Budget 2026: Liberals pin tax changes, billions in spending on ‘economic sovereignty’

The Liberals are expanding their affordability measures and offering a broad suite of changes to make life simpler for taxpayers — including a new tax filing deadline of May 15 for all filers starting in 2028.

The budget — titled “Masters of our Destiny” — is light on references to tariffs or trade aggression from United States. As the title suggests, the 511-page document is framed around “economic sovereignty” — giving Canada a solid foundation in a volatile world.

“This is a budget that reflects the priorities of Canadians: affordability, growth and sovereignty. Taking control,” Prime Minister Mark Carney said as he walked into the House of Commons on Thursday.

In an embargoed press conference before tabling the budget, Finance Minister François-Philippe Champagne told reporters Canada will be “more prosperous, more independent” after this period of global disruption.

Despite the raft of new spending measures in the budget, the federal government continues to pitch its plan as fiscally sustainable.

The government expects to post a deficit of $62.3 billion in this fiscal year, some $3 billion lower than projections in April’s spring economic update. Higher federal revenues tied largely to a spike in global energy costs had been expected to improve Ottawa’s fiscal standing in the near-term.

When asked why Ottawa did not use its fiscal windfall to pay down the deficit further, Champagne said two-thirds of the measures in Budget 2026 are meant to boost the economy, while the remainder are about supporting Canadians struggling with the rising cost of living.

Ottawa is proposing another boost to the Canada Groceries and Essentials Benefit in the form of a one-time payment worth half the benefit’s annual value. It’s expected to land in early 2027.

“If we have the fiscal capacity to grow, we also need to be there to support Canadians,” Champagne said in his press conference.

The budget includes a reference to the tighter fiscal conditions constraining the United States and other peer countries. A steep path for borrowing south of the border is a major force driving up global bond yields, raising costs for governments with particularly heavy debt.

“Unlike what we are seeing in other advanced economies, Canadians — not the bond market — will determine our choices,” the budget reads.

Canada is more insulated from rising global bond yields than some other deeply indebted countries, said Desjardins’ deputy chief economist Randall Bartlett. But he warned the country is not immune to intensifying fiscal pressures.

The Liberals say they do expect to meet their dual fiscal anchors. The government is projecting a stable decline in the deficit as a share of the economy through to 2029-30 and expects to balance the operating budget by 2027-28, a year ahead of schedule.

Bartlett said he doesn’t put much stock in the federal government’s fiscal anchors. Ottawa’s definitions of what constitutes operational spending versus capital investments are arbitrary, he argues — a critique echoed by the parliamentary budget officer.

The Liberals have been able to paint a picture of fiscal sustainability despite hefty spending commitments by baking “ambitious” revenue projections into its outlook, Bartlett argued.

“Without these very generous forecasts and the generous assumptions underneath them, they would not be able to reach the deficit numbers that they have. They would have much larger deficits,” he said.

The federal government is expecting the trade war with the United States will weigh on growth at the end of this year and the start of the next, but its overall growth outlook has been broadly stable since the spring.

Based on surveys from private sector economists in September, the budget projects real gross domestic product growth of one per cent this year, 1.7 per cent next year and two per cent by 2028.

The Liberal government continues to present in the budget its previous fiscal anchor, the debt-to-GDP ratio, which most economists consider a key measure of a sustainable debt path.

The government sees this metric rising but holding broadly stable over the next five years and declining over the longer term — even under a stress-test scenario that sees Canada face sharper economic disruption.

Bartlett said Desjardins also sees debt-to-GDP remaining broadly in check over the long term and, as a result, Canada is likely not at risk of an imminent downgrade to its sovereign credit rating.

Conservative Leader Pierre Poilievre railed against the Liberals’ deficit track in the House of Commons on Thursday and claimed the pace of borrowing will add to costs for Canadians who are already struggling.

Poilievre said he will not support the budget and put forward a motion to reject the spending plan, primarily over rising debt costs.

“It’s not too late. They can reverse their costly plan today. They can replace the costly credit card budget with a budget that saves Canadians money,” he said in the House of Commons.

On his way out of West Block on Thursday, Carney told The Canadian Press he didn’t understand the leader of the Opposition’s “inability to actually read the budget” and cited an overall lower track for the debt-to-GDP ratio compared to the spring economic statement.

“The core of it is, we’ve got spending under control … Canada’s moving forward. It’s a fantastic day for the country,” he said.

Unlike Carney’s first budget, which was tabled under a minority government, the Liberals now have a majority mandate and can get their agenda passed without the support of other parties.

Bloq Quebecois Leader Yves-François Blanchet said Thursday that the budget’s French title, “Maitres Chez Nous,” evokes the Quiet Revolution — a period of rapid socio-economic change in Quebec. But he argued the budget does not give Quebeckers more control over their own affairs.

Tax incentives for businesses in the budget are led by the previously announced productivity mega-deduction, which will cost an estimated $36 billion over five years.

The government anticipates this incentive — which allows businesses to write off the full cost of new machinery or equipment in year one — will add $22 billion to Canada’s GDP annually and create 80,000 jobs over 10 years.

The Bloc’s finance critic, Jean-Denis Garon, said Quebec will have to absorb a $1-billion hit to its revenues from the mega-deduction. He said Ottawa is sabotaging the province’s control over its finances.

NDP Leader Avi Lewis said “it’s a happy day for corporate Canada” but argued that setting the government’s priorities around tax deductions for businesses fails to meet the actual needs of Canadians.

“Where is the mega-deduction for my grocery bill?” he asked.

Green Party Leader Elizabeth May said she was pleased to see supports for caregivers and the creative industry in Canada, but the lack of environmental measures left the budget a disappointment.

This report by The Canadian Press was first published Nov. 5, 2026.

Craig Lord, The Canadian Press

by The Canadian Press