminated parts of the luxury tax, except they kept it for automobiles for some stupid reason. You know, that's good, but it's all, all that good is overtaken by this outrageous spending, which is going to be a burden on your kids, on my kids and our grandchildren and their kids. And that, that, to me is almost unforgivable.
• 13:17
  Speaker B: And there's a multitude of ways that that burden may present itself. There is obviously the impact of increasing debt loads that fundamentally every Canadian citizen has some share of. And whether we're talking to, of course, our Canadian friends or our friends down south who have their own unique challenges and problems. We, we're all saddled in North America with some measure of monstrous overspent debt that no one really particularly agreed to.
• 13:47
  Speaker A: Europe is the same way.
• 13:48
  Speaker B: And we're in a position where it, you know, the piper is going to have to be paid. How is it going to be paid? Well, one of the ways that perhaps they're paying it is by devaluing the value of the currency so that they can pay it with a weaker dollar. Some, some might say that that is the case, but there go if that is, if that were true, hypothetically speaking, well then you, the virtue of the printing or the, the expansion of this debt obligation money supply element is what many people would agree is the leading cause of what amplifies inflation. Well, inflation is the biggest hidden tax. It's a word used to describe something that doesn't truly describe what actually happens, which is why it confuses people. And then additionally it should be listed as a tax if we were really truthful.
• 14:39
  Speaker A: And who does it hit? Like who does it hurt the most? Inflation.
• 14:43
  Speaker B: It, it hurts the low to middle class and it, and it, and it hurts the, the consumer. And the degree to which all elements of your buying is completely eroded. There's no impact, no, no value in being a saver anymore because you, by, by having savings, the savings is being eroded by the virtue of government decisions. And the, the combination of the, I would call it the cartel between the government cartel and the banking cartel that seem to work hand in hand with one another in relation to how money is doled out into the system.
• 15:19
  Speaker A: It became very obvious and historical example. There's lots of historic examples about how inflation hurts the poor. But you know, it happened right before our eyes in 2021, 22, 23. And it's, it is so unfortunate to see how it, it hurt the poor. Which is one of the reasons why I was so shocked that the liberals got reelected. And when you look at the voting numbers, of course it's the boomers that put them over the top, which, the boomers tend to be wealthy. You know, they've already retired, they've got their money and so, you know, so they just want to maintain their lifestyle and don't worry about the, the youth generation that's struggling, which to me is ridiculous. And so it's, it's surprising to me that it's not a bigger issue this spending. You know, I talked to Jack Mintz yesterday. I had him speak to one of my coaching groups and I asked him, I said are you concerned that this massive spending will generate inflation. And he said not so much on the capital side he, but on some of the stuff he, he is concerned and even some of the capital stuff he's concerned. And so we'll see if it, it plays out. I mean when you have that much money entering the system, it's, it could be, you know, could be very inflationary, which I, I do worry about.
• 16:42
  Speaker B: Well, I mean I, I really do think like, I don't know if it's a, if it's a, if it's a gift to some degree, but the fact that we have seen it so recently and there's literally a massive printing situation in the COVID time we're talking the last five to six years, we saw the immediate aftermath within a reasonably short period of time, within a 12 to 18 month period of inflation, rapid increase. We saw that was the thing in the whole news cycle. But yet the people that were warning about it prior to the printing of the money, nobody was replaying their clips.
• 17:21
  Speaker A: And you know, my, but my buddy Pierre was a very, you know, early on bell ringer for that and, and it's just crazy stuff.
• 17:31
  Speaker B: And so you know, you did mention there was a couple of elements, a few miscellaneous taxes that seem to be eliminated. And so that is good from a perspective of less things to deal with on, on your annual tax return. Why don't we talk about. Let's, let's, let's give the people some positive news. You mentioned two things, some luxury tax elements. What were the positive isolated elements from your vantage point that you could pull out of the budget that people can say okay, at least there's some little things that I might be able to hold on to.
• 18:04
  Speaker A: Some glimmer of hope on the tax side because on the economic side I don't see much. As a matter of fact, I think it's quite the opposite on the economic side. On the tax side, there's just not a lot there. I mean if you're a business owner and if you, you know, if you happen to be in the right industry, manufacturing for example, and you build a building or acquire a building, then you may be able to write off the building 100% which is kind of unheard of. But how many manufacturers do you deal with, Richard?
