After every visit to the grocery store, I’m astonished by both the total price tag and by how few staples that price actually buys.

Cost-of-living increases are everywhere and have been the norm since outrageous COVID-19-era government spending fuelled inflation, a basic economic principle that arises when the money supply exceeds the amount of goods that are available.

In other words, prices don’t just rise when governments inject unprecedented amounts of money into the economy while productive capacity is constrained; they become embedded. With eye-popping government deficits continuing to be the norm, prices for groceries

increased at a faster pace in 2025 (3.5 per cent) than in 2024 (2.2 per cent) on an annual average basis.

Unsurprisingly, affordability has become a central political issue. If Canadians are suffering , what should the government do? It most certainly should look at the root cause of affordability matters and adjust course. Oh, but that would make way too much sense. Instead, it just hands out money to buy votes and entrench the welfare state. Yeah, with a PhD economist at the helm, that makes perfect sense.

Against that background, should anyone be surprised by last week’s

announcement that the federal government would expand the GST credit by increasing the quarterly amount by 25 per cent for 2026–2030 and pay a one-time “top-up” payment in mid-2026 equal to 50 per cent of the recipient’s 2025–26 credit amount?

Both measures, which will cost the government $12.4 billion over the next six years, are income-tested and use existing eligibility rules. And, of course, a

well-thought-out taxation policy must come with a cutesy new name: the Canada Groceries and Essentials Benefit . Sarcasm aside, this announcement is yet another example of how Canada’s taxation system is being driven more by

politics than sound policy . What was once a well-designed and efficient tax has become a political prop.

Tying the GST credit to “groceries and essentials” through its rebranding is rhetorically clever, but entirely misleading. It does nothing to reduce grocery prices, nor does it address the underlying drivers of inflation or affordability. What it does do is hand out cash to low- and modest-income Canadians with no clear fiscal anchor to pay for it.

Let’s provide some historical context. The GST was introduced on Jan. 1, 1991, by then prime minister Brian Mulroney’s government. It replaced the inefficient manufacturers’ sales tax (MST) first introduced in 1924.

Prior to being scrapped, the MST was a hidden 13.5 per cent tax applied at the manufacturing level to a narrow base of goods, which led to many economic inefficiencies. It was replaced by the GST to create a more transparent, broad-based value-added tax on a wide range of goods and services, which eliminated tax-on-tax effects and better supported exports and economic growth.

Importantly, to address the inherently regressive nature of consumption taxes that can hit lower-income households harder, the GST included carefully crafted exemptions and zero-rated items for basic living essentials such as groceries, residential rents, health and dental, financial services and other amounts.

That helped, but the government also introduced the GST credit: a refundable, income-tested benefit for low- and modest-income Canadians to reduce the net impact of the tax.

As a package, the GST was well-structured, fair and relatively efficient. Yes, the carve-outs created complexity, but the GST remains a much more efficient tax than the income tax. So much so that there should be an

expanded role for the GST . However, it’s been politically toxic from day one. Shortly after the introduction of the GST, the Conservatives were punished at the ballot box in 1993. The 1993 Jean Chrétien Liberals famously campaigned on a promise to scrap the GST entirely, only to reverse course once in government. Stephen Harper’s Conservatives later reduced the GST rate to five per cent from seven per cent because it was politically popular.

The Justin Trudeau Liberals joined the party during COVID-19 by paying out numerous one-time “GST top-up” payments and, more recently, tried their hand at retail populism by implementing a

GST “holiday” on certain items between December 2024 and February 2025 — a policy that had all the sophistication of a grocery flyer.

And now the latest instalment: the rebranding of the GST credit into the Canada Groceries and Essentials Benefit.

Let’s be clear: this is not a tax policy improvement ; it’s politics, plain and simple. So, how is this being paid for? As economist Jack Mintz said last week, either increased taxes, reduced government spending or increased government debt will be needed to pay for this political promise. With warnings from the Parliamentary Budget Officer that federal finances are on an

unsustainable path , tacking on another $12.4 billion of debt is irresponsible.

It’s unfortunate that a well-designed tax like the GST — with its neutral base, targeted exemptions and income-tested credits — gets hijacked for political ends. First, we slash the rate to curry favour. Then we pile on rebates during crises and add populist “holidays.” A year later, that holiday is repackaged as cash handouts and a rebranding to make them sound like gifts.

I’m not opposed to targeted transfers for those who need help. But if the goal is affordability, we need serious structural solutions, not more political marketing campaigns disguised as good policy that distorts a well-designed system and undermines public confidence in fiscal management.

The next time I visit the grocery store, I won’t be thinking about the so-called Groceries and Essentials Benefit. Instead, I’ll be thinking about how much damage is done when sound tax design gets hijacked for short-term political gain and a simple marketing ploy, one that Canadians will end up paying for in debt, interest costs, distrust and diminished confidence in tax policy.

Canadians should reject this thinly veiled vote-buying scheme.

  • Jack Mintz: The GST credit becomes another Liberal social program
  • Will Carney’s GST credit top-up help Canadians with the rising cost of groceries?

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

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