Ontario's "made by the Harris government" fiscal crisis

November 7, 2001

In a study released today the Ontario Alternative Budget says that the Harris Government's tax cuts are the sole reason why Ontario is facing a revenue crisis.

The study documents that the Ontario fall economic statement "misrepresents the current state of Ontario's economy. It misrepresents our near-term economic prospects. It misrepresents the governments's fiscal position. It misrepresents the reasons for Ontario's tightening fiscal circumstances."

Using growth forecasts based on the expected pattern of economic growth over the next two years, instead of the best-case scenarios used by Minister Flaherty, the study shows that Ontario is heading into a tax-cut-induced deficit for each of the next two years.

Using private sector forecasts of 0.8% growth for 2001-02 produces an estimated Ontario deficit of $1.44 billion, which exceeds the total available contingency funds by $200 million. And, at the low end of private sector forecasts, at 0.5%, Ontario will hit a deficit of $2.6 billion in 2002-03.

The fiscal squeeze now facing Ontario is the direct result of the Harris Government's seven year long attack on the province's revenue base. While the impact of the tax cuts on Ontario's export-led recovery has been all but invisible, their impact on Ontario's revenue base has been dramatic.

Tax cuts have reduced annual personal income tax revenue by $9.5 billion. Corporate tax cuts have cost the revenue base an additional $2.6 billion. And thanks to the fact that the first four years of tax cuts were delivered while the province was running a deficit, the cost of carrying the debt incurred to finance the tax cuts now exceeds $800 million a year.

Without the Harris tax cuts, there is no fiscal crunch. There is no health care funding crisis. There is no looming crisis in education funding. And the resources are there to pay for infrastructure renewal and an affordable housing program and to support a social assistance system that treats the disadvantaged with dignity.

It really is all a matter of choices.