• 18:39
  Speaker B: Not a ton.
• 18:40
  Speaker A: Yeah, because manufacturing in Canada is almost non existent. Right? I mean it's, and if you are a manufacturer, you're a fairly large one.
• 18:47
  Speaker B: Yeah, you've already got a building and.
• 18:49
  Speaker A: You'Ve already got a building. And so it's very, you know, stuff like that in my view is very political. Right, because where's the manufacturing belt in Canada? Well, it's, it's typically going to be in Ontario, maybe a little bit Quebec, but in, in Ontario. And how broad based is that? It's not like when you take that, you know, the, the bread and butter of this country is small business owners, you know, that provides 60% of the employment roughly. At least that's what Jack Mintz told me yesterday, which I always believe him. I thought it was actually a little higher, but let's just say it's 60%.
• 19:26
  Speaker B: I think it used to be higher until there was a rapid hiring of non, non, let's call it government employees over the last number of years. So, so maybe the, maybe the, the curve of those numbers may have swung a little bit in the last 10 year period.
• 19:43
  Speaker A: Yeah, and you're probably right. But, but how many of those small businesses are manufacturing? And we'll be able to take advantage of the 100% CCA write down or depreciation right now write off on buildings. I would say it's going to be, it won't be zero percent, but it'll be very close to that. And so when they come out with this big announcement that hey, look at what we're doing, we're accelerating depreciation, it's a bunch of crap in the whole scheme of things.
• 20:13
  Speaker B: So.
• 20:13
  Speaker A: But having said that, if you happen to be one of these chosen industries, manufacturing or green, which I just always turn my, I go like that on because of such a bunch of crap, you know, providing, you know, tax incentives to the green industry. Again, how many clients do you deal with in the green industry? Yeah, well, I'm pretty close to that so. Because it's just not pervasive. I mean on the very large side perhaps, but, but outside of that, on the tax side, the only one that got a lot of play, which again was there's a few things that I think are, are good on the tax side. One, or actually before I say good, some people might be able to take advantage of this, the so called heroes tax credit, or they call it personal support workers tax credit. It's a refundable, it's temporary for five years. They promised it in the election, their election policy platform. And if you happen to fit within the definition of what a personal support worker is, then you'll get eleven hundred dollars, maximum $1100 refunded on your tax return. But it's such a narrow definition of what a personal support worker is. From what I can Tell so far it's going to be like caregivers and nursing homes, but the average nurse? I don't think so. From what I can tell. Again, I stand to be corrected on that. So some might view that to be good. I don't because I think it just clutters the Income Tax Act. Again, I hate personal tax credits. They, they're, they're just very much political tax noise that clutters our star system.
• 21:54
  Speaker B: It creates unnecessary confusion because most people don't know it's there. Most people don't know it exists. A lot of the accounting professionals, because there's so many changes, you can't keep up with them all. They may not agree, not even know it's there. They may not ask the question, it's not on their updated form. Hey, do any of these things apply to you when you come in to file so that they even know to ask you more appropriate questions? So it's, it's not like even if they put something like that out there, unless you are actively seeking for that, the probability you would even find it or you're a specialist in that nature is quite low.
