HILL, FUSS: Many Gen Z, millennials don’t believe in corporate welfare

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According to a new Leger poll, a significant percentage of Gen Z and millennial Canadians don’t believe billions of dollars in government subsidies to build electric vehicle (EV) plants — including $5 billion to Honda, $13.2 billion to Volkswagen and $15 billion to Stellantis — will benefit them. And based on a large body of research, they’re right. The poll, which surveyed Canadians aged 18 to 39 who are eligible to vote, found that only 32% of respondents believe these subsidies (a.k.a. corporate welfare) will be of “significant benefit to your generation,” while 28% disagree and 25% are on the fence.

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Unfortunately, this type of taxpayer-funded corporate welfare isn’t new. The federal government spent an estimated $84.6 billion (adjusted for inflation) on business subsidies from 2007 to 2019, the last pre-COVID year of data. Over the same period, provincial and local governments spent another $302.9 billion on business subsidies for their favoured firms and industries. And these figures exclude other forms of government support such as loan guarantees, direct investments and regulatory privileges, so the actual cost of corporate welfare during this period was much higher.

The Trudeau government has shown a particular proclivity for corporate welfare. According to a recent study, federal subsidies have increased by 140% from 2014-15 to 2023-24. But again, the money used to fund these subsidies isn’t free — its funded by taxpayers. The Parliamentary Budget Officer recently estimated federal government support for EV initiatives will cost Canadian taxpayers $31.4 billion, which represents roughly $1,043 per tax filer.

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And Canadians are right to be skeptical. Despite what the Trudeau or provincial governments claim, there’s little to no evidence corporate welfare creates jobs (on net) or produces widespread economic benefits.

Instead, by giving money to select firms, the government simply shifts jobs and investment away from other firms and industries — which are likely more productive, as they don’t require government funding to be economically viable — to the government’s preferred industries and firms, circumventing the preferences of consumers and investors. If Honda, Volkswagen and Stellantis are unwilling to build their EV battery plants in Canada without corporate welfare, that sends a strong signal that those projects make little economic sense.

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Finally, higher taxes (or lower government spending in other areas) ultimately fund corporate welfare. And higher taxes depress economic activity — the higher the rates, the more economic activity is discouraged.

Unfortunately, the Trudeau government believes it knows better than investors and entrepreneurs, so it continues to use taxpayer money to allocate scarce resources — including labour — to their favoured projects and industries. And since politicians spend other people’s money, they have little incentive to be careful investors.

Canadians, including young Canadians, are right to be skeptical of corporate welfare. As the evidence suggests, there’s little reason to think it will lead to any economic benefit for them.

Tegan Hill and Jake Fuss are economists with the Fraser Institute.

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