Manitoba’s Progressive Conservative government laid out an unusual budget on Wednesday afternoon that sought to beef up its tax-cutting bona fides and remind Manitobans of its fiscally responsible credentials, while still appearing to deliver on promised COVID-19 relief.
This government expects to rack up another $1.6 billion in deficit spending this year due to the ongoing COVID-19 pandemic, but is also cutting taxes by $200 million, with much of that tax relief in the form of $190 million in rebates to property owners as the province seems to have sped up its plan to phase out education taxes.
Owners of both residential property and farmland will receive a 25 per cent rebate this year, while owners of commercial and other land are to get a 10 per cent rebate. Property taxes will cut again by equal amounts next year, resulting in total savings of $1,100 for the average homeowner, according to government figures.
At the same time, businesses are going to get a tax break to encourage hiring. As The Canadian Press reported yesterday, the threshold at which companies start to pay the province’s payroll tax is to rise in January to $1.75 million from $1.5 million of total payroll. The threshold at which companies pay a higher rate will rise to $3.5 million from $3 million.
But the amount of money this government plans to spend on pandemic programs this year is expected to drop by about $800 million, even as problems continue to plague Manitoba’s vaccine rollout.
All told, Manitoba’s total debt will rise to about $30 billion — an increase of $2.4 billion from a year ago.
Depending on what side of the equation you currently find yourself, you can spin this decision in a few directions. Premier Brian Pallister and Finance Minister Scott Fielding no doubt believe that by lowering taxes, they are increasing the amount that Manitobans are keeping in their bank accounts at a time when certain sectors of our economy have been hit especially hard.
At one point last summer, for example, Brandon’s unemployment rate stood at 12.9 per cent as the pandemic raged in our region and layoffs abounded in the retail and service industry. Moving up the timetable for property tax relief for farmers and general property owners — the government initially said the removal of education property taxes would take about a decade — would seem to be a relatively simple move to improve the financial position of Manitobans overall.
Yet it’s not that simple. The government has never come forward with a coherent plan to pay for the loss of those education tax dollars, a problem made more obvious within this budget document, which states the additional education funding will come from a dip into general revenues. The question that needs to be asked is whether this kind of education plan is sustainable in the long term.
We also have to wonder at the province’s plan to give further tax breaks to businesses "to encourage hiring." This is an old Conservative and Republican mantra that has never shown itself to be particularly fruitful.
In 2015, following a wave of billions in corporate giveaways by the federal government under Stephen Harper, a study by the Canadian Centre for Policy Alternatives found "no evidence" that this tax relief "did much of anything to stimulate the economy or create jobs."
What it did find, however, was that corporate Canada took that cash and sat on it — there was a distinct downward trend in new investment, and job creation went down, not up, with the average rate of growth of employment in the top 60 firms stagnating at -0.7 per cent between 2000 and 2010.
In short, cutting corporate taxes led to cash hoarding.
This was echoed in the massive 2017 Tax Cuts and Jobs Act bill pushed through by former U.S. President Donald Trump and Republican lawmakers, who argued the tax cuts would boost jobs and investment. According to a report by "PBS News Hour," Treasury Secretary Steven Mnuchin said in October 2017 that the tax overhaul would push GDP to a sustained level of three per cent or higher leading to "literally millions and millions of jobs."
Two years later, survey findings from the National Association for Business Economics suggested that most companies prioritized stock buybacks over making new investments and hiring more workers.
Why is this important? Because the Pallister government hopes to buttress its tax cuts and pandemic spending with strong economic growth. The budget documents provided by the Tories project gross domestic product (GDP) to grow by 4.1 per cent in the coming fiscal year and another 3.6 per cent next year.
Meanwhile, the province plans to make it more costly to use streaming services, online accommodation platforms and online marketplaces by December as it begins to apply the provincial sales tax. That’s not likely to be a particularly popular move.
We fully support any government efforts to be fiscally responsible stewards of our tax dollars, and not spend unnecessarily. Further to that, providing relief to our business community should be one of the priorities of this government.
However, we are growing concerned that the Pallister government’s single-minded focus on tax relief is ignoring the needs of the here and now.
Such ideological blinkers are hardly practical. As we are still trying to find our way out of this pandemic — even as a third wave of COVID-19 threatens provincial governments all around us — we need pragmatic thinking from our provincial leaders to carry the day.