Previously published in the Winnipeg Free Press, March 6, 2024
The first budget of the new Manitoba government needs to shore up tax revenue to pay for essential public services and act on costly social and environmental challenges in Manitoba. This starts with reversing regressive tax cuts.
A new report by the auditing firm MNP, commissioned by the Manitoba government, found that the massive cut to personal income taxes in last year’s budget created a “high budgetary risk” due to the projected economic slowdown and commitments to increase spending while making significant cuts to revenue. Real GDP in Manitoba is in a slump, projected to grow by just 0.4 per cent in 2024.
The same study found that the previous Manitoba government made commitments in the 2023-24 budget that create long-term obligations for the government in the form of public sector wage increases and infrastructure capital spending.
This report confirms Budget 2023/24 made reckless, radical tax changes that limit Manitoba’s capacity to invest in public services.
The cuts in the last spring budget contributed to a $1.6-billion deficit projected in the second quarter fiscal update, second only in size to the deficit seen during the pandemic. The sources of the deficit are a $420-million decrease in tax revenues, below what was estimated, a $566-million increase in health-care expenditures than estimated due to long-awaited wage settlements with workers and increased overtime costs; and $610 million less revenue from Manitoba Hydro due to low water.
The MNP report finds that the province should have forecast for the health sector wage increases as these were known at the time of the budget, and the province would have known the “overall deterioration of the province’s fiscal situation relative to the budget, it would been reasonable for the previous government to better anticipate these financial obligations and make greater provision for them in their financial forecasting at budget time” As a result, Manitoba is in a huge deficit position.
The size of the deficit is equal to the amount of taxes cut under the previous government — personal income tax cuts, education property tax cuts and corporate tax cuts. It is not clear why Manitoba radically raised the Basic Personal Amount from $10,145 to $15,000 per year, a move that gave huge returns to high-income earners and a pittance to lower-income people. A chart of comparing the basic personal amount across Canadian provinces shows a huge variation. The rate in oil-rich Alberta is $21,000, but B.C.’s rate remains at $11,981. Ontario’s is at $11,865. And, Ontarians pay a health-care premium of up to $900 per year, and their PST is set at eight per cent.
As a smaller “have not” province, Manitoba does not have the revenue to provide government services at the same rates as provinces we are often compared to — tax revenues here must equate services needed. Taxes paid in Manitoba must be considered as a package alongside the lower cost of living.
As a result of the massive tax cuts in Manitoba, revenues are forecast by Royal Bank of Canada economists to decline by 2.2 per cent in 2023-24 and down again another 4.8 per cent in 2024-25. This is even with rising equalization payments and the bilateral health accord Manitoba recently signed. Revenues relative to GDP will continue the downward trend in Manitoba, from 25.6 per cent in 2022-23 to 24.3 per cent in 2023-24 to 22.5 per cent in 2024-25.
On top of the taxes cut by the previous government, the Manitoba NDP campaigned on the cut to the gas tax, labelled as a “gas tax holiday” to last six months or as long as inflation remains high. This is costing the province $163 million in revenue. The move was criticized by environmentalists for enabling fossil fuel usage and anti-poverty activists as regressive.
The Manitoba Campaign 2000’s most recent report on child and family poverty, Poverty Eradication: There Are Ways, So Where’s the Will? found higher-income families saved $400 due to the gas tax cut, while lower-income families, with cars, saved just $77. Those who don’t have personal vehicles and rely on public transit see no support under this policy: bus fares went up another 10 cents this year in Winnipeg.
There is also an opportunity cost of lost revenue like the gas tax holiday. 10,290 more children are in poverty than the previous year’s measure, bringing the provincial child poverty rate to 24 per cent. Using the gas tax as an example, had this $162 million been collected and directed toward child poverty measures, Manitoba could have eliminated 31 per cent of poverty in Manitoba families with children. In a full year, $362 million raised by a tax, like the gas tax, would eliminate 62 per cent of child poverty in Manitoba.
Child poverty is associated with increased risk of preterm birth, child mortality, dental extraction surgeries and suicide, according to Manitoba Centre for Health Policy data. For every dollar invested in preventing child poverty, $3.30 is returned to the population under seventy (Child Health Canada).
The campaign to eradicate child poverty by the year 2000 was introduced by the late Ed Broadbent, who was honoured as a visionary leader by many, including Premier Wab Kinew. The Manitoba NDP campaigned on ensuring every child reaches their 18th birthday and on universal meal programs in schools. It is time the Manitoba government acts on the evidence and provides sufficient resources to prevent the damaging impacts of poverty.
This starts with honouring the “holiday” aspect of the gas tax. Alberta cut the gas tax in 2022 and eliminated the 13 cents per litre charge but when they brought it back in, it was at a lower rate. Ontario recently cut its gas tax from 14.7 cents to 9 cents per litre. Fuel taxes are predictable sources of revenue and are needed by provincial governments. In 2024, in an era of high poverty and climate change, this revenue is needed more than ever.
As Manitoba tries to dig itself out of the fiscal hole created by the previous government, the province should shore up revenue and reverse regressive tax cuts so that all Manitobans have a chance at a good life.