The government’s gas tax increase was the biggest mistake of its kind in Canadian modern history, and that’s why Canadians are furious about it.
But in the end, it may not matter what it does to the economy because it will never get the votes to get through parliament.
The Liberal government, led by Prime Minister Justin Trudeau, has now announced the gas tax is back, but only for a year, from Jan. 1, 2019, to May 1, 2020.
The Liberals say they’ll bring it in line with other major federal taxes, such as GST and other provincial taxes, to create “fair and balanced” budgets.
They’re also promising to spend the money on the social safety net.
It will be a big change from the gas-tax hike Trudeau promised in 2016, which raised $7.2 billion, and is now projected to be $3 billion in 2018-19.
That’s a drop of $1.6 billion.
Trudeau said it was important for his government to make the change, which has been widely praised by economists and economists say it will actually make the economy stronger.
“The $3-billion in the 2019-20 budget will be spent on infrastructure and social services, which will be in line … with our other commitments,” Finance Minister Bill Morneau said in an interview with the Toronto Star.
The $3,000 gas tax for everyone in the country was set at $2.60 per litre.
But now, it will be $1 per litere, from January 1, 2021 to May 31, 2022.
And it will drop from $3 per lite to $2 per litene in 2019-21.
This will make the gas prices cheaper for consumers and businesses, and the tax is expected to generate $100 million for social assistance.
But Morneau was careful not to call it a gas tax, saying the tax “is meant to be the first step in a gradual change in the tax regime.”
And he said it will only apply to Canadians earning $70,000 to $180,000 a year.
Trudeau says the government has taken some of the criticism over the gas hike and will continue to make changes to the tax, including raising the top rate to $60 from $38 per litne.
He also said the tax will be phased out over three years.
Trudeau’s government says the $1-per-litre hike for everyone is the biggest tax increase in Canadian political history.
But economists say that is misleading.
In fact, the gas price hike was supposed to be a one-time boost, but the Liberals have now doubled down on the hike for five years.
The increase is also expected to lead to higher inflation, as people will pay more in the form of higher prices for gasoline and other products.
The Globe and Mail’s David Hunter and the CBC’s Mark Strahl contributed to this report.