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MGEU numbers don’t add up

Author: Todd MacKay 2016/02/18

Public debate is the best way to make sure Manitobans have the information they need to make their choice at the ballot box this spring. But those debates are most productive when they’re based on facts. And, while we welcome union leaders to present their vision with vigor, it’s important to check the math.

Michelle Gawronsky, president of the Manitoba Government Employees Union (MGEU), says province’s problem is that taxes are too low.

“If anything has tied the hands of provincial policy-makers and eroded Manitoba’s fiscal flexibility, it is … unsustainable tax cuts,” said Ms Gawronsky. “In 2015, Manitoba’s business community will pay $446 million less in provincial taxes than in 1999.”

Unfortunately, Ms Gawronsky doesn’t show how she calculated those numbers.

Here are some facts. In the 1998-99 fiscal year the Manitoba government collected $215 million in business taxes – that’s $291 million in today’s dollars after adjusting for inflation. In the 2014-15 fiscal year the province collected $562 million in business taxes.

Bottom line: Manitoba businesses are sending the provincial government nearly twice as much money in corporate taxes as they did in 1999.

While Manitoba business are paying more into the provincial treasury, it’s true that business tax rates have come down. Perhaps Ms Gawronsky assumes that a higher tax rate would automatically mean more revenues for government. That’s very questionable logic. It’s like suggesting that the Sun could make twice as much money if it doubled its prices – theoretically that’s possible, but it’s more likely that the paper would lose customers to competitors. It’s the same with business taxes – higher taxes might mean more revenue, but they’ll more likely force an entrepreneur to start a new business in Regina rather than Winnipeg.

And what exactly does Ms Gawronsky think Manitoban businesspeople do when they get a little tax relief? They probably aren’t lighting cigars with hundred dollar bills. Here’s what happens when there are a few extra dollars in the cash register: businesses grow. They hire people in our communities. They provide new services and products for customers. They start new businesses. And yes, they pay the taxes that pay the salaries of MGEU members.

Then there’s MGEU’s total disregard of the dangers of run away deficits.

“Governments can support economic recovery by borrowing in the short run to invest in infrastructure, public services and jobs,” said Ms Gawronsky.

Whether or not government spending sprees drive growth is a debatable point, but one thing is certain: borrowing brings interest charges. Manitoba is already spending $842 million this year to cover the interest on the provincial debt that’s more than $36 billion. That’s money that doesn’t go to Ms Gawronsky’s MGEU members through salaries or to Manitobans through tax relief.

Debate is healthy, but it’s also good to seek consensus where we can find it. So let’s agree on one thing: it’s not good to flush hundreds of millions of dollars away through interest payments. The MGEU can argue we should use that money to expand the bureaucracy and the Canadian Taxpayers Federation will continue to call for tax relief, but surely nobody wants to keep stuffing money into the pockets of Wall Street bond fund managers.

Change is coming. Either we can manage that change by making our government more efficient, trimming the budget and paying down the debt; or we can continue to run reckless deficits and wait until soaring interest costs force much deeper cuts and tax hikes that drive jobs out of the province.


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Franco Terrazzano
Federal Director at
Canadian Taxpayers
Federation

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