Fuel-tax holiday election lure fails governing-logic test

Hey there, time traveller!
This article was published 01/12/2023 (684 days ago), so information in it may no longer be current.

At some point, Premier Wab Kinew will have to drop the political gimmicks and start governing like a serious premier.

The NDP premier’s decision to cut the provincial fuel tax for six months is not only bad policy, it’s a political shtick, the kind parties often use during election campaigns to sponge for votes. It will do virtually nothing to help Manitoba’s most vulnerable people — those who most need help with rising prices — and will primarily benefit higher-income people, including motorists who liberally drive around in fuel-guzzling half-tons and SUVs.

Kinew said this week the fuel-tax holiday, scheduled to kick in Jan. 1, should bring down grocery prices, since it will cut transportation costs in the food industry. If it doesn’t, he said he will take action against unco-operative grocers. He wouldn’t say what kind of action that may be.

“If we don’t see those savings materialize, then that’s when we’re going to follow up on those further steps,” the premier said.

That’s a lot of political bravado, but it’s mostly hollow rhetoric. What “steps” could a provincial government possibly take against grocers who allegedly refuse to pass on fuel-tax savings to consumers? How would that even be measured in a marketplace as volatile as the food industry, whose prices fluctuate constantly, owing to a broad range of factors largely out of the control of local retailers? Is the province really going to start penalizing grocers, including the smaller ones, for not cutting prices? It’s a ludicrous proposition.

Even if government could force grocers to pass on their “savings” to consumers, it would be a temporary measure. After six months (or slightly longer, since the bill introduced last week allows the tax holiday to be extended for up to six additional months), fuel prices and, consequently, transportation costs for grocers would rise again and food would become just as unaffordable as it was prior to Jan. 1.

A temporary fuel-tax cut will not reduce grocery prices in any measurable way. It may even cause a price shock after the holiday is lifted, as the reduction may not get fully passed on to motorists at the pump. Will the provincial government go after gas station owners, too, if they don’t pass on the savings to consumers?

This is one of those really dumb, gimmicky promises that may sound good during an election campaign, but is not only ineffective in practice, it will hurt the government’s short-term revenues — money that could be used to help those genuinely in need of assistance. The six-month fuel-tax cut is projected to cost the provincial treasury $163 million. It could be higher if it’s extended beyond that period. Those are tax dollars that could be put to far more effective use.

It’s similar to the pledge to freeze Manitoba Hydro electricity rates for one year — a pledge the NDP is already waffling on for all the reasons they were warned about when they made the pledge during the election campaign.

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Hydro’s revenues have tumbled this year, mostly a result of low water levels. The publicly owned utility is now projecting a hefty deficit for 2023-24, which means the rate freeze may have to be delayed, or possibly cancelled altogether. That would be a good thing, since interfering with the Public Utility Board’s rate-setting process would undermine the independence of the public regulator.

Much like the fuel-tax holiday, an electricity rate freeze would benefit higher-income Manitobans the most and do little to help low-income residents. The rate-freeze pledge was a poorly conceived campaign gimmick to attract votes. The NDP would be well advised to drop it.

There are far more effective and intelligent ways to help low-income people struggling with affordability issues than across-the-board tax and rate cuts. Assistance should be targeted to those whose needs are greatest, so resources can be concentrated in areas where they are most effective. There is no shortage of income-tested options, such as a PST tax credit for low-income Manitobans and/or a rent-assist boost, to achieve those goals.

Now that the NDP is in government and has access to an experienced civil service that can propose and analyze such policy options, it should move on from attention-grabbing election pledges and start adopting serious, effective policy.

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.