The Harper government’s disdain for provincial governments and the public services they provide to their citizens is on full view as the budget season in Canada rolls along. Last week the feds finally announced April 21 as budget day in Ottawa. We already have a glimpse of several of that budget’s expected features – income splitting, higher caps on tax free savings accounts (TFSAs) and richer child care benefits. The first two measures have been studied and declared to be perks for higher income earners, while the child care plan will transfer a few billion in benefits to people who don’t even pay for child care.
The Parliamentary Budget Office (the creation of which is the one good thing I can think of that the Harper government has done) looked at the three initiatives. In brief, this is what the PBO concluded.
- Income splitting – dubbed The Family Tax cut in Conservative ads – will reduce federal government revenues by $2.2 billion this year, while providing “near zero” in benefits to the lowest income percentile and helping only 15% of households, mainly middle-high income ones.
- Doubling the contribution limit on TFSAs will reduce both federal and provincial revenues and produce benefits that “skew to higher income, higher wealth and older households.”
- An enhanced Universal Child Care Benefit will cost an additional $4.4 billion in 2015 but incredibly, over 60% of the increased benefit will go to families with no child care expenses or with kids older than 13.
At the same time as the federal Conservatives are dishing out goodies that are windfalls or of benefit to high income earners, provincial governments across the land are bringing in tough budgets that hit almost everyone. On March 30, an economist working for the Bank of Montreal estimated that three-quarters of the tax cuts and increased benefits being proposed by the feds will be taken back this spring through provincial tax increases and cuts to services. As usual, the mainstream media cast the provinces as villains. As the Globe and Mail‘s report put it: “Provincial governments are wasting little time snatching back (italics added) the breaks the Canadian government gave taxpayers.”
Not exactly. What is actually happening is that the Harper government is unabashedly giving breaks and benefits to its preferred taxpayers – the ones with higher incomes and/or the right family profile. Provinces, victimized by some combination of a lousy national economy, lower oil prices and an unfair distribution of federal transfers, are mainly looking to snatch things from a whole different group. Taken together, the federal-provincial shuffle amounts to an upward transfer of wealth, reminiscent of the deal that saw Alberta get a 38 % increase in health transfers this year while everyone else received from zero to four per cent.
Alberta’s much-discussed oil royalty drop notwithstanding, the feds’ fiscal fecklessness will be felt worse in this neck of the woods. On a macro level, the income splitting and the TFSA’s will benefit wealthier taxpayers, and we have fewer of those in the Maritimes. What we do have are provincial governments determined to shoot for balanced budgets despite depressed revenues. Nova Scotia’s Premier and the Finance Minister have been in spin mode the last week or so, with the latter warning that with this years’s budget “we all have to feel some pain.” We will get some indication of how that pain will be distributed when the budget is tabled in the legislature tomorrow (April 9). But the Liberals have already provided a preview, hitting rural Nova Scotians with higher ferry fees and shuttered tourist information centres. Income splitting and higher TFSA limits will not be much of an offset.
Prince Edward Island and Newfoundland have yet to bring in budgets. On Spud Island, the Liberal government insisted it would balance the books in 2015-16, but declined to present a budget before calling an election for next month. Count on the opposition parties to raise the topic of pain. On the Rock, the drop in oil prices is expected to leave the government facing a $1 billion deficit with no help from the feds – federal transfer payments for Newfoundland’s health and social programs are going up just 2.3% this fiscal year.
But at least Newfoundland is getting a bit of an increase. In New Brunswick, federal transfers will be down by $15 million in 2015-16, according to the budget introduced late last month by he Liberal government. There’s plenty of pain in that document – for example, rural court houses and government offices will be closed, grants to universities frozen, 249 teaching position eliminated and civil service jobs cut. To its credit, New Brunswick proposes to snatch back some of the federal largesse by raising the top tax rate on people making over $150,000 a year. But the government promised more cuts next year, once it completes its “Strategic Program Review.”
In the meantime, the Conservatives are reportedly planning to spend $7.5 million in public funds to advertise the giveaways in its upcoming budget. If nothing else, they’ve got a lot of chutzpah.