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Spending Explodes Driving Huge Ontario Deficits and Ballooning Debt

Author: Kevin Gaudet 2009/03/26
  • $25 in new spending for every $1 of tax relief in 09/10; $7:1 over two years
  • Taxes up for individuals and families with BST
  • Accumulated deficit to grow by 54%
  • Taxes down for businesses - tax rate to 12% in 2010

 

TORONTO:  The Canadian Taxpayers Federation (CTF) responded to the Ontario provincial budget released today with dismay.  CTF Federal Director, Kevin Gaudet, said “government spending is out of control.  There is $25 in new spending for every $1 in tax relief.  The new tax will increase costs for individuals and families and is the wrong thing to do during these tough economic times.” 

Program Spending Continues Out of Control – Grows by 12.5% Hits $100-billion

The government should have frozen spending.  Government program spending was budgeted to be $87.3-billion in Budget 2008.  Instead Mr. McGuinty is projected to have spent $88.5-billion - $1.2 billion over budget.  Budget 2009-2010 sees a projected explosion to $99.6-billion in 2009/10 – an increase of $11.1 billion.  Since having been elected, Mr. McGuinty will have increased program spending by $35-billion or 55%.

Spending ramps us in 2009/10 with meaningful tax relief not budgeted until 2010/11.  There will be a total of $27.3-billion in cumulative new spending over two years with only $4.2-billion in cumulative tax relief.

Deficits – $56.8-billion over Seven Years 

The government is projecting some of the largest deficits in the history of the province at $3.9-billion in 2008/09, $14.1-billion in 2009/10, $12.2 in 2010/11, $9.7-billion in 2011/12, $8.0-billion in 2012/13, $5.8-billion in 2013/14, and $3.1-billion in 2014/15.  This amounts to $40-billion over four years and $56.8-billion over seven years. 

“Reckless spending has taken Ontario back into huge deficits.  Despite projected revenue declines, if, during the last five years, the government had held the line on spending instead of having grown it by more than twice the rate of inflation and population growth combined there would be no deficit at all”, said Gaudet.  “The government should be leading a discussion on how to spend less and how to balance the books, not how to spend more, for how long.”

Debtload – Accumulated Deficit To Grow by 54% -Total Debut Will Surpass $200-billion

The accumulated deficit amount stood at $105.6.  Adding $56.8 billion to it will cause it to grow to $162.4-billion – a 54%.
In 2003/04 Ontario’s Total Debt was $148.7-billion.  It is projected to grow to $177.3-billion in 2009/2010.  Debt interest charges are already starting to climb up to $9.3-billion in 2009/10 from $8.9-billion in 2008/09.  Debt interest is projected to exceed $11 billion in 2011/12.  Gaudet said, “this is a mountain of debt that future taxpayers will have to pay off. This amounts to fiscal child abuse.”

Tax Changes – Business Tax Lowered, Both Surtaxes Hiked, Beware McGuinty Bucks

Ontario’s two top tax brackets will both be raised by reducing the threshold for their application.  The PST and the GST will be blended, adding 8% on most Ontario services.  Dividend tax credit rates will be reduced to 6.4% for large corporations and 4.5%. 

Gaudet said, “Now is not the time to increase taxes and to put more costs onto individuals and families in Ontario. The new changes don’t make taxes lower, simpler or flatter”.  

The McGuinty government has already introduced a new health tax, new electronics tax, new paint tax, new energy tax, new home sale energy audit tax, raised business taxes, and helped Toronto with a new land transfer tax and a new vehicle registration tax.  Now it is going to saddle Ontarions with an 8% increase on new homes over $400,000, gasoline, home heating fuels, home renovations, haircuts, television service, internet service, telephone service, cellular phone service, taxi fees, airplane tickets, bus tickets, train tickets, dry-cleaning services, accounting services, legal services, Christmas trees and more.  All tax relief offered by lowering the first bracket is offset for the middle class with the new tax hikes.

The government will provide a one-time payment of cheques amounting to $1,000 for families earning income of $160,000 or less. “These McGuinty Bucks will be more than offset by new taxes in one year alone”, said Gaudet.

When Atlantic Canada went to the HST it reduced the combined rate at introduction to help offset the large tax impact.  Ontario is blending with no reduction.

The Corporate Income Tax rate will be lowered from 14% to 12% in July 2010 and to 10% by 2013.  Gaudet said, “this is a good measure that could be speeded up to be more helpful.”  As well, the lowest bracket will be reduced to 5.05% from 6.05% in 2010.

What Should Have Happened

Gaudet recommended8, “The budget indicates it will find $1-billion in efficiencies in 2011/12. It should start this process today not in two years time after ballooning spending”.  Leading up to the budget, the CTF had been calling for Mr. McGuinty to follow the New Brunswick example by providing tax relief through personal and business tax relief by reducing and flattening taxes; reducing the size and cost of government by freezing government employee salaries, reducing the numbers of government employees; eliminating corporate welfare; and, eliminating the Health Tax instead of harmonizing the Provincial Sales Tax with the Goods and Services Tax. 


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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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