• 22:27
  Speaker A: I don't disagree. The, the one thing that I'll, and I did say this in one of my articles, the one thing that was good in my view is they're making. It's. It looks like at least anyhow, and we'll see if the rubber hits the road. But looks like they're making legitimate progress on automatic tax filing, which, you know, some people don't like that I support it because they think that Big Brother, you know, the government is going to have more control over, you know, the filing of your returns. You know, there's other countries in the world that like, for example, the uk, if they have all the information, like information slips about your income, well, they'll prepare the tax return for you. You have the ability to review it and approve it. But if you don't do any of that, they'll just file it for you. In my view, that's a good thing because the average Canadian does fit within that simple system. In other words, they get a T4 slip. You know, they might have a bit of interest income from their bank account. They might have, you know, an RSP contribution, but the government has all that information. And so what's to stop them from just taking that information and running it through a tax return? Nothing but. So I've been on this bandwagon that the average Canadian who, you know, shouldn't have to pay clowns like me to file their tax terms. Now frankly, I don't file tax terms. That's, you know, haven't found one for years for clients that have some staff members that do that. But, but to have, you know, a person that makes $50,000 a year on a T4 slip and, or even less than that, say $40,000, $50,000 and they have an RSP contribution maybe, and they have to go out and buy TurboTax or have to pay H and R block or worse yet, an accountant to file their tax return. That's disgusting, you know, because at minimum they're going to pay a couple hundred bucks minimum. Worst case, you'll get some shyster that charges them a lot more than that. And to me that's ridiculous because the tenets of a good tax system is it should be administratively easy and approachable. But unfortunately with the system we have, you know, you have to file a tax turn to get eligibility for all these stupid credits. You know, the redistribution of income programs like the GST credit, the carbon credits, which I think has finally gone away.
• 25:00
  Speaker B: At least from a personal standpoint.
• 25:02
  Speaker A: Yes, exactly. The Canada Child Benefit, you know, the list goes on and on and on and on. But you can't get that unless you file a return. So if we're going to have that system, then make it easy for these people to file the returns. Now I get grief from organizations like the Canadian Taxpayers Federation that, that doesn't like my views on this. But too bad, I mean, you shouldn't have to pay people to comply when you're simple from a tax perspective. So that, so they are making progress from what I can tell.
• 25:34
  Speaker B: So that's good, interesting about that. So I, I appreciate your take on it and one of the, I guess things that I can see based on how you've described it is in, in theory you have a more automated system. Well, that automated system doesn't require a bunch of human beings working at Canada Revenue Agency to now administer all this pencil pushing and paperwork.
• 25:55
  Speaker A: Exactly.
• 25:56
  Speaker B: So in theory, the real. So now I, I say in theory because generally speaking, when, when a governing body increases in size, it does not contract very often.
• 26:10
  Speaker A: In theory, yes.
• 26:11
  Speaker B: So, but in theory it could contract if we have proper technology identifying and if that technology was designed for the benefit of the people, where it actively went and it found applicable elements. Okay, hey, you're married or you're a, you're a caregiver, like whatever boxes it can determine, it may automatically begin to apply tax credits and things in a changing dynamic system where, you know, if that were the case, that I could see that being highly beneficial, especially if it also reduced the, the workforce necessary. So because there are people doing fraudulent activities and there should be people who can go chase after those fraudulent activities, I think that there should be a measure of that that takes place that that does exist. I would disagree maybe with the size of the workforce out there doing that and who they're, who they're actually chasing because they're chasing not the people who are hard to go after, they're chasing the people who are easy to go after, which is everyday Canadians. And so it's a lot easier to get a thousand or two thousand dollars from, from 10 million people than it is to get $10 million from one person. To some degree, like when you putting, when you're putting, you know, someone who, who's, who owes $10 million because of a fraud situation, they probably are really good at hiding it. So you need a lot more energy and effort to try to go track and figure that out, put a case together. And it might just be easier to just try to get it from everyone else. And that, that is not ideal. So you have. So if everyone in your description, you know, the bulk of, you know, Canadians employed individual, they got a simple tax return, they save a couple hundred dollars a year. You could look at that as an, as a tax savings in itself because they're saving the tax effort and the cost of what they need to file the tax. Although it's not a direct tax savings and maybe there's some potential where it just simplifies their life. I could see the absolute benefit of that. I could also see the degree that Big Brother. I'm not a big fan of Big Brother either and I think everyone should read the book 1984. Apparently it's been flying off the shelves in the last number of years. But I, I think there, there is a, there's a degree to have healthy skepticism over that because oh for sure that while the intention might be good, the intent in the hands of the wrong people, where and where you have a changing guard every number of years, you might have a system in place, but then, then the guard looking after the system changes and now how do they utilize that system? I think there is some, there's some degree of concern that could exist there for sure.
