Introduction

Thank you for inviting me to speak to you today.

The Canadian Taxpayers Federation is a grassroots organization of concerned citizens fighting for lower taxes and accountable government.

We have about 80,000 members across Canada, but we are probably strongest right here in Saskatchewan.

I would like to be able to take credit for that strength, but I can't. The credit for the success of the Canadian Taxpayers Federation largely goes to four men whose actions encouraged the creation and growth of this organization to fight for the rights of ordinary taxpayers.

And who are these men, who have sold more CTF memberships than the rest of us combined? Their names are Chretien, Mulroney, Devine, and Romanow.

Because of these guys, the people of Saskatchewan bear one of the heaviest tax burden in Canada.

But we can change that by working together, which is why I am here today:

To encourage taxpayers to work together to end taxpayer abuse once and for all.



The Provincial Budget

Today I want to talk to you about the provincial budget, about missed opportunities, and about our province's future.

The good news on the budget is that it will hopefully start the province down the road toward tax relief and tax reform. The bad news is that our progress is too slow, and it is marred by back-sliding tax hikes, and endangered by increased spending.

In the weeks and months before the provincial budget, the Canadian Taxpayers Federation pushed for bold action to spur Saskatchewan's economy and combat the brain drain.

We pushed for quick tax relief and comprehensive tax reform, including the immediate adoption of the Vicq Committee proposals, and we made other proposals that went even further.

So on budget day, we had mixed feelings.

On the positive side, we support the principles of tax reform and tax relief being proposed for the long term in the Saskatchewan budget.

When and if the promised changes are fully implemented, Saskatchewan people will benefit, and thousands of low income people will be removed from the income tax rolls altogether. The tax system will be flatter and simpler, and we will eventually be rid of bracket creep.

These are all positive measures that taxpayers have advocated for a some time. But consider the language I have to use to qualify them: "hopefully," "long term", "promised", "when and if", and "eventually".

The finance minister said his budget contained historic tax cuts. But a more accurate description would be futuristic tax cuts, because the promised tax relief is in the future, whereas higher taxes and increased spending are being inflicted on us in the present.

And this is the first great disappointment of the budget.

In spite of the government's rhetoric about this being a tax cut budget, the only thing that happened on budget day was an effective increase in the PST. Tax cuts are only tax cuts when they're implemented. Period.

We all agree that the PST is complicated and costly for businesses that have to compete with their counterparts in Alberta. But if there was to be an expansion of the PST base the CTF called for it to be accompanied by a cut in the PST rate, so that the change would be revenue-neutral. Instead, the PST is a bigger cash cow than ever, and is still cluttered with a whole bunch of oddball exemptions.

And then there is bracket creep. (Bracket Creep you may remember is when taxpayers are pushed into higher tax brackets because the tax system has not been fully protected from the effects of inflation. The result has been a series of ongoing stealth-like tax increases worth billions).

In spite of the government's taking credit, we are free of bracket creep this year not because of anything the Romanow government did, but because the federal budget eliminated bracket creep and we are still tied to the federal system.

Next year when we separate from the federal system, the Saskatchewan government will correct that generosity, and bracket creep will be re-imposed on taxpayers for two more years (thank you very much, Roy).

In fact, the only real Romanow tax cut this year is the 1% cut in the flat rate tax. But since that does not begin until July, it is more like a ½ % decrease, which will be largely offset other tax increases.

As this chart demonstrates, this tax cut budget delivers only $3.3 million in tax cuts in 2000, and $21.9 million in fiscal 2000-2001. Compare that with the 1 point cut in the PST in last year's budget that was worth $75 million in 1999 - a tax cut 23 times larger.

Clearly, the 2000 Saskatchewan budget does not contain the bold action that Saskatchewan needs.

It can be argued that this budget may actually increase taxes this year. In addition to the PST increase, and other tax measures, including increases in the insurance premium tax, tobacco taxes, etc., we have increased rates from our government-owned utilities, and increased user fees that are not included in this calculation.

So you can now see why I called the budget "a kick in the pants now and the promise of a pat on the back later."

The long-term proposals for tax relief and tax reform are promising, but they are still just promises. And in the meantime we have taxes to pay.

But even down the road, the proposed tax cuts are too stingy. For example, the increased basic personal exemptions are still lower than the Vicq Committee proposed. The government should increase this amount to help more lower and middle income families.

This is the second great disappointment in the budget. Not only are the tax cuts too slow, they are too small.

This chart demonstrates the scale of tax reduction that the Canadian Taxpayers Federation proposed in our pre-budget submission. This is the kind of major and immediate tax relief that Saskatchewan needs to jump-start our economy, as compared to the timid and delayed tax relief offered in the budget.

These are also achievable tax reduction targets, as I will discuss in a moment.

But first, I want to highlight another flaw in the budget, which is the lack of serious property tax relief.

This is of particular concern to hard-pressed farmers, and anyone in towns and cities who depend on their business - as many of you may.

The elimination of fuel taxes and the two-year property tax rebate program is welcome, but insufficient and temporary. The $50 million rebate works out to about $450 per year per farmer, and will do little to stem the growing tax revolt.

