Financially reckless PCs suffering from premature ridiculousness

The Manitoba Progressive Conservatives are at it again, promising a massive tax cut the province can’t afford and one the party has obviously not thought through.

On Thursday, PC finance critic Lauren Stone introduced a resolution in the legislature calling for Manitoba to raise the basic personal exemption to $30,000 (the motion was defeated). That’s the amount of income people can earn before paying provincial income tax.

Manitoba’s current basic personal exemption is $15,780. Nearly doubling it to $30,000 would be a huge blow to the provincial treasury — likely in the order of $1 billion a year, or more.

It would also be the highest exemption in Canada, by a wide margin.

Oil-rich Alberta has the highest basic personal exemption in the country at $22,323. Newfoundland has the lowest at $11,067. Manitoba sits somewhere in the middle.

The PCs want to blow past all of them.

Under the proposal, a family of four with two income earners and a combined income of $60,000 would save up to $3,070 per year, according to the Tories. A single person earning $30,000 would save about $1,535.

That might sound attractive. Who wouldn’t like more money in their pocket?

But here’s the important detail the PCs glossed over: they have no idea what it would cost or how they would pay for it.

When asked whether they have calculated the lost revenue from the proposed tax cut, they claim they have, but won’t release it until election time (the next scheduled provincial election is in October 2027). That’s not only a cop-out, it likely means they have no idea what the impact would be on provincial revenues.

The reality is, if implemented, it would result in the province losing hundreds of millions of dollars a year.

That would be beyond reckless for a provincial government currently running a $1.66-billion deficit, and one that continues to grapple with serious cost pressures in health care, education, family services and infrastructure.

If this sounds like a familiar approach for the Tories, it should. The PCs essentially followed the same playbook the last time they were in government.

 

 

In their last budget before losing the October 2023 election, the former Tory government raised the basic personal exemption to $15,000. That was a big jump from the previous amount of $10,145.

And while it was a meaningful tax cut for lower-income people, it was a bigger tax cut for upper-income earners. That’s because the basic personal amount applies to all taxpayers. Which is why raising it — as opposed to providing low-income taxpayers with targeted relief — is so expensive.

At the time, the move cost the provincial treasury $326 million a year, a number that continues to grow.

Worse, the Tories did it while projecting a large deficit.

Governments that cut taxes while running deficits aren’t really cutting taxes at all. They’re simply shifting the bill to future taxpayers.

Manitobans eventually have to pay that money back, with interest.

As it turned out, the fiscal picture in 2023-24 was far worse than the Tories projected.

By the second quarter of that fiscal year — several weeks before the new NDP government was sworn in — the projected deficit had ballooned to $1.6 billion.

By the end of the fiscal year it had grown to nearly $2 billion.

 

 

Those numbers didn’t explode out of nowhere. They were the result of years of tax cuts (there were many under the Tories between 2016 and 2023), combined with poor spending controls.

The predictable result was further deficits and rapidly growing debt. And Manitobans are now paying the price.

Manitoba’s net summary debt is now a staggering $38 billion, up from $20.4 billion in 2015-16. The cost of financing that debt is $2.3 billion a year, nearly triple what it was in 2015-16.

Every dollar spent servicing that debt is a dollar that can’t go to health care, education, infrastructure or other public services.

That’s the real cost of reckless fiscal policy.

And yet here we are again.

Instead of acknowledging the province’s financial reality, the PCs are floating another massive tax cut with no costing and no explanation of how it would be paid for.

Would they slash spending? If so, where?

Cutting $1 billion or more out of revenue would require painful reductions somewhere.

 

 

But the PCs haven’t identified any.

Alternatively, they could simply borrow the money and run even larger deficits, like they did in the past.

That would follow the same pattern as before: cut taxes now and let future generations deal with the consequences, while continuing to pay increasingly higher debt-servicing charges.

That would be the height of fiscal irresponsibility, especially for a party that’s supposed to stand for the opposite.

tom.brodbeck@freepress.mb.ca