• 28:43
  Speaker A: Yeah, I don't share your views too much on, on that last point. The rest of it I do because at the end of the day right now that the government is the gatekeeper of that information. They already have. So if they Just take that information and put it into a tax turn. Assuming that it's a, a proper tax return. I don't see the mischief.
• 29:02
  Speaker B: Yeah, I mean, yeah, they have the information. It's right. You're talking about information that's, that they have in place already, which makes a lot of sense. I mean it's not like they're, and.
• 29:09
  Speaker A: They'Ve had it for ever since income tax has been around. Right. You have to file these information slips and they've got it. So that, that's the part that I disagree with the Canadian Taxpayers Federation and, and the last comment that you made right now, having said that, do I think that there should be a healthy dose of skepticism whenever the government does something for you? Yes, I do, I do. But on something like this, you know, they've already got the technology, you know, they know how to process tax returns. They do millions of them a year. And so to me, to take out the non productive side of society, which is, you know, charging taxpayers who are pretty moz means, you know, 200 bucks to or more to do their tax returns, I think is very non productive and could could be done better. So there's my little rant. I do think that's a positive thing that's coming out of the government budget. I would say the rest of it is pretty ridiculous.
• 30:10
  Speaker B: It is interesting to see. I asked for the positive elements because I wanted to give people something upbeat to look at and you did identify some, but you also had to really, really work at it to try to pull those things out. That should tell everyone listening just, you know, and you know, you've been doing this for a long time. You've been, you've been seeing and looking at reviewing budgets. You've been writing articles on them for years and years. So this isn't something new. What is new is what's in the budget. And you know, we have to formulate an opinion about it and we can use some facts to do that and we can use our personal experience to do it. My personal experience is not in your unique ability in the realm of tax and legal knowledge base that you have. So that's one of the reasons why we have you on the program. If we go back to the budget we think about. I'm just curious from your vantage point, let's walk through what are some of the future possibilities based on what you see in the budget? Where do you see this? Where would you want Canadians listening in to be aware of in how this budget might impact their lives? And other than the inflation that we've discussed. I think we've already hit that bullet point. Where's the other areas that you see them where they should be really aware and cognizant if they were starting to ask better questions?
• 31:27
  Speaker A: I think it goes back to the economics and I put this in my writings, and I'll continue to write about this, but when you have debt that accumulates in our country, and you mentioned one way to pay that is devaluing the currency. And I actually could have put that alternative in one of my articles, which I didn't. But there's really only two ways to deal with that debt. Right. One, increase revenues for the government, which means increase taxes. And two is austerity measures, which means cut expenses like crazy so that you have more money in order to pay down the debt. Or a combination of the two. Right. And those are really the only three ways. I said two, but you combine them as three. Three ways to deal with it. And so when you don't have a plan to pay to do either One of those 1, 2 or 3, that means that something's going to happen down the road because eventually you're going to, you're going to face a crisis. You know, we faced a crisis when you were a Youngster back in 1994, I think it was, or 95, when we had a debt crisis and Krechen had to deal with that. And so ultimately there was significant austerity measures and there was tax cuts put in place. And it was actually an interesting time. But ultimately the crisis went away because we dealt with a plan to deal with that accumulated debt or that growing debt. And I can see that we're going to have to deal with. I could see that coming. I already see some people ringing that alarm bell. And what's interesting is some of those people that are ringing that alarm bell are getting dismissed. Oh, you're just an alarmist. You're just an alarmist. Which, you know, is so typical in today's environment. Right.
• 33:18
  Speaker B: There's a reason that people have alarms. Yeah, I agree.
• 33:23
  Speaker A: And some of the people that are raising these alarms, you know, a guy like Martin Peltier, who I have a lot of respect for, and you know, he's, he's been putting out relentless amount of information on his ex feed about, you know, the looming crisis. So, so that's a concern to me. The other concern is are we going to see huge taxes? Yes, I think we will if this is, if we continue to see the debt increase. And the other thing that really does concern me is the debt charges, which, you know, the average Canadian doesn't have a clue about what this is. But the, the federal, you know, the budget projects that we're going to spend $55 billion this year on debt charges, on our debt growing to 76.1 billion in a few years from now. Now, first of all, I don't believe those numbers. I think they're actually maybe a lot higher, but let's just assume they're right. Do you know how much GST we collect as a country, Richard?
