In Manitoba, Tory tax cuts help rich most By: Dan Lett Posted: 7:00 PM CDT Friday, Mar. 17, 2023

Opinion

Although the rich get richer in most places around the world, few seem to be getting richer faster than those in Manitoba.

Thanks to a provincial budget that cuts taxes by nearly $1 billion, Manitoba’s upper-income earners stand to make a significant windfall. Of course, that’s not how Premier Heather Stefanson and Finance Minister Cliff Cullen explained their fiscal strategy.

In the budget speech and papers tabled last week, the Tory government said income tax cuts alone would save the “average” family more than $1,000 on their 2023 tax return. Unfortunately, when governments deliver broad-based tax cuts, the whole concept of “average” doesn’t really tell us much. You need to look at how tax expenditures affect people at different rungs of the income ladder.

Fortunately, that’s what the Canadian Centre for Policy Alternatives did.

It analyzed the Tory income-tax cuts included in the 2022-23 budget using Statistics Canada tax-modelling software. It found the average savings for all tax filers was $502, half of what the Tories had claimed. And the top 10 per cent of tax filers — those who make more than $101,274 — will get up to $1,300 in tax savings. At the very bottom of the income ladder ($7,900 to $17,900), the average benefit is only $74.

The same dynamic is at work with the vaunted education property tax cut. You have to be wealthy enough to own a home to qualify for a rebate; and the people who own the biggest homes get the biggest return.

The centre’s analysis reveals one of the fundamental and enduring realities of broad tax cuts: you have to earn a substantial income to see anything that approaches a meaningful benefit.

What is most odd about the PC government’s fiscal policy is that many other right-of-centre politicians, both in Canada and around the world, have figured out that tax cuts are neither politically, nor economically, advisable in the current economic conditions.

What is most odd about the PC government’s fiscal policy is that many other right-of-centre politicians, both in Canada and around the world, have figured out that tax cuts are neither politically, nor economically, advisable in the current economic conditions.

Liz Truss, as British prime minister last fall, triggered a fiscal and political meltdown when, shortly after succeeding Boris Johnson, she unveiled aggressive tax cuts aimed at the top 1 per cent of income earners. She was condemned, both from within her own party and from opposition quarters.

More importantly, however, was the reaction from the markets, which abandoned the British pound in droves.

Truss resigned only 45 days into the job. Her successor, Rishi Sunak, has warned citizens of his country not to expect tax cuts, as tackling the deficit and debt were more pressing concerns.

Political observers all over the world suggested the colossal failure of “Trussonomics” should serve as a warning about the perils of force-feeding citizens with ideologically driven fiscal policies. “In six short weeks, Truss has discredited high-octane, free-market economics, perhaps for ever,” wrote Guardian political columnist Jonathan Freeland.

Perhaps, but clearly not everywhere.

Brian Pallister, as Manitoba premier before the pandemic, arguably became the most aggressive, tax-cutting premier in the country. Even before he had officially balanced the budget, Pallister drained hundreds of millions of dollars from the provincial treasury by cutting sales taxes and shrinking the PST base, increasing the basic personal exemption and cutting payroll levies on small and medium-sized businesses.

Tax cuts, and the accompanying caps on program spending that were required, have left health care and education on life-support.

Remarkably, since taking over from Pallister in the fall of 2021, Stefanson has demonstrated the same appetite for tax cuts. So much so that Stefanson stands in contrast to other conservative-led provinces.

Tories herald personal income tax cuts, increase in health spending in election-year budget

Saskatchewan and Alberta, for example, have prioritized deficit-reduction as the core of their fiscal policies. In Saskatchewan, Premier Scott Moe’s government broadened the provincial sales tax base last year to generate additional revenue for that goal.

In Ontario, after introducing somewhere in the neighbourhood of $8 billion in tax cuts since taking office in 2018, Premier Doug Ford has made a conspicuous effort to avoid more broad-based tax expenditures while his province tries to rebound from pandemic-era deficits.

Even so, last year Ford introduced a targeted tax cut that was focused solely on lower-income Ontarians to help offset his decision to abandon a promise by the previous Liberal government to raise the minimum wage to $15 per hour.

The low-income workers tax credit (known as LIFT in political circles) provides tax credits of up to $875 for individuals who earn less than $50,000, and families that make less than $82,500. As opposed to the Manitoba approach, LIFT does not provide tax relief to all Ontarians, only those who fall under the income threshold.

Right-of-centre politicians everywhere have learned these painful lessons, and applying new-found wisdom when it comes to fiscal matters… Everywhere, it seems, but Manitoba.

Although the minimum-wage hike would have helped more people, the Canadian Centre for Policy Alternatives was able to classify LIFT as a “somewhat progressive” tax expenditure.

The most important takeaway from the Ontario example is that even a fiscal hawk like Ford is loath to cut major tax streams at a time when deficits rule and economic uncertainty threatens economic growth.

Right-of-centre politicians everywhere have learned these painful lessons, and applying new-found wisdom when it comes to fiscal matters.

Everywhere, it seems, but Manitoba.

dan.lett@winnipegfreepress.com

Dan Lett
Columnist

Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.

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