Chrystia Freeland and Dominic LeBlanc look on as Prime Minister Justin Trudeau speaks in Ottawa, on Aug. 18, 2020.Adrian Wyld/The Canadian Press
It’s time for an adult conversation on how governments of all stripes plan to pay for their pandemic-inspired spending.
Political talking points around fiscal policy that worked in the past are now laughable. For example, last week Alberta Finance Minister Travis Toews claimed “spending restraint” can balance a budget that is projected to be $24.2-billion in the red. He said this with a straight face. Alberta’s government is now spending almost $2 for every $1 it brings in. If the province closed every hospital, it would still run a deficit.
The province’s United Conservatives are letting a crisis go to waste if they refuse to reintroduce a provincial sales tax – Alberta imposed, then ditched the levy in the 1930s. In every other province, voters shrug off a tax at the cash register. Every percentage point of a sales tax would put roughly $1-billion in Alberta’s coffers. No less an authority than University of Calgary economist Jack Mintz says taxing consumption would make the province’s tax system fairer and more competitive.
The same mature discussion around government revenue – rather than just spending – is long overdue in every jurisdiction, starting with the federal Liberals.
In his first term, Prime Minister Justin Trudeau paid for new programs by raising taxes on the rich, and still ran deficits. Squeezing harder, with another income-tax hike, is unlikely to yield more cash. Like doomsday preppers stocking up on canned beans, Canadians who face significant tax bills are already taking steps to keep the Canada Revenue Agency from grabbing more of their money. The wealthy and wanna-be wealthy are mobilizing an army of advisers who devote their considerable skills to minimizing taxes.
As the Liberals huddle ahead of a Throne Speech that will set out plans to build back better from the pandemic, they have every reason to revisit past decisions, and to act boldly.
For example, the Liberals nixed their Conservative predecessor’s plan to move eligibility for Old Age Security benefits from age 65 to 67. It’s time to reverse that decision and raise the threshold. With Canadians living and working longer, the shift would save billions of dollars.
And despite saying it’s keen to bring private capital into essential infrastructure projects – the reason for creating what to date has been an ineffective Canada Infrastructure Bank – the Liberal government continues to own ports and airports.
At former finance minister Bill Morneau’s request, investment banks already tabled studies of what these businesses are worth, and how they can be monetized. Successor Chrystia Freeland should dust off the file and sell these assets – they are private-sector businesses in most developed countries.
Privatizations should be top of the agenda for governments of every stripe. Why do Saskatchewan taxpayers need to own a phone company? There’s been minimal revenue growth at government-owned SaskTel in recent years, as private-sector rivals such as Telus and Shaw target the company’s best customers.
Conservative Premier Scott Moe can sell now, or watch the value of the business erode at the same time SaskTel needs to make a significant investment in 5G technology.
Why does any province need to own liquor stores? Ontario Premier Doug Ford will realize a huge windfall if he follows through on his private-market instincts, defies union pressure and sells the LCBO. As the pandemic recasts the role of government, let’s ask if taxpayers are the best shareholders at utilities that produce power, or distribute water.
User fees also need to be a part of the conversation around how governments pay the bills. Three years ago, Toronto Mayor John Tory embraced tolls on the major highways linking the city to its suburbs. Those tolls would have forced those who use the roads to pay for their upkeep. They would have given commuters an incentive to use public transit. The toll booths never got built because of a lamentable lack of support from the province. Why shouldn’t every major new bridge, tunnel or highway feature tolls?
It’s time for governments to show a little courage, and respect for taxpayers, by plainly explaining how they plan to pay the bills when they announce massive spending plans.
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