Less than a year out from the next Ontario election, campaign planning is in full swing for all parties.
At this stage we know few details of their platforms. But in a report last Thursday, the non-partisan Financial Accountability Office (FAO) hinted strongly that the current provincial government may be planning new tax cuts as soon as next spring.
To be clear, no such cuts have been announced. But like invisible black holes in space, we know they are there because they affect what’s around them. In the case of Ontario’s fiscal plan, the FAO has detected a hole in the government’s revenue projections.
Both the government and the FAO predict an economic boom as COVID-19 vaccines work their magic. But based on “the usual relationships between tax revenue and economic growth,” the FAO says, revenue estimates by Queen’s Park are simply too low. Money is missing. Tax cuts — planned but not announced — are the most obvious explanation.
This is troubling. Any move to cut taxes next year would be an unmitigated disaster.
Ontario was in dire straits long before COVID-19 came along. We were dead last in Canada in per capita spending on public services. According to the FAO, Queen’s Park was spending about $2,000 less per person per year than the average of the other provinces.
The results of that penny-pinching were not pretty: Compared to OECD countries, Ontario had the fewest hospital beds per capita. We had fewer nurses per capita than any other province. Long-term care was tragically underfunded. Our colleges and universities were getting less support from Queen’s Park than they got from international students.
None of those issues have gone away, and now the government is driving spending down even further. The FAO says Ontario program spending is set to fall by an additional $1,281 per person (in 2020 dollars) by decade’s end. That’s a huge cut, equivalent to slashing the entire Ministry of Children, Community and Social Services.
As the FAO notes, cuts on this scale are notoriously “difficult to achieve.” They won’t be easier to make as we recover from COVID-19. Our health-care system needs money to clear surgical and diagnostic backlogs. Our schools need extra resources to help students get back in the groove of learning. Long-term care needs more staff now, not four years from now. We need a comprehensive plan to combat systemic racism. And the climate emergency grows more urgent every day.
The government must take real action on all these fronts. That means spending money.
To its credit, the Ford government knows it needs more money for public services — that’s the only explanation for the premier’s repeated calls for more federal funding for health care.
Nonetheless, this government is not inclined to raise revenues at the best of times. “Historically this government, and our party, has not been the ones to raise taxes,” Finance Minister Peter Bethlenfalvy told reporters not long ago. “As you know, we’ve been reducing taxes.”
He’s not wrong. Since taking power in 2018, the current government has reduced its own income by more than $4 billion annually — roughly 2.5 per cent of total revenues.
The obvious alternative to cutting taxes and slashing services is raising taxes and investing in services. As the FAO notes, reduced consumer spending and massive government support to households and businesses contributed to the big increase in the household savings rate last year. Where normally Ontario households save two or three per cent of their incomes, in 2020 they saved 13.4 per cent.
As the economy recovers, some Ontarians will pour much of that money into travel, recreation and cultural events — understandably so. But some of it can support the public services we all depend on.
As a general rule, those who save big are those who earn big. Ontarians who have worked from home while others delivered their groceries have an opportunity now to give back and help rebuild our province in the years to come.
It’s a reasonable guess that any tax cuts in next year’s budget, if they happen at all, will aim to corral votes in key constituencies on the eve of an election campaign. If the government sticks to its current fiscal plan, those tax cuts can only be paid for by cuts to public services.
After all we’ve been through in recent times, let’s hope it doesn’t come to that.
Randy Robinson is the Ontario director of the Canadian Centre for Policy Alternatives. This piece was originally published in the Toronto Star.
