Tax cuts vs. restoring services: choice between Tories, NDP stark

Hey there, time traveller!
This article was published 18/09/2023 (761 days ago), so information in it may no longer be current.

It’s halfway through the provincial election and Manitobans now have a ballot box question: tax cuts versus fixing health care.

It’s a pretty clear choice. The Progressive Conservative party is proposing a staggering $900 million in tax cuts for individuals, businesses, homebuyers and consumers. The NDP, by contrast, has pledged to rehabilitate Manitoba’s beleaguered health care system and reinvest in front-line services after seven years of Tory government austerity.

There is usually some degree of choice between political parties in election campaigns. But it hasn’t been this stark in Manitoba for years.

For Premier Heather Stefanson and the Tories, that’s by design. The only path to victory they see is to divert attention away from areas where they are most vulnerable: health care, public schools and other front-line services.

For the NDP, promising to renew funding in those areas falls naturally into its wheelhouse. But it’s also where most of the votes are, especially in the important battleground of Winnipeg.

The PC party can’t focus on health care and public schools because it knows doing so would remind voters of its disastrous record in those areas. After driving up emergency room wait times and defunding hospitals, it can no longer speak confidently about “healing the health-care system.”

So it’s opting for deep tax cuts instead. What the Tories haven’t said is how much they would have to cut in spending to do so. Because Stefanson is also promising to balance the books by 2025, two years earlier than planned.

The Tories are promising to cut the income tax rate on the first tax bracket by 50 per cent at a cost of $600 million a year. It’s a massive tax cut, especially since the Tories have already increased the threshold for that tax bracket to $47,000, beginning in 2024.

The party has also pledged to phase out the so-called payroll tax on large businesses. The annual price tag for that after four years: $220 million.

The PC party has promised to eliminate the land transfer tax for first-time homebuyers — a $40-million hit to the treasury. Also, the Tories have pledged to eliminate the PST on restaurant meals ($25 million), boost the tax credit for charitable donations ($12 million) and remove the provincial sales tax on trees and flowers ($750,000).

All told, that’s $898 million a year in lost revenue after four years. That doesn’t include the full phase-out of education property taxes the PC party has been promising since 2019.

According to the 2023 provincial budget, Manitoba Finance is projecting a deficit of $197 million in 2025-26. It includes all the tax cuts and additional spending in the 2023 budget (which the NDP has vowed to keep) but not the new ones the Tories have pledged during the election.

If half of the new tax cuts proposed by the Tories were in place by 2025-26 ($449 million), the projected deficit would rise that year to $646 million. That’s how much the Tories would have to cut in spending to balance the books. It’s an astonishing amount.

Naturally, the Tories have conveniently ignored that part of the equation, making false claims instead that the tax cuts would stimulate the economy enough to replace the lost income. That’s voodoo economics. Some of those tax cuts may come back in the form of taxation revenue, but only a small fraction. The vast majority of the lost revenue would have to be made up through spending cuts. The question is, where? Hospitals? Public Schools? Municipalities? The money would have to come from somewhere. It’s the elephant in the Tory war room.

Which takes us back to the ballot box question: do Manitobans want tax cuts and the corresponding spending cuts required to pay for them, or do they want government to fix health care and reinvest in front-line services?

The NDP is pledging to boost spending in health care and other areas, but they’re not promising to balance the books by 2025. They have promised to eliminate the deficit by 2027-28, which gives them more fiscal wiggle room than the Tories. (The party has also pledged to cut the gas tax temporarily, for six to 12 months, which would have little impact on the deficit in the long run).

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There is no need to balance the books by 2025. The Tories’ plan to do so while introducing massive tax cuts would be reckless and fiscally irresponsible. Whether the deficit is eliminated in 2025, 2027 or 2030 makes no difference to the credit rating agencies. There’s no rush to eliminate the deficit as long as there’s progress made towards a balanced budget.

Manitoba Finance is projecting a deficit of $53 million in 2026-27 under current economic growth projections (not including any of the parties’ election promises). Which means there would likely be a surplus by 2027-28, enough to increase spending modestly, but nowhere near enough to afford $900 million in tax cuts, not without slashing spending.

The fiscal plans of both parties will be further scrutinized when they release their fully-costed financial blueprints, likely by the end of this month. When they do, both will have to show how they plan to meet their balanced budget targets while achieving their election promises.

Either way, the ballot box question for Manitobans in this election will be clearer than it has been in decades.

tom.brodbeck@freepress.mb.ca

Tom Brodbeck
Columnist

Tom Brodbeck is an award-winning author and columnist with over 30 years experience in print media. He joined the Free Press in 2019. Born and raised in Montreal, Tom graduated from the University of Manitoba in 1993 with a Bachelor of Arts degree in economics and commerce. Read more about Tom.

Tom provides commentary and analysis on political and related issues at the municipal, provincial and federal level. His columns are built on research and coverage of local events. The Free Press’s editing team reviews Tom’s columns before they are posted online or published in print – part of the Free Press’s tradition, since 1872, of producing reliable independent journalism. Read more about Free Press’s history and mandate, and learn how our newsroom operates.