Do the right thing and scrap the gas tax holiday

Hey there, time traveller!
This article was published 04/12/2023 (708 days ago), so information in it may no longer be current.

During this fall’s provincial election campaign, Wab Kinew and his fellow NDP candidates campaigned on the promise that, if elected, they would pause collection of the 14-cent-per-litre provincial gasoline tax for six months. Having decisively won the election on Oct. 3, they feel obligated to keep that commitment.

They have introduced legislation that, if passed before the end of the current session ends on Thursday, will see the temporary tax cut take effect on New Year’s Day. Amendments to that legislation, tabled last week, would also pause the three-cent-per-litre tax on marked gas used in farm operations and would remove clauses that restrict the use of discounted gas on off-road trails and waterways.

It is estimated that the original tax cut promise will cost the provincial treasury $163 million, while the cuts contained in the amendments will cost an additional $1 million, for a total of $164 million.

Pundits have criticized the proposed cut on the basis that the province can’t afford to lose that revenue when it is running a sizeable deficit and additional money is needed for health care, education and municipalities. Many also argue that the tax cut would result in increased greenhouse gas emissions, undermining the fight against climate change.

Last week, Premier Wab Kinew attempted to characterize the tax cut as a measure intended to reduce the soaring cost of groceries. He told the Association of Manitoba Municipalities convention that he expects Manitoba grocery stores to lower prices in response to the tax cut, and warned retailers that his government would take steps to punish those who don’t pass the savings on to consumers.

“We do expect that grocery chains will pass on the savings to you when we reduce their transportation costs starting on Jan. 1,” the premier said. “If we don’t see those savings materialize, then that’s when we’re going to follow up on those further steps.”

Kinew and his government colleagues have painted themselves into a political corner. If they don’t keep their commitment to cut the gas tax, they will be accused of breaking their promise, and they no doubt remember what happened to the Selinger NDP government when it broke its promise to not raise the provincial sales tax.

On the other hand, keeping their promise to cut the gas tax deprives the province of money it desperately needs and alienates a vocal segment within the NDP that feels the government should be doing more to fight climate change.

Of even greater concern is the fact that gas stations operators are not legally required to pass the savings on to drivers. In addition, calls to extend the tax cut for a longer period are inevitable, costing the province even more revenue. Does the government seriously plan to reinstate the gas tax on the Canada Day weekend?

Kinew’s attempt to re-frame the tax cut as a means of addressing the rising cost of groceries, combined with an empty threat to punish retailers who don’t reduce prices is a weak, transparent attempt to drown out the many critics of the tax cut.

It ignores the fact that transportation costs incurred within Manitoba have a microscopic impact on grocery prices compared to many other factors. And, really, does anybody expect the government to start prosecuting grocers for not cutting prices?

Beyond that, if the government’s objective is to reduce the impact of rising grocery prices, it would make more sense to create an income-based plan that puts money in the hands of Manitobans who need it most.

The gas tax cut promise was an election gimmick — a commitment made by the NDP in the heat of the election campaign, when political calculations obviously overwhelmed sound public policy considerations.

With the election two months behind us, however, the Kinew government must ask itself whether the virtue of keeping a reckless campaign promise is worth losing almost $200 million in funding for health and education, and worth making this year’s budget deficit that much higher.

It is never the wrong time to make the right decision. With the tax cut legislation scheduled to pass just three days from now, however, the clock is ticking.