Economic Outlook a Bleak Picture for Taxpayers

- Federal health transfer masks McGuinty spending spree
- Tax hikes dampen consumer spending, slow economy

Toronto: The Canadian Taxpayers Federation (CTF) today responded to the 2004 Ontario Economic Outlook and Fiscal Review, presented by Finance Minister Greg Sorbara in the Legislature at Queen's Park. According to CTF Ontario director Tasha Kheiriddin, "This economic outlook is a bleak picture. This government is a spendaholic, pure and simple - and it's the taxpayer who's paying the price."

Federal health transfer masks government spending spree

The government claims it is "on track", but the evidence indicates otherwise. According to government figures, increased projected revenue of $79 billion includes the additional federal health transfer of $824 million granted after the First Minister's Conference this fall.

"This government is not on track. The new federal health transfer was only granted to the provinces in September. Yet in the first six months of the 2004-2005 fiscal year the government managed to overspend by $610 million. In other words, Premier McGuinty spent the health care money before it was received," said Kheiriddin. "What if the Premier hadn't obtained the additional funding Obviously the debt would be even higher. He's using handouts from Ottawa to balance his books."

"Instead of taking advantage of higher revenues to balance the province's books faster, or to reduce taxes, the government has chosen to spend beyond the levels called for in the May 18 budget," added Kheiriddin. "Had it applied additional revenues to balancing the books, this year's deficit would be $1.5 billion - saving taxpayers a potential $51 million in interest payments."

Revenues Fall Flat

The finance minister may blame oil prices, the higher dollar and a sluggish US economy for Ontario's economic woes, but the evidence points in a different direction. Higher taxes are dampening consumer spending by leaving less money in the pockets of Ontarians. In fact, despite substantial income tax hikes, overall tax revenues are down by $45 million.

There is evidence of lower-than-forecast revenues on a variety of consumption-based indicators. According to its May 18 budget, the government expected sales tax revenues of $15 billion; revenues are now projected to be $160 million less. Gasoline tax projections declined by $65 million. Lottery and gaming revenues, also an indicator of consumer spending, are projected to be $102 million less. Finally, job growth is projected to hit its lowest level in the last 3 years.

"The government's tax increases have softened consumer spending, by siphoning money from taxpayers which would have otherwise been spent on goods and services," said CTF Ontario director Tasha Kheiriddin. "The health tax of $50 to $900, taken from wage earners in this province, represents a loss of spending power. The government's combination of cancelling corporate tax cuts and hiking personal income taxes has clearly dampened economic growth."

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Media contact: Tasha Kheiriddin, Ontario Director, 416-725-0501