Carney’s next budget has to offer real changes, not just paint over the economic cracks

Hiding a tax, like painting over a crack, doesn’t make the tax cheaper or repair the crack; it just makes both harder to fix in the long run. Photo by vid64/Getty Images

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My wife and I once bought a house that needed obvious renovations, but every time we pulled something apart with the renovators, it revealed a previous patchwork and sometimes multiple patchworks stacked on top of each other.

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At those points, we had a decision to make: keep patching or do it properly. We chose to do it properly, which meant a full rebuild instead of another layer on top of the old ones. It also meant reworking our own budget so the project could be paid for. A patch job is cheap because it defers the real cost. We weren’t interested in deferring, but in doing it right to last for generations.

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Canada’s tax system is that house and this government seems determined to keep patching it. It’s long overdue for repair and reform since it’s a patchwork mess that is almost impossible to navigate.

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During the 2025 election campaign, the Liberals promised an expert review of the corporate tax system, a commitment that at least gestured toward pulling the wiring out of the walls. Budget 2025 did not mention the promised expert review; neither did the spring economic update in April.

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Finance Minister François-Philippe Champagne’s spokesperson recently said it would be “inappropriate” to speculate on prospective changes to the tax system and that the minister has been clear about the budget’s emphasis on innovation, growth and entrepreneurship.

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Translation: the review is dead and the government would prefer nobody notices.

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One of the Prime Minister Mark Carney’s point people on the budget consultations has said Ottawa plans to tackle tax reform “one bite at a time,” with small business changes high on the priority list. That’s a candid admission of the real strategy: individually defensible, politically safe measures bundled together and marketed as tax reform this fall.

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Some of those bites may be sensible. None of them, stacked together, will fix a system that hasn’t had a genuine structural look since the Royal Commission of the 1960s and Michael Wilson’s reforms of the 1980s.

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For example, using small business as the starting point, you cannot meaningfully reform how a small business is taxed without also touching how its owner is taxed personally. The small business deduction, the corporate tax rate, the dividend tax credit and the capital gains treatment when the owner eventually sells are all links in the same chain; you can’t patch one without affecting the others.

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A consultation portal or meetings with various groups soliciting short-term ideas isn’t built to trace a chain like that. It’s built to generate a list of grievances and popular ideas for political staff to sort into a budget.

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I understand the political calculus. A body with a genuine mandate takes time and by the time it reports and anything gets implemented, you’re deep into the back half of the mandate, with the riskiest measures landing just in time to become an opponent’s talking point in the next campaign.