Interesting budget wasn’t Ottawa’s
On Friday morning the Angus Reid Institute announced that Brad Wall has held onto his long- standing title as Confederation’s most popular premier. His approval rating stands at 52 per cent: it’s down six points over the last quarter, but his closest challenger, Manitoba’s Brian Pallister, lost almost the same amount of ground. The possible bad news for Wall is that good old Angus actually performed the survey between March 6 and 13, when the tough 2017-18 Saskatchewan budget was just a rumour.
Or, rather, a hundred rumours, each wilder than the last, about what sacred Saskatchewan cattle might be slaughtered. Some of them even came true. Wall’s budget is closing down the government- owned Saskatchewan Transportation Company, an intercity bus service created by Tommy Douglas’s government in 1946. Saskatchewan doesn’t have many militant socialists left, and STC ridership had been in free fall, but state- owned enterprises — even, perhaps especially, the ones that lack a good economic justification — have a way of wearing a groove in people’s habits and souls.
The austere budget set off a terse verbal exchange between Wall and Alberta’s premier, Rachel Notley. Wall, the nominal conservative of the pair, is fighting fiscal disrepair by raising consumption taxes: the big headline measure in his budget was an increase in the province’s retail sales tax rate from 5 per cent to 6 per cent, with some reductions in income tax to compensate. This medicine was combined with highly visible service cuts and other painful frontline measures: the demise of STC, belttightening for civil servants and municipalities, a dollop of austerity for colleges and universities, increased sin taxes. This is the sort of thing Notley has tried to avoid in Alberta, relying instead on deficit spending and greater taxes on high earners.
If it is still weird for Alberta to have a New Democratic government, it was even weirder to see an NDP premier of Alberta chortling at tax hikes introduced by a non-NDP Saskatchewan government.
“That’s not how we believe we should approach things in Alberta,” Notley heckled. Taking note of Wall’s measures to broaden the base of the Saskatche wan PST a nd r e move exemptions, she almost sounded like an advocate of the “trickle- down economics” that leftists are always accusing conservatives of practicing. “When you pull money out of the economy, you slow economic recovery,” she said, which is a pretty remarkable thing for a bornand- bred socialist to say about taxes.
Alberta has a well- known prejudice against sales taxes that is quite a bit like Sas- katchewan’s fondness for its legacy Crown corporations. Economists would like to see an Alberta PST, and the province could put a moderate dent in its deficit with a small one. But Notley has used up a lot of political capital introducing Albertans to the madnessinducing spectre of carbon taxation. The treasury does not keep much of the revenue from that tax, so it is not really helping with the deficit, but Albertans align themselves spiritually with the oilpatch — the business of carbon. Plenty of people who personally come out ahead on the carbon- tax rebate will never forgive the NDP for it.
Notley cannot be the premier who brought in both a carbon tax and a retail PST, so she might as well make fun of Wall and burn her government’s bridge to sales taxation. Wall’s increase in the rate to 6 per cent shows off some of the features that economists like and taxpayers fear about consumption taxes. It is cheap to raise revenue in a crisis by hiking PST. The change is transparent to the voter, it can be made on very short notice, and the suffering is shared widely. It is an attractive lever for a finance minister to grab — once someone has installed it.
But if you dig into the backgrounders paperclipped to the Saskatchewan budget, you realize that Wall’s PST rate increase i s much l ess consequential, revenue- wise, than the changes in the PST base. The extra point of PST, by itself, is expected to fetch about a quarter- billion dollars over the next year. The changes to what’s taxable are worth more like $ 650 million when you add them all up. Applying PST to construction contracts is expected to bring in $ 345 million; the tax is being applied to insurance premiums for the first time, which comes to $ 158 million; and charging PST on restaurant meals and snack foods is thought to be worth $ 95 million.
The effect of these changes is to make the base of Saskatchewan’s PST a lot more like that of the federal GST, and, as economist Jack Mintz hinted in the Financial Post, that would make it easier for Saskatchewan to formally harmonize its PST with the GST later. It is worth remembering that the five provinces which have harmonized their sales taxes with Ottawa got large one-time payments from the federal government for doing it — a billion apiece, for the three have- not Atlantic provinces that signed on in 1996. A cheque of that approximate size would come in handy for