Tax cuts and rebates highlight free-spending budget
TORONTO STAR FILE PHOTO
Ontario has taken the lion’s share of job losses in Canada.
March 26, 2009
RICHARD J. BRENNAN
OTTAWA BUREAU
The Liberal government released a big-spending budget today featuring the largest deficit in Ontario history and a new blended sales tax that will make everyone's wallet a little lighter.
In an attempt to fight the recession, the government is rolling out record infrastructure spending of $27.5 billion plus $5 billion from Ottawa to create jobs, more than $10 billion in tax cuts and a couple of billion dollars more in sales tax rebates.
Much of the budget had already been telegraphed in an attempt to dull the pain, but critics cautioned that the worst is yet to come as the province struggles under the weight of a $123.6 billion debt.
Finance Minister Dwight Duncan's whopping deficit of $14.1 billion – or $1,076.90 for every man, woman and child – eclipsed the long-held red ink record held by former Ontario NDP Treasurer Floyd Laughren of $12.4 billion in 1993.
"The state of the economy is something we take very seriously. The people who have lost their jobs, the communities that are suffering need this kind of response," an emotional Duncan told reporters.
"Returning Ontario to a balanced budget will take time and require tough decisions," said Duncan in the budget speech in which he promised to start tackling the deficit after 2010-11.
Critics immediately seized on the budget as being "worthless" for people trying to cope with the recession, described the harmonized sales tax as a "massive tax increase" and accused the Liberals of trying to buy off voters with their own money, referring to planned sales tax rebates for 93 per cent of Ontarians.
The provincial sales tax of 8 per cent will be married to the 5 per cent GST as of July 1, 2010.
The 13 per cent tax will be applied to many items not taxed now – from Big Macs to McMansions – but the government insists that other tax breaks totalling $10.6 billion will more than offset the consumer tax increase.
"This package of tax reductions for Ontario individuals and families and business is the right package for Ontario ... I think Ontarians will understand that," Duncan said.
There will be some exemptions, such as children's clothing, feminine hygiene products and books, but the 13 per cent will be applied for the first time on things like homes of more than $400,000, heating fuel, gasoline, tobacco, taxis, golf green fees and landscaping, newspapers and magazines, gym membership, veterinarian fees and even vitamins.
"Let's be clear, overall provincial government revenue would not increase as a result of this reform package," Duncan said in his speech.
"The single tax would make Ontario more competitive and cuts paperwork costs for businesses by more than $500 million a year," he said.
To soften the blow to consumers, the government is handing out up to $1,000 in three payments beginning June 2010 to every family with an income below $160,000. A single earner making less than $80,000 a year will receive three cheques worth $300.
This cash giveaway will cost $2.7 billion in 2010-11 and $1.3 billion in 2011-12 all of which is being totally covered off by transfer from the federal government.
Interim Conservative Leader Bob Runciman summed up the budget in one word: "worthless."
"This budget is worthless for Ontarians looking for help to get through the recession, it's worthless to taxpayers struggling to pay for Dalton McGuinty's uncontrolled spending and it is worthless to the future of our great province which will be saddled with the biggest debt and deficit in its history," Runciman told reporters.
NDP Leader Andrea Horwath said a tax hike is the last thing that Ontario residents need right now.
"As Ontario families worry about their jobs, savings and pensions, Dalton McGuinty is going to whack families with a tax hike instead of providing them with relief," she said.
"Ontarians are going to be worse off every single day and every single week under this budget."
The government proposes $4.5 billion in tax cuts for businesses over three years and increasing the annual child tax benefit for low-income families to $1,100 from $600 as of July.
Among other things, the budget calls for infrastructure spending totalling $32.5 billion for hospitals, roads, social housing and schools, which the government estimates will create 300,000 jobs.
"Devastating job losses are hitting many Ontario families hard. In my hometown, Windsor, I have witnessed first-hand friends and neighbours cope with job loss," Duncan said.
The budget sets aside $3.2 billion for the ailing auto sector but details on how much money will go to which companies have yet to be worked out.
Other details include:
- A 100 per cent tax write-off for new computers for manufacturers and small businesses;
- Freezing MPPs' pay for one year;
- Creating 100,000 summer jobs for students this year;
- Cutting the 68,645-strong public service by 5 per cent over three years through attritions;
- A new $130 million fund to support business and workers in the agriculture, forest products and mining industries over the next three years;
- $700 million over the next two years for skills training and literacy initiatives as well as enhancement to existing programs.