• 34:23
  Speaker B: Not enough to pay that interest.
• 34:26
  Speaker A: It's roughly the same as the debt. Roughly. Do you know how much we collect in corporate tax revenues?
• 34:33
  Speaker B: I don't.
• 34:35
  Speaker A: Well, let me put this in perspective. And these numbers are from 2024, the fiscal year for the federal government ending 2024, the total amount of revenues, tax revenues, levies, et cetera, that were collected was $459.5 billion. That's all the revenues they collected. Now, when you have GST being only 50 billion of that, and then personal tax, by the way, was 217.7 billion. So it's about 47% of that 459 billion. So we very much rely on personal tax revenues as a country because it's so skewed to that. But then you have $55 billion growing to 76 billion and you've got 459 and a half billion. Think about that. That's a material percentage of our costs against total revenues. It's more than 10%. Now, the average Canadian will go like this. What does that mean? It means nothing. Well, what I've been trying to raise the alarm bell on is that money goes to bondholders, which doesn't benefit the average Canadian, even mostly it goes out of the country. Well, from what I loosely understand, about 30% of it goes out of the country. Foreign bondholders. But all that aside, which we could debate, that does every dollar of interest, like if we had a dollar that went to a bondholder as opposed to a dollar that went, you know, that was that we could ultimately use for some other purpose for the country, such as health transfers to the province or education transfers and maybe improve our shitty education system that we have in the provinces. You know, you've got young kids that are going through school. Thankfully, mine are done. But I'll tell you, the education system, it's more about indoctrination than it is about providing good, good teaching these days, in my opinion. But so if we had actually some decent structural changes, and that money that could go to education or to health care or to improving our roads, et cetera, et cetera. I think our country overall would benefit. But no, they go to bondholders instead, which doesn't benefit the average Canadian. And instead we're dealt with increasing pressures from the government. And those pressures are going to have to be increasing taxes, cutting spending, and worst case, they're going to have to cut social programs because they're not going to be able to afford them. And that's when that if they cut social programs, that's when the average Canadian will wake up. What do you mean I don't have my old age security? What do you mean?
• 37:29
  Speaker B: But in the meantime, the old age part is still there. It's just the security part that we're taking away. It's interesting you mentioned. So Nelson Nash, you know, my mentor who wrote becoming your own banker, he used to say, and I remember being in an event with him and his wife Mary would often attend and they were, they were married for, I believe, close to 50 years. And she'd say, what, what is that you say, Mary? Every time the school bus goes by, she would pipe up, oh, there go the inmates. I always, I always stuck with me. So your, your comments about the education system I thought was interesting. But here's another thing that based on everything you're, you know, you know, unveiling here and you're really just, you're just logically thinking through some of these elements, you have some basic numbers. Cool. We've got 450 billion of revenues and we're 55. More than 10% is just interest servicing alone. But that interest servicing number is rising and it's rising at a degree that we can't control. So it is very much like if you just keep borrowing from your credit card and you're barely making the minimum payment in this scenario. And in this case, I don't even think Canada is making the minimum payment. Really. And now you're in a position where, you know, they made it mandatory. We're on the credit card statements. It tells you how many years it's going to take for you to now pay that off. Making the minimum payment. But no one produced that in the budget document. I think that should be a required element of every future budget that should be on the very front page. Like based on this level of spending and the current economic status of the country, here's how long it's going to take based on our projections for you to pay this off. Oh, it's going to be 782 years based on current numbers. Now what was really interesting about this is, you know, interest rates have an impact and the interest rates impact the consumer at the you and me level, but they impact us twice. They impact us and our day to day spending on the credit card charges, the mortgage renewals, those things, the credit lines, the HELOCs, etc. But then they also impact us on the degree to which it blows up the federal debt. And so in an inflationary element, there's only, there's very few, virtually one lever that they play, they have, they go to the machine and there's this big lever that they can grab that says, here's how we're going to combat this thing called inflation that we created for you, the hidden tax. We're going to ratchet up this interest rate and that's going to, that's going to reduce the inflation problem. So we're going to reduce the problem we gave you by creating another problem for you. And that problem that we're creating for you, we're actually, we're just not going to tell you. It's going to show up in two ways. One is in your general pocketbook and the other one is what you owe. Because what's going to amplify the cost on all the federal debt? Well, if you go up a couple of basis points or a full percentage point and you do that on, on the degree and the volume of debt that we have, you go from a $55 billion interest number to $100 billion interest number in a nanosecond.
