In response to the latest CD Howe report on the province’s fiscal situation. It comes as no surprise that these economists have but one solution to offer; enact austerity measures and cut program spending.
Their saga continues that Newfoundland and Labrador (NL) has been spending too much on public services. Our revenue base of yore, based largely on high oil prices, allowed us to spend wildly. With our revenue base greatly diminished, cuts are inevitable. That means we have to take out the same old hatchet, and try and cut our way out of the big hole we find ourselves in. A tried and failed method by both Liberal and PC governments. Austerity does not grow the economy, and many organizations like the International Monetary Fund, the World Bank, the United Nations, the Federal Government along with numerous economists, political scientists, and others around the world agree.
The part CD Howe omits is that although oil money allowed us to increase spending, it also allowed the province to introduce the largest tax cuts in the history of our province. In 2007, Minister Tom Marshall announced tax reductions to the sum of $111.3 million for Budget 2007 and “$160.5 million annually once fully annualized.”
In her 2014 budget speech, Finance Minister Charlene Johnson bragged about NL competitive tax rates stating, “this year, savings to residents will total approximately $600 million. Budget 2014 includes further enhancements.” On their website, the ruling PC party was known to brag that “total personal income tax reductions from 2006 to 2014 were estimated to have returned approximately $2 billion back to taxpayers in the province.” Since then, there has been more than a billion dollars of cumulative lost revenue from our coffers.
Why would CD Howe ignore these figures? Why call for program spending cuts and not for a return to more normal and fair income tax rates?
After all, tax cuts disproportionately benefit the rich while public services, by their very nature, benefit all of us. In a recent poll, 81% of Atlantic Canadians agreed that the rich should pay their fair share of taxes.
Currently, our highest Provincial Income Tax rate is 18.3% for incomes $190,364 and over. Yet Nova Scotia and New Brunswick have significantly higher tax rates, 20.3% and 21%, starting at significantly lower incomes. Nova Scotia and New Brunswick are much smaller provinces with larger populations.
Of course we need to address the debt and deficit, but let’s not only look at one side of the ledger. The CD Howe report notes that the province’s “tax effort” is below Manitoba, Quebec and the three Maritime Provinces. Why not suggest we increase our top tax rates to be more in line with our sister provinces?
Boosting our top tax revenue on the richest population, to the Atlantic average, could raise over $40 million in extra revenue annually – revenue that this government desperately needs.
An austerity budget that focuses on public service cuts will result in greater inequality and poverty, especially for vulnerable populations. Austerity is why we’re in this mess to begin with. And austerity doesn’t address the real crisis of rising unemployment. What this province needs most is a “good jobs for all” strategy; including a youth, green jobs, and a forward thinking comprehensive labour market strategy, with input from all stakeholders.
There is an alternative vision for a strong economy that benefits all of us –not just the rich. One where governments make choices to invest in the people of NL; to close – not widen the gap between the rich and the rest of us; between undervalued work that is predominately done by women; choices that ensure the people of NL benefit from the resources they own; that they can have decent, fair and safe work; live in supported communities, with access to the services they need; where local businesses thrive; and where the environment is respected.
NOT a fairy tale – but a political will of a government that truly invests in a strong and robust economy, and an equal and fair society where no one is left behind.
President, Newfoundland & Labrador Federation of Labour