This is a very serious matter that strikes at the heart of Saskatchewan's future. And I am not talking just about the impact on farmers, but the impact on our children.

School and property taxes have skyrocketed while rural incomes have dwindled and the province has retreated from school funding. 61% of the cost of schooling is now covered by local property taxes. That's the second highest in Canada. Saskatchewan also has the highest residential and business property taxes compared to assessed value of any province in Canada. And the pressure is not letting up.

Our children are being squeezed between provincial funding cuts and tapped-out municipal taxpayers. Unless we find a way to fund the schools without breaking the back of taxpayers, we are risking nothing less than the future of our children and our economy.

Fortunately, Saskatchewan has a choice, and a potential source of school funding, which led to one of the boldest pre-budget proposals by Canadian Taxpayers Federation:

To save our schools it is time to sell the Crowns.

If the government would open the Crowns up to private partners and shareholders, and then use the proceeds to pay down the province's debt, money that would otherwise have gone into debt payments could go a "Future Fund".

This Future Fund could help to fund schools, and thereby improve the quality of education, and lessen the burden on property taxpayers considerably.

In the Action Saskatchewan report, the Saskatchewan Chamber of Commerce points out that the Crowns dominate the provincial economy, to the point that they are crowding out private enterprise.

Opening up ownership of the Crowns will open up a whole new segment of the Saskatchewan economy to businesspeople, and the proceeds from their sale can open up a whole new future for our children, and give hard-pressed taxpayers some real relief.

Many Saskatchewan people are very attached to our Crown corporations. But the age of government-owned dinosaurs has come to an end almost everywhere but Saskatchewan. By selling Crown assets, and establishing a Future Fund, these icons of the past can do our future a great service.

But the Crowns represent the economy of the past; our schools and children represent the economy of our future. We can't hold on to the past at the future's expense.

We should think of the Crowns as an education savings bond. It's time to cash in that bond, and send our kids to school, and cut taxes.

This proposal, which was not adopted by the government, underlines the third great disappointment in the provincial budget, the failure to think big.

You may not believe me, but I was prepared to like this budget a lot more than I do. Knowing the seriousness of the Vicq Committee proposals I believed the government would take much stronger action.

So where did things go wrong? The fact is, if the government had held the line on overall spending they could have provided real tax relief now, and they could be providing much more tax relief in the future.

Prior to the budget, the Canadian Taxpayers Federation called on the government to put a two year cap on spending to reduce the size and cost of government. And we called for a comprehensive review of government spending to prioritize and control expenditures.

That doesn't mean that we can't make key reinvestments into important areas such as health care, education, and highways. It just means that government has to make difficult decisions about other areas of spending to hold the line on overall expenditures.

But instead of this restraint there has been a $783 million increase in new operating spending from 2 budgets ago, a 17.4% increase.

14 of 15 major departments are increasing spending this year, and 80% of all departments and agencies are increasing spending.

This is the final disappointment in the budget – the lack of spending restraint.

Spending restraint now is the best way to finance tax cuts in the future. And by the same token, increased spending today is virtually a guarantee of higher taxes tomorrow.

That is one of the reasons why when a Finance Minister promises great things a couple of years down the road, I prefer to wait and see. Because for the present, we still have bracket creep and we still have spending creep.

This budget is a small first step. But our government is still addicted to high taxes and big spending. They are like smokers who say they are going to quit - tomorrow - by cutting back to only one pack a day...

This pack of cigarettes represents the income of Saskatchewan people.

The government says they're going to stop raising taxes tomorrow. But first, they're going to increase the take from the PST just a little bit.

(Extract a cigarette)

The government says we are going to put an end to bracket creep, but not cold turkey.

So here's bracket creep in 2001 (pull out cigarette), and 2002 (pull out cigarette).

The government says they're going to eliminate the flat tax… But only halfway through the year.

(Take a cigarette out of the pack, break it in half and put half back.)

(Hold up the smokes taken out)

Ladies and gentlemen, this is no way to quit smoking. And it's no way to bring real tax relief to the people of Saskatchewan.



The Future

Now I want to put away the smokes and turn to the future. Toward the next budget, the next decade, and the kind of province our children will inherit.

If our children are going to inherit a strong province, if they are even going to stay here, groups like the Canadian Taxpayers Federation and the Moose Jaw Chamber of Commerce need to promote those things that can make our province work better:

Lower taxes, smaller more efficient government, a stronger and freer business sector.

We need to work hard at this because there are a lot of entrenched interests in this province who are promoting the exact opposite:

High taxes, bigger government, and a centralized economy.

Those who actively promote these things represent a thin sliver of Saskatchewan society that depends on the status quo, and to hell with everyone else. But they have a big impact on government policy.

They include a cadre of professional union leaders, bureaucrats, socialist politicians and ivory tower elites. Promotion of the status quo by this cadre could be considered a reasonable – if selfish – position if the status quo was sustainable.

But the status quo is living on borrowed time.

When our young people leave because of lower taxes and greater opportunities elsewhere, who will pay for the rising costs of important social programs? Who will pay to fill the potholes then? How will our children make a living in a province with no jobs, few prospects, and a stagnating tax base?

