-CTF Applauds New Tax Cuts -Urges Faster Action on Debt Reduction and Spending Controls-

TORONTO: The Canadian Taxpayers Federation (CTF) today reacted to the tabling of the Ontario budget, by Finance Minister Ernie Eves, this afternoon at Queen's Park in Toronto.

"Overall, Mr. Eves has continued the proven path of tax cuts as the quickest route to economic prosperity," stated CTF Federal and Ontario director Walter Robinson. "Sticking to the income tax cut schedule and eliminating provincial bracket creep are moves that support all taxpayers, especially lower income earners and working families."

"The challenge for the government now is to manage expectations and set priorities for the post-deficit era," added Robinson. "Our current crop of MPPs have never governed in an era of over-taxation surpluses. We have moved from an environment of cuts to choices. The demands for new spending will be immense. Fiscal discipline - so prevalent during the deficit battle - must remain paramount as legislative attention now must turn to debt reduction and ensuring that priority spending envelopes only reflect inflation and population growth."

Taxes

Today's budget announces a variety of positive tax relief measures including the second installment of the 20% provincial income tax cut schedule. In addition, the full 20% cut will be implemented at least one-year in advance.

 

Other tax relief measures include:

 

• Restoring full-indexation to the provincial income tax system: eliminating bracket creep.
• Reduction of the capital gains inclusion rate from 75% to 66.6% (2000) to 62% (2001) to 50% (by 2004).
• Permanent extension of the Land Transfer Tax rebate, up to $2,000, for first-time new-home buyers.
• Phase out the retail sales tax (PST) on motor vehicle insurance premiums and repairs/replacements under warranty.
• Provide a refund of up to $200 for each Ontario taxpayer, depending on income tax paid.
• Moving to a Made-For-Ontario tax on income system (de-linking from the federal regime).

"These measures are substantive and serve as a challenge to the federal government and other provinces to go further in the all-but-undeclared tax-war between Canadian jurisdictions," noted Robinson.

However, Robinson added a note of caution on the tax relief front. "While the province will try to spin this budget as adding 67 new tax cuts for a 5-year total of 166, this is a touch disingenuous. Over 30 of these are back-door credits and another 40 are merely extensions of earlier cuts. Ontario's tax cuts have worked by leaving more money in the pockets of Ontarians and promoting economic growth, the government doesn't need to mislead people with this spin, the results speak for themselves."

"We are also disappointed that PST reductions were not more ambitious. While the PST reductions for motorists are welcome, the province's intransigence to reduce fuel taxes based on some ill-founded fear that 'big oil' will not pass these savings through to consumers defies logic," said Robinson. "But to be fair, commitments to increased highway construction activity are a fair use of tax dollars and provide some measure of comfort to motorists that provincial fuel taxes are returning, in part, to their intended purpose."

Debt

"While taxpayers should take heart that the debt is no longer rising and that the first payment of $654 million on our intergenerational mortgage has been made, taxpayers must remain vigilant," stressed Robinson. "And while we are encouraged that Minister Eves has doubled his contingency reserve from $500 million to $1 billion annually, this is a far cry from the $3 billion that the CTF recommended during pre-budget hearings in February."

"At the current pace, it will take 114 years to pay down our provincial debt. This is tantamount to intergenerational tax evasion. The absence of a legislated schedule of provincial debt reduction is unacceptable. Paying down today's debt cut's tomorrow's taxes," added Robinson. "Unfortunately, the government is still averse to this approach."

 

Health Care Spending

"While no one should doubt or dismiss the public anxiety over the future of health care, the absence of a long-term plan in health care is very troubling" said Robinson. "In 1995, the federal Office of the Superintendent of Financial Institutions (OSFI) noted that by 2040 almost 94.5% of household income would be needed to fund public medicine. This is shocking."

"The goal to have 80% physician pick-up for primary care in the next four years is unrealistic. And the $54 million per year to reduce waiting times for cancer care, renal disease and cardiac care doesn't seem to account for the rapidly expanding acuity and prevalence of these afflictions," added Robinson.

"Unless Ontario looks seriously at medical savings accounts (MSAs) as a way of funding primary care, today's announcements will not stem patient demand or other supply-side pressures in primary care," Robinson cautioned. "Along with these issues, the Province should be lobbying for the inclusion of the principles of quality, sustainability, and accountability in the Canada Health Act. Although health care funding now accounts for 37cents of each dollar spent, it is not a substitute for long-term reform," concluded Robinson. "At this pace we'll only need two Ministries in 25 years, Finance to collect taxes, and Health to spend them. Then what will we do with all our other public services "