The ruling NDP will hike the provincial sales tax to eight per cent July 1 to not only help slay its nagging deficit, but so it can also build a new level of flood protection in western Manitoba.
But first they need to make it legal.
Under current law, the NDP needs the permission of Manitobans in a referendum to raise the sales tax, but in the coming days Premier Greg Selinger's New Democrats will introduce legislation to do away with that requirement. It's the second time in three years the NDP will rewrite the province's balanced-budget legislation to legalize its fiscal plan. The first time was in 2010 when the NDP said it had to run multi-year deficits because of the ravages of the 2008 recession.
"We'll be accountable for that," Selinger told reporters Tuesday after Finance Minister Stan Struthers tabled his second budget as finance minister. "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."
The one percentage point sales-tax hike is the main pocketbook hit for Manitobans in a cautious budget that also makes it more expensive to smoke cigarettes, buy a fishing licence and signals a 20-cent rise to the $10.25 minimum wage this fall.
Among other items in the budget is $1.8 million in annual funding for the STARS helicopter ambulance service to fly 24 hours a day, effective immediately.
Selinger said proceeds from the tax hike will go into the new Manitoba Building and Renewal Fund to spend on what the NDP calls "critical infrastructure" -- anything from an expansion to a hospital, university or personal-care home to a repaved highway to massive new flood protection recommended in a recent report on the 2011 flood. The tax increase will be tied to a time limit of 10 years that allows the province to tap in dollar-for-dollar in the federal Building Canada Fund program announced in the Harper government's recent budget.
"We'll show how the money will benefit all Manitobans as we go forward, and it will also keep the economy going at a time of great economic uncertainty around the world," Selinger said.
The increase in the provincial sales tax is expected to raise $277.6 million per year in extra revenues. The sales-tax increase is expected to cost the average Manitoba household $300 a year. It follows a $184-million increase in taxes and fees in last year's budget.
"The PST is the fairest way to reach these goals because the cost will be shared by everyone," Struthers said, adding Manitoba's sales tax will remain the third-lowest in the country.
Reaction to the sales-tax hike was swift.
"For a government to proceed in this way is truly the height of arrogance," Progressive Conservative Leader Brian Pallister said.
Dwayne Marling, of the Canadian Restaurant and Foodservices Association, said the budget 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.
"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 a decade of financial decisions that have brought us to a provincial debt of $17 billion."
Struthers cushioned the sales-tax hike by increasing the basic personal exemption by $250 and beginning the process to wean home-owning seniors 65 and older from paying the education property tax by 2015.
A group that represents Canadian retailers said that wasn't good enough. 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, store owners 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.
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."
Struthers and Selinger were nonplussed.
"It was definitely a difficult decision, one we did not take lightly," Selinger said. "But we saw the circumstances in front of us. We saw the (economic) slowdown. We saw the economic uncertainty. We saw the third major flood risk in five years. We realized we had to do something very significant that would position us for opportunities for people now, protection for communities now, for economic growth now, but also build our capacity to be prosperous in the future."