The Economic and Fiscal Update released Friday shows that the status quo deficit in the next fiscal year of 2016-17 will likely be $3.9 Billion compared to the surplus of $600 Million assumed by the Liberals when they calculated their fiscal plan.That means that the new government has a big hole to fill, some $4.5 Billion next year, if they are to stick to the spending and tax plans outlined in the platform on which they were just elected.Finance Minister Bill Morneau essentially has three (not mutually exclusive) ways to deal with the problem: run a bigger deficit than the promised $9.9 Billion in 2016-17; roll back Mr. Trudeau's public infrastructure and social spending promises; or raise new revenues. The third option is the most attractive to most progressives.Mr. Morneau could scale back the Liberals' promised and misleadingly named “middle class” tax cut which will cost $3 Billion per year, most of which will go to the top 10% of Canadian taxpayers (minus the top 1% who will face a higher tax rate.)And he could take a page out of NDP leader Tom Mulcair's book and modestly increase the corporate income tax rate by two percentage points, while still leaving it well below the level in the United States.What might be more palatable to Mr Morneau would be to accelerate the review of “tax loopholes that particularly benefit Canada's top one percent” that was promised in the Liberal platform. Even more specifically, the Liberals said they would restrict favourable tax treatment of stock options to amounts of less than $100,000 per year.Some 75% of the benefits of taxing gains from stock options at a lower rate (just half have to be included in taxable income) goes to 8,000 very high income taxpayers who average $800,000 gains from options, according to a Department of Finance study referenced in the Liberal platform. This costs more than $500 million per year in lost revenues.Fully including stock options in the taxable income of the ultra-wealthy should be a fiscal no brainer. But this will be effective for the 2016 fiscal year only if announced by the government shortly after Parliament reconvenes next month.In looking for more ideas, Mr. Morneau should turn to a very useful study by experts Brian Murphy, Mike Veall and Michael Wolfson just published in the Canadian Tax Journal. This estimates the value of a wide range of tax provisions to Canada's top 1% of taxpayers who earned 11.7% of all income in 2011.One key finding is that almost all of the benefit of the stock options deduction goes to the top 1%. Nothing could be more progressive than limiting a tax loophole that exclusively benefits the most affluent 1% of taxpayers.The authors further estimate that 87.4% of the benefit of the capital gains deduction goes to the top 1% of taxpayers, with almost one third of the benefit going to the top 0.1% (ie the richest person in every one thousand.)While all wage and salary income above basic deductions is subject to tax, just 50% of capital gains has to be included in taxable income. Prior to 2000, 75% of capital gains were taxable.The Parliamentary Budget Office calculates that increasing the capital gains inclusion rate by ten percentage points would raise $840 million in additional revenues.The new Minister of Finance will find that the promised increase in the top tax rate for Canada's top 1% can raise even more annual revenue than the estimated $3 Billion if he moves quickly to limit tax loopholes for those at the very top of the income ladder. That is certainly a far better choice than postponing needed infrastructure investment and social spending.Andrew Jackson is Adjunct Research Professor in the Institute of Political Economy at Carleton University, and senior policy adviser to the Broadbent Institute.