Hey there, time traveller!
This article was published 17/4/2013 (1262 days ago), so information in it may no longer be current.
Many have called the 2013 Manitoba budget the "taxing budget" because of the one percentage point increase in the provincial sales tax, but it is more appropriate to call it the "inequality and poverty budget" because its main effects are to increase inequality and maintain high levels of poverty. It justifies this by claiming that all Manitobans will benefit; but what it does not say is that affluent Manitobans will benefit the most and poor Manitobans the least.
First, it is important to note there is significant income inequality in the Manitoba economy, so doing nothing about it is problematic, and taking action to worsen it is damaging. There is clear evidence economic inequality erodes health and increases social conflict, including crime.
The most recent Statistics Canada data are from 2010. In that year, on average, the richest 10 per cent of Manitoba families with children received 9.3 times as much income from all sources ($207,223) as the poorest 10 per cent ($22,309).
Put differently, 2.5 per cent of all income received by families with children went to the poorest 10 per cent of families and 24 per cent went to the richest 10 per cent.
How does this budget increase inequality? Both by the means through which it raises revenues and through the expenditure choices that it makes.
First, on the revenue side, the government could have taken action based on the ability to pay so that those with higher incomes and more capacity to pay would have borne more of the burden. One way to do this would be to add an additional bracket at the top end of the income hierarchy. All Manitobans who earn more than $67,000 pay the same marginal tax rate for income earned over that amount.
Why not establish a new bracket for those earning more than $135,000 as the federal government does? This would have acted to decrease economic inequality.
But the taxation measure the government took does the opposite. It is unfair in that it treats those in different circumstances as equal. The finance minister characterized the increase to the provincial sales tax as "the fairest way to reach these goals, because the cost will be shared by everyone."
But is it fair that the working poor and welfare recipients pay the same consumption-tax rates as Manitoba's millionaires? In fact, since the poor have less money to save or invest and must spend more of their income on daily living, the provincial sales tax increase likely amounts to a higher percentage of their income than for the rich.
And how will those on minimal fixed incomes bear the increased purchasing costs? Did the government consider raising the Manitoba child benefit for the working poor or employment and income assistance rates?
What about the expenditure side? Has the government really taken action to reduce poverty and economic inequality as claimed? Not by a long shot. There is a paltry increase of $20 per month that will not come close to allowing welfare recipients to achieve access to 75 per cent of the rental housing market. More progress would have been possible because the government has budgeted a $4.5-million decrease in welfare expenditure from last year.
This is especially important because adequate housing has been found to be an important determinant of health. The government probably is increasing demand for health-care services through its inaction.
And then there's the $250 increase to the personal income tax exemption. This is one of a series of increases that applies equally to the richest and poorest Manitobans, except for the fact that those who are too poor to pay any taxes do not benefit at all. Most of the benefits go to those above the poverty line, so it does nothing to fight poverty and little to counter inequality.
Sid Frankel is a University of Manitoba social work professor.