• 40:29
  Speaker A: I agree. It's for the poor especially or the highly leveraged. It's a double edged sword. Right? I mean it's, and this budget is not going to do anything to help that situation of it is bleak as they say.
• 40:46
  Speaker B: But you know, when, when you go into the doctor and you have a real medical challenge and you know, they, they, you want them to tell you if you've got gangrene that you're going to lose the arm.
• 41:00
  Speaker A: Yeah.
• 41:00
  Speaker B: You don't want them to say oh no, it's fine, we'll put a band aid on it. You know, we'll put some iodine, we'll throw some, we'll throw some, you know, antibiotics at it, you'll be fine. You want to know, you want the doctor to walk in and say, hey, I've got some bad news for you, everything's going to be okay, except for the fact that we gotta lose the hand. And once we do that, everything's gonna be okay. You're gonna go through some pain, you're gonna go some retraining, but you're gonna be here and you're gonna be around a long time. You want someone to come and tell it to you straight. And so I guess to some degree, Kim, that's why I asked you to be on the program today. I wanted you to come in and tell us that we've got gangrene in the country with the budget and maybe we need to lose a hand or two somehow to fix it.
• 41:45
  Speaker A: My personal opinion is that it's still at a situation and I'm, you know, I'm not an economist. I mean, I'm no dummy when it comes to studying economics, and I've studied a lot and I continue to. But do I think we're at the point of, of no return? I. I think no. I think if we had the political will and the policy will, I think we could turn this engine around, this train around is what I meant to say. But unfortunately, it's not going to happen with this government. You know, you've got a lot of big promises. You've got, oh, he's such a wonderful, smart businessman with no business experience. And frankly, you know, his track record as an economist is iffy at best. And so I don't see it happening with this government. And so then that leads to, will we see a government change? Well, that's up to the voters, right? And when you have a financially illiterate voter base and looking at how they voted in a new, a new government, I'm not all that optimistic. But I think with people like you, you know, people like me that keep, you know, being blunt and saying that this is not acceptable, then, then great. You know, just as we were chatting, I see the parliamentary budget officer released a report on the budget. So, you know, after we finish this, I'm going to go and take a look and see what he says. But my editor for, my editor for the Financial Post, you know, just flashed on my screen here. It said, hey, this, you need to write about this. Okay? So I know what my next. I mean, I haven't even read what, because we've been chatting, but I suspect it's pretty blunt. And as you probably already know, the government wants to release and replace this, this parliamentary budget officer because he is too blunt. So I'm sure this guy's getting in his final, final two sets before he's fired.
• 43:37
  Speaker B: Well, he's, you know, heaven forbid he should actually do his job, which is, you know, identify where problems exist. And so Kudos to him for, for stepping out to do that. Because I don't imagine that it was easy for him to, you know, indicate some of the things that he's indicated because it, he, I'm sure he was well aware it might put his position at risk as.
• 43:57
  Speaker A: Yeah, but good. You know, I admire people like that. Right. The, when you, when you say something at the risk, you know, of sacrificing your own advancement, you know that there's, there's a word for that. And the word to me is courage. And I think what we need as a country is a lot more people to take courage, you know, have the courage to make the right decisions. And unfortunately, we don't have that with this current government. We have a lot of, you know, usual politics and pacifying to people that are going to preserve their, their power and their votes. And it'd be nice for once, and I know it's wishful thinking to just see decisions that are being made for the betterment of Canada as a whole.
