Less is more (.pdf)Simply put, Saskatchewan needs to eliminate its debt and lower taxes. This less-is-more approach is just the tonic for a province crippled with debt, heavy school property taxes, and high income taxes. Recent windfall revenues mean Saskatchewan has its best chance in decades to deal with all three.

Finance Minister Rod Gantefoer acknowledged as much at the end of July. It was hard not to. Whereas the 2007 budget predicted a $700 million loss, the final tally was a $1.8 surplus (minus $529 million in interest payments on provincial debt). Three months after the 2008 budget was announced, it too was blown out of the water, with annual revenues $3.1 billion more than was first anticipated. That's a lot of room to move.

Gantefoer said the government has heard strongly from citizens that debt reduction is a priority. If the province keeps its purse strings tight, this will happen by default. The Sask Party passed legislation that dedicates half of all surpluses to go to debt reduction. This means by April 2009, Saskatchewan's debt will shrink from $6.8 billion to $4.7 billion.

That's not to say a debt elimination plan wouldn't be a good idea. Already, the province has its hands in the cookie jar and expects to spend $350 million more this year than first budgeted. Thankfully, Premier Wall said he favors a debt elimination plan that also calls for pre-surplus dollars to pay off the debt. Doing so would shrink surpluses and leave a smaller political target for advocates crying for more government spending.

But, make no mistake, there's still a lot of room for tax relief. Although resource revenues fluctuate, the continued industrialization of China, India, and other parts of the world suggest that demand for Saskatchewan's resources will remain high in the long term. The government already has $1.6 billion in the fiscal stabilization fund, an amount that will almost double by the time this fiscal year is over. That's a lot of padding.

Besides, tax relief can pay for itself in the medium to long term. Business tax reforms brought in by the NDP government provide a home-grown example of how keeping taxes low allows the economy to flourish. In fiscal 2005, the 17 percent Corporation Income Tax (CIT) generated $394 million. Last year, a 13 percent rate brought in $674 million. The result of a 4 point drop in business taxes was 71 percent more revenue.

Similarly income and school property taxes require reform for the same reasons. They're too darned high and put the province at a competitive disadvantage.

In 2003, the Boughen Commission found that Saskatchewan property taxes took 2 percent of the income for those over $100,000, steadily increasing to 10 percent of incomes for those making less than $20,000. Five years later, school property taxes remain high, accounting for half of the property tax bill-the highest level in Canada.

Likewise, the province's income taxes are out of line for the working poor. All earnings above $8,945 are taxed at 11 percent. By comparison, Alberta's 10 percent rate begins after $16,161. In British Columbia, the basic exemption is $9,189 with the next $35,016 taxed at just 5.35 percent. No wonder the Fraser Institute found that the lowest 10 percent of wage earners in Saskatchewan have 14.2 percent of their income taxed-again, the highest level in Canada.

Our provincial debt costs us $500 million annually in interest payments. With that kind of money, the province could pay for 85 percent of school funding, leaving just 15 percent for property tax. Not only can the province afford a less-is-more policy, it can't afford not to.

--Lee Harding, Sask. Director