This year’s budget forecasts a deficit of $12.5 Billion. It commits to a smattering of public sector investments over and above the previously committed spending and proposes tax increases totaling $900 million in additional revenue this budget year.
Tax increases include:
- a 1 percentage point income tax increase on income between $150,000 and $220,000 and a 2 percentage point increase on income between $220,000 and $514,000. This is a change that comes on the heels of a new report from the Organization for Economic Cooperation and Development that recommends Canada tax high income earners or risk exacerbating the growing income gap between the rich and the rest that is currently the second fastest growing among OECD nations. Total additional revenue: $635 million
- an increase on tobacco to 13.97 cents per cigarette – a tax that was last increased in 2006 when the tax per cigarette was increased to $0.1235. Prior to 2006, Provincial taxes on cigarettes had increased on an almost annual basis since 1981, when they were first introduced. Total additional revenue:$140 million
- an increase in the tax applied to aviation fuel. It will amount to a 4 cent increase per litre over 4 years. The tax applied to aviation fuel has not been increased, not even for inflation, since 1992, when the tax was set at 2.7 cents per litre. Total additional tax revenue: $25 million
- eliminating the ability of large CPCCs to claim the small business tax deduction will raise an additional $40 million in revenue
- Paralleling Federal tax measures introduced in the federal budget will raise an additional $60 million in revenue
The government also commits to clamping down on corporate tax avoidance.
These amendments are no sea change, but the government seems to be signaling that tax cuts are off the table for now.
Every budget is political in nature, and this year’s budget may also serve as an election platform for a minority government attempting to reset its priorities. While this budget gets points for sticking its neck out and testing a conversation that is long overdue its a far cry from the $19 Billion in foregone revenue that has been cut out of provincial tax revenues over the last 20 years.
Kaylie Tiessen is an economist with the Ontario Office of the Canadian Centre for Policy Alternatives. Follow her on twitter @KaylieTiessen