• 44:41
  Speaker B: Absolutely. Well, Kim, this was a ton of fun. You obviously have some writing to do. You've got some new homework on your desk based on our conversation. Really appreciated having you back on the program again. I'd love to. Of course, as the, as the news cycle develops, I'm sure something else will come out of, out of the Woodwork and we'll want to request having you back on to share your, your well thought out and knowledgeable opinions on it. And for everyone watching, make sure you connect and tune in to all the amazing posts and articles that Kim Produces. Post on LinkedIn. He's quite prolific there. I get value out of it every time I see it. And so that's one of the reasons we've requested to have him back on the program today. He is a well sought after in his knowledge base, especially when it comes to how long he's been helping clients in his boutique, but yet quite expensive tax firm. And there is an awful lot that you're doing, you know, and the last time we had you here, we talked about the exit. This might be the final discussion point here before we let you go. The exit of dollars and clients that you'd seen where you were producing a high, a vastly high volume of exit tax returns for people leaving the country. Given the conversation we had at the beginning of the year in 2025, seeing how the election results have gone, seeing how this budget has gone, what are you hearing through the woodwork, whether it's in your own firm or through other professionals, about that particular element.
• 46:02
  Speaker A: It's still continuing. I mean, I get calls weekly. As we chatted during this podcast, I had a number of notifications show up about new meeting requests to leave Canada. And so I've got, I've got some calls to make to see, you know, whether or not those are real.
• 46:18
  Speaker B: And.
• 46:19
  Speaker A: But I'm act, you know, active files right now that I'm working on for leaving Canada is probably about a dozen, and the wealth associated with that is, Is massive. And when I say a dozen, I mean just me personally. That doesn't, that doesn't include.
• 46:35
  Speaker B: Not your whole firm, just people you, you personally are working with of clients.
• 46:39
  Speaker A: Yes. Now, there's a fellow down the hall here, you know, one of my colleagues and partners who, you know, he handles a great deal more volume than I do, and when it comes to this. And so it's continuing. It's sad. You know, I had a chat yesterday with a, with somebody from the Fraser Institute because they published how much capital has left Canada, And I think the number was something like $450 billion.
• 47:09
  Speaker B: We said the equivalent amount that we need, that one, one full year's worth of government revenue for the entire nation's tax base has left the nation never to be seen again.
• 47:21
  Speaker A: Yeah, that's a good point. I didn't even think of that.
• 47:23
  Speaker B: But it's not a small number.
• 47:25
  Speaker A: I didn't even, didn't even put two and two together on that. That's a good point. But I asked this fellow, I said, where did you guys get these numbers? Like there. Is it all from Statistics Canada, or did you have other sources? Because I'm curious if you took some extrapolations on, for example, the files that people like me are working on. And so I talked to him about this very matter, and I said, the numbers that we've seen through our firm have been certainly well into the billions of dollars big time. And he goes, no, no, no, we don't capture any of that. And so to me, that number is a very conservative number, and it's likely a lot higher because the private wealth that's leaving is huge and the opportunity cost is even worse. Right. I mean, how much are we not receiving as a result of poor policy?
• 48:12
  Speaker B: Well, you had indicated that, I think approximately 40% of the total government revenue source comes from, you know, basically T4 employees, employee individuals, the personal tax base. And 47.7%, if we consider that. Well, the only way that that 47.7% can exist is if those people are gainfully employed. So if.
• 48:37
  Speaker A: Or have Assets in Canada. Right. That, that generates investment income.
• 48:40
  Speaker B: Exactly. But if you take, I mean, but out of that, the degree to that 47% that is based on investment income taxes is probably a small, it's low. Yeah, maybe 10% of that entire number.
• 48:54
  Speaker A: I did have that number. I just can't remember off the top of my head. But that, but certainly a good chunk of that, you know, 217.7 billion is T4 type income.
• 49:03
  Speaker B: T4 Inc. And so now granted, you have the business owner, it's paying themselves a T4 income as well. Etc. But, but fundamentally you take all that investment which, which most likely would have went to job creation, investment in something that created jobs, whether it was more businesses directly or housing or what, what have you any, you know, a lot of people, they in that wealth category put their money in large real estate developments. They put it in large things that are going to produce some economic turn for a number of years. And if it's no longer entering or being reallocated within the nation and it's, it's exiting, I mean the, the long term impact of the job market based on that exit of capital is not friendly. And so I agree that that then correlates to a lower overall tax base, which means, okay, so now we're trying to raise taxes to solve this debt interest problem, but we can't raise it because we don't have enough people to get it from and there's not enough, you know, so then you have an employment rate issue. Like there's a, there's a whole confluence of events where this could go really drastically sideways in a, in a, in a reasonably short period of time if we don't try to solve, number one, the exit of the exodus of capital, exodus I think is the right word, and find a way to have it reinvested or applied to things that can help our overall economic machine grow. And the reality is probably the leading benefit of a lot of that, that money is actually leaving to our friends down south. And yeah, there's a much friendlier environment for that capital to grow there. And capital work. As Jason, who's not with us today would say, capital will go to where.
