The budget in a nutshell:
http://www.ottawabusinessjournal.com/280538548221602.php
UPDATE: McGuinty's health heavy budget has hidden gem for business
By Ottawa Business Journal Staff
Tue, May 18, 2004 4:00 PM EST
The CFIB's Garth Whyte
The "comprehensive" and "compassionate" first budget of Ontario Liberal Premier Dalton McGuinty delivered Tuesday afternoon dished out billions in new spending for healthcare and education that will cost taxpayers an estimated $9 billion over four years.
The Liberals abandoned their election promise of producing a balanced budget and holding the line on taxes. A new healthcare "premium" will start cutting into the pocket books of taxpayers this summer, taking $300 to $900 per year off one's paycheque depending on income.
HIDDEN GEM FOR SMALL BUSINESS
One big gain for small business that is buried under all the focus on healthcare and education is a technical change to provincial legislation that will allow municipalities to create a new tax class.
This new tax class, which would be a sub-class in the commercial category, will give municipalities the wiggle room to address the huge gap between the property taxes that a small business owner pays and what a homeowner pays on a home with the same assessed value. The two amounts are supposed to be the same, but small business owners across the province have suffered for years from higher tax rates.
"The balls back in the court," of Ottawa city council and other municipal governments across the province, said Garth Whyte, executive VP of the Canadian Federation of Independent Business. "So we're going to go to city hall and see if we can work something out on that."
Whyte added that he is pleased that the budget did not penalize job creators in any significant way, though he warns that the loss of $1.6 billion from taxpayers' wallets in the first year of the new heathcare premium could hinder economic growth. "That's going to hit consumer spending," he said.
Healthcare will now consume about 45 per cent of the provincial budget for the year. Whyte said that will make taxpayers that much more vigilant about whether or not they are getting their money's worth when they visit a doctor or a hospital.
He also expressed reservations that the Liberal government is increasing spending by 6.9 per cent, three times the rate of inflation. The deficit inherited from the Tories is also being allowed to deepen before it its reined in, but he added that "at least they've got a plan to reduce it."
SHARED GAS TAX
Another gem, this one for municipalities, is that two cents per litre of the taxes that the province collects on gasoline sales will be used to fund city infrastructure needs. A number of big city mayors, among them Ottawa's Bob Chiarelli, has been petitioning the provincial and federal governments for years to share gas tax revenues with the municipality in which they are collected.
In its budget delivered about two months ago, the federal Liberals under Prime Minister Paul Martin balked at making a commitment and said more study of the issue must first be carried out.
the Ontario Liberals are promising to share one cent per litre beginning in October. That amount will increase by a half a cent a year until it reaches two cents in October 2006. The money is meant for public transit, a key infrastructure need of most municipalities.
About 14.7 cents of the price per litre of gasoline is provincial tax. A sharing of two cents per litre will translate into $312 million for municipalities. For the three months of this year that the program will be in effect, the benefit to municipalities will be $39 million.
HIGHER TAXES ON ALCOHOL, TOBACCO
The new spending commitments will also be financed by increasing taxes on cigarettes and alcohol and hiking the cost of a driver's licence renewal.
Hydro costs will also go up as the province shifts about $3.9 billion in electricity liabilities to taxpayers, increasing the average hydro bill by about $1.70 a month. This will reduce the provincial deficit this year from an estimated $6.1 billion to $2.2 billion.
Finance Minister Greg Sorbara, who told the media in recent days that the budget would be "comprehensive" and "compassionate", said Tuesday it was a choice between election promises and what Ontarians really want.
In comments made before delivering his budget, Sorbara emphasized that Ontarians want to see action taken to restore healthcare and education systems battered by years of Tory cuts.
The health premium plan will skim about $1.63 billion from taxpayers' wallets in the first year and $2.6 billion by 2008. It will help pay for $4.8 billion in additional health-care spending over the next four years.
NDP leader Howard Hampton described the premium as the most "regressive" tax in Ontario history.
"This is a tax which will hit every modest and middle-income family. The government is literally picking the pockets of the wrong people," Hampton told the media.
The Canadian Taxpayers Federation was equally critical about the budget and called it a declaration of war on taxpayers.
"They have totally broken faith with the voters of this province," said Tasha Kheiriddin, the CTF's Ontario director. "The Liberals campaigned on a platform of fiscal responsibility, balanced budgets, and no tax hikes.
"At no time did they talk of health taxes or any other multi-billion dollar tax increases," she added. "In fact, they ran election ads and signed a public pledge with the CTF to do the opposite. They promised a balanced budget yet they won't deliver one for another three years. Ontario has returned to the days of rampant tax-and-spend liberalism."
In his budget speech, Sorbara acknowledged that running a deficit and raising revenue with new fees are "choices that are inconsistent with our election commitments; we openly acknowledge that.
"However, it would simply not be possible to deliver a balanced budget this year without destabilizing vital public services and perhaps even the economy itself. Such an approach would be irresponsible, and we reject it."
The healthcare premium and the deficit budget put the Liberals in violation of the Taxpayer Protection Act and the Balanced Budget Act, both introduced by the Tories. To address that problem, Sorbara said the Liberals will simply repeal and revamp those acts.
The four-year plan for education is for $2.1 billion to help reduce class sizes, hire 1,000 more teachers, improve literacy levels and ensure stable funding for school boards.
The budget also avoids making any substantial cuts to the provincial civil service to achieve its goals. However, budgets in 15 different ministries will be frozen or reduced. Average annual increases to program spending will be capped at 1.9 per cent.
AMONG THE HIGHLIGHTS:
* Cigarette prices will go up by $2.50 a carton by Wednesday, the cost of a case of beer by 45 cents June 21 and wine 15 cents a bottle. These measures will add about $60 million to government coffers.
* Welfare and disability benefits will go up three per cent, the first such increase in 11 years.
Health-care spending will rise by $4.8 billion over four years to $32.9 billion in 2007.
* Most eye exams, physiotherapy and chiropractic services will no longer be covered by the provincial health plan, saving the government about $143 million.
* The cost of drivers' licences will up, with the five-year rate up 50 per cent to $75.
$3.3 billion has been earmarked for public transit, roads and bridges. Ottawa already saw some of that money committed as part of last week's $600-million O-Train transit announcement.
* Provincial deficit to be cut from $6.2 billion to $2.2 billion by next March, eliminated by 2008.
