Manitobans will see the provincial sales tax rise to eight per cent on July 1 as the Selinger government continues to wrestle with a half-billion spending deficit.
The one percentage point sales-tax hike is the main pocketbook hit for Manitobans in a cautious budget handed down today that also makes it more expensive to buy tobacco and purchase a fishing licence and signals another rise in the minimum wage.
The tobacco tax will go up by four cents a cigarette — to 29 cents — effective midnight tonight.
Manitoba will see an increase of $250 in the basic personal exemption on their personal income taxes, while seniors are promised an end to school property tax payments by 2015.
Low-wage earners are promised that the minimum wage will rise to $10.45 per hour in October, up from the current $10.25.
The increase in the provincial sales tax, which will require a legislative amendment, is expected to raise $277.6 million per year in extra revenues. It follows a $184-million increase in taxes and fees in last year’s budget.
Tax hike the 'fairest way' to reach goals: minister
Finance Minister Stan Struthers said the new one-point increase in the PST will expire in 10 years — at the same time as a new federal infrastructure fund expires. Manitoba will be expected to match federal investments in order to take advantage of the federal monies.
Struthers said the sales tax was seen as the best way to ensure the province could protect key government services while improving the province’s roads, bridges and flood-protection infrastructure.
"The PST is the fairest way to reach these goals because the cost will be shared by everyone," the minister said, adding that Manitoba’s sales tax will remain the third-lowest in the country.
Spending up 3.1%
Total government spending will rise to $14.8 billion, an increase of 3.1 per cent from the previous year. The projected deficit is expected to fall slightly to $515 million, compared with $583 million for the fiscal year that ended March 31.
"Manitoba has weathered the financial crisis better than most provinces," Struthers said in his budget speech. "Over the last five years our province’s average annual economic growth rate was second best out of all provinces, and almost double the rate of national economic growth. Forecasters expect us to outperform the national growth rate again in 2013."
The government will freeze or reduce the budgets of 11 government departments and extend a 20 per cent reduction on cabinet ministers’ salaries for another year.
Among the announcements contained in the budget is a decision to provide, effective midnight tonight, 24-hour STARS helicopter ambulance service in Manitoba, up from 12 hours per day. The initiative will cost $1.8 million a year.
The province will invest a record $1.8 billion to build and renew critical infrastructure including roads, hospitals, schools and flood protection, Struthers said.
"We'll be accountable": Selinger
Premier Greg Selinger said the one per cent tax increase is needed to grow the province’s economy, and fix what has to be fixed, at a time of global uncertainty.
He said a bill to do away with a requirement for a public referendum for the tax hike will specify where the new revenue is to be spent. That amending legislation will be brought in this week.
He said the tax increase will be tied to a time limit of 10 years with revenue earmarked towards the new Manitoba Building and Renewal Fund to spend on what the NDP calls "critical infrastructure." The 10-year span also allows the province to tap in dollar for dollar in the federal Building Canada Fund program announced in the Harper government’s recent budget. "Critical infrastructure" includes hospitals and schools, plus further flood proofing.
"We’ll be accountable for that," Selinger told reporters. "We have to get on with it now. The construction season is in front of us. The flood risk is in front of us as we speak. It’s time to move on and get these things done."
AMM: Flooding an excuse?
Dwayne Marling of the Canadian Restaurant and Foodservices Association said today’s NDP is a triple whammy for the province’s restaurants.
Not only have they been hit by recent alcohol increases, they now face the July 1 tax increase plus a hike to the minimum wage for workers effective in October. The basic hourly wage is going up 20 cents to $10.45.
"We’re getting it from all sides," Marling said, adding it’s disingenuous of the NDP to say the sales-tax increase was due to the increasing occurrence of major flooding.
"This didn’t happen overnight. Floods aren’t an unusual occurrence in the province of Manitoba. To blame one or two years of flooding on an increase in taxes seems disingenuous to me when you’ve had more than decade of financial decisions that have brought us to a provincial debt of $17 billion."
Association of Manitoba Municipalities president Doug Dobrowolski agreed, saying it will also hurt cash-strapped municipalities.
"I believe they’re taking that tax room away what we’ve been asking for to repair municipal infrastructure," he said.
"Are you going to use an event (spring flooding) as an excuse to what they’re doing. They’re not focusing on what has to be done in this province."
Retailers incensed at PST increase
A group that represents Canadian retailers was incensed at the percentage point increase in the PST, which is expected to cost the average Manitoba household $300 a year.
Lanny McInnes, Prairie director of the Retail Council of Canada, called the hike "a huge disappointment for Manitoba retailers and … a huge hit for Manitoba consumers."
He said the measure "stomps" on consumer confidence and could send more Manitobans looking for deals south of the border.
Furthermore, he said, storeowners will incur additional costs recalibrating their cash registers to collect the increased tax.
"It’s as bad a news budget as we could have possibly dreamt," McInnes said.
- Retail sales tax to increase to eight per cent on July 1 for a period of 10 years.
- Basic personal tax exemption to rise by $250; spousal and dependent exemptions also go up by $250.
- School property taxes to be eliminated for all seniors by 2015.
- Provincial sales taxes will be removed from baby supplies such as diapers, car seats and strollers.
- Minimum wage to rise 20 cents to $10.45 an hour Oct. 1.
- Effective at midnight, tobacco taxes are going up. The increase is four cents per cigarette to 29 cents per smoke.
- Fishing licences going up $5 due to a doubling of the fishing ‘enhancement‘ levy.
- Government spending is expected to increase by 3.1 per cent as revenues rise three per cent.
- Health spending will rise by 4.5 per cent and education-related spending is also projected to go up 4.5 per cent.
- The province has created a $30-million contingency fund to battle this year’s flood; it expects to spend another $105 million in ongoing flood mitigation.
The province’s finances
- A deficit of $518 million is forecast for 2013-14.
- The deficit for the recently completed 2012-13 fiscal year is now projected to hit $583 million, up $16 million from what was projected in December.
- Debt servicing costs are expected to increase by $19 million.
Budget winners and losers
- The Department of Immigration and Multiculturalism will see its spending plummet by 57 per cent due to federal cuts last year to settlement services.
- Conservation and Water Stewardship spending will drop 6.2 per cent due to the elimination of positions and reductions in grants.
- The Department of Justice will receive a budget hike of nearly 10 per cent due to an increased inmate population.
- The Health Department will see 2.7 per cent more funding (4.5 per cent more on a summary budgeting basis).