• 50:47
  Speaker A: It is most respected, no question where it's friendly. Right. And yes, the vast, vast majority is going to the United States. And I get into, you know, little battles with colleagues who, not around my firm, but you know, outside, like my coaching group yesterday, you know, some people were saying in my group, I'm not going to the United States. Oh, come on. Like, come on. How Shallow is that you really think you're making a difference. You know, you're not traveling to the United States, which I know CBC and CTV love to publish. How travel to the United States has gone down. It's so breathtaking. It's gone down. Thank you, Canada, for responding that way. You know what the reality is? The United States is not going away. And whether or not you believe this or not, the truth is that Canada exists at the whim of the United States. In other words, if the United States really wanted to take us over, they could. Their military is so huge that they could swallow us up on a heartbeat. And I know that's offensive to people, but I don't care. It's the truth. And so when you think about it in that perspective, yes, the leader might be offensive to you. I don't particularly think Trump is a great leader, do I? Like some of his policies? Sure, sure. I think some of his policies on immigration and tax make a ton of sense. But if you think that you're going to eliminate the economic activity of Canada, which 70% of our economic. I think it's 76% of our economic activity relies on relations with the United States. If you think you're going to bring that down to zero and replace it with some other trading partner, you're dreaming. You're absolutely dreaming. And Carney can go on and on and on and on. All he wants to appease the boomer client or folder base that he has about the relationship that we have with the United States is over. Yeah, Well, f you, Mr. Carney, because the bottom line is it's not. And during your lifetime and my lifetime and probably our kids lifetime, it will be around. And so the issue is, let's just get a deal. And it's not gonna be the greatest deal. Let's get a deal so that we can just move on.
• 53:00
  Speaker B: Version one, there's lead to version two.
• 53:03
  Speaker A: Yeah. And so there's my little rant.
• 53:05
  Speaker B: You know, in. In. I've heard that when you have an issue and a pet, like a dog, you know, it bites somebody very often that that dog gets put down. That's what happens. Because it's a. It's deemed a danger to some degree. Well, there's something to be said.
• 53:21
  Speaker A: Are you saying you want to put me down?
• 53:23
  Speaker B: There's something to be said for biting the hand that feeds you, which you could say several prominent political individuals in our nation of Canada have done, you know, to. To our American counterparts and ultimately 76 of our entire trade, you know, everything that we do here as a nation is based upon this. What is the, what is the longest standing free trade arrangement that exists probably on the planet. And you know, it really is unfortunate. I believe that things will turn around, but I don't think they're going to turn around by the whims of who, who's currently pontificating about it in, in the federal government. I think it's going to be the people and it'll be a, it'll be a bottom up solution to a top down problem. Business owners across borders who have been working well with one another, they're going to solve it on their own way and they're going to figure out a way to get it done because that's where the real work happens. And Kim, thanks for being with us on the program today. Appreciate everything you have to say and how you and how you share your opinions the way that they are and what's true for you. But you also go by the, by the facts and the data and you're able to release a lot of that for us. And I think it's eye opening for our listeners to pay attention to. So make sure you, you connect with Kim on LinkedIn. His information will be down in the show notes. For those of you watching, of course on YouTube, you'll see another video that just appeared right there. It's going to be really good. You should click on it and watch it. Thanks again participating in the program today.
• 54:49
  Speaker A: My pleasure. Thanks a lot.
• 54:51
  Speaker B: If you're enjoying this episode, make sure you're subscribed, whether it's on Apple or Spotify. Hit that button right now so that you never miss a show in the future.