Before the budget, the Saskatchewan Government Employees Union (SGEU) used several thousand dollars worth of their members' dues to buy half-page newspaper ads attacking tax reform and tax relief proposals, in spite of the fact that the tax cuts would undoubtedly help their members, many of whom are middle class taxpayers.

The provocative headline of the ads: "Do you want to be an Albertan?" Presumably union leaders are trying to warn the people of Saskatchewan about adopting the barbaric low tax and pro-business policies of our western neighbours.

The irony is that last year, more than 26,000 Saskatchewan people moved out of the province but only 20,000 moved in. And according to the Action Saskatchewan study 59% of the working age migrants who leave head for the province of Alberta.

You know who these people are. They are your kids, your brother, and your sister just out of high school or university, looking for jobs and careers. They leave out of necessity, taking their education, skills, and potential with them. Even older people are leaving Saskatchewan to be closer to their kids and grandkids, and they are taking their wealth with them.

Go to Calgary, Vancouver, or Toronto, and you will find tens, even hundreds of thousands of Saskatchewan people. Go to a football game in McMahon Stadium and you will find there are more Rider fans than Stampeders fans!

If only Saskatchewan's entrenched government and union leaders had the same energy as those Rider fans. But the sad fact is that under their uninspired mixture of punishingly high taxes and government control of the economy, Saskatchewan has become the country's farm team. A place you leave to become a success.

Some of these defenders of the status quo that I have been talking about say that the brain drain is exaggerated, that is doesn't exist. Some may even be victims of brain drain themselves, for their mouths are obviously unconnected to any intelligent organ.

These people deny the evidence of their own eyes and experience. But as far as I know, this is the first graph that actually shows the rut we are in.

As the Chamber's Action Saskatchewan study points out, Saskatchewan has the highest dependence ratio in Canada. The highest number of seniors and children compared to working age people. That dip in the middle of the graph is where our working people should be, instead of working in other provinces.

Saskatchewan has Canada's oldest population because so many young people leave. We also have the least-educated workforce in Canada, because many people who get an education in Saskatchewan promptly leave to seek opportunity elsewhere. Once again, Saskatchewan plays the farm team, educating people for the 21st century economy, at the expense of Saskatchewan taxpayers, and sending them off to build other provinces.

If this trend continues, in a few years we will only need two government departments. A department to collect taxes and a department to run nursing homes. Because without new economic growth, Saskatchewan's future looks smaller and poorer.

This is why I am so passionate about the need to reduce taxes dramatically and quickly. I myself am a young man with a family, raising a son in Saskatchewan. I want my family to succeed in this province. I want my neighbours to succeed in this province. And when I look at this graph I know that we don't have any time to waste.

Tax relief and reform will help spur economic growth, which means more business opportunities, and more and better jobs.

If we work at it, we can turn the tide toward success, and turn the exodus of Saskatchewan people into a great return of people, businesses, and investment.

And contrary to the propaganda from defenders of the status quo, tax relief will also lead to better health care and education. Because important government programs – the ones we value – need a strong economy to support them, not an economy weakened by high taxes, where lack of opportunity forces people into dependency on the state.

A couple of years ago a friend of mine drove his car to Mexico. He told me a story that illustrates my point about the folly of high taxes:

A few years ago the Mexican government decided to build a network of modern highways and pay for them with tolls. But the tolls are so ridiculously high that most Mexicans can't afford them, and drive on overcrowded, crumbling side roads, while the beautiful toll roads are empty.

Lowering tolls would increase traffic, increase toll revenues, and put the roads to good use. But instead the tolls are jacked-up to squeeze even more money out of the diminishing number of drivers.

Presumably tolls could increase until the toll charged to the last billionaire that can still afford to drive is enough to pay for the whole highway system.

In the same way, keeping taxes high in Saskatchewan discourages economic growth and depresses tax revenue. Some of the potential tax revenue goes to other provinces, as jobs, taxpayers, and businesses move away, or goes down the "side road" of the underground economy.

Pro-tax advocates would probably agree with Mexico's toll road operators that taxes must rise to replace the revenue lost when these taxpayers left the province. But be careful not to be the last taxpayer in Saskatchewan when the tax deadline rolls around.

To conclude, I want to congratulate the efforts of the Saskatchewan Chamber of Commerce through the Action Saskatchewan report, for helping our province on the road to the future. And I want to encourage all of you to support the efforts of the Canadian Taxpayers Federation, which is also working to make this a more successful province.

In their ad SGEU asked "Do you want to be an Albertan?" The question the CTF is asking is "Will you work to make Saskatchewan a success?"

We say, STAY in Saskatchewan, and STAY TO FIGHT. This province belongs to you and your children, as much as to the union elites and socialist old-boy networks who defend the status quo.

Stay to fight for better opportunities for your children. Stay to fight the farm team mentality that preys on our success. Fight to put Saskatchewan in the Big Leagues, where we belong!

By: Richard Truscott
Posted: May 17, 2000
Topic: Saskatchewan

Contact the regional director Colin Craig for further information.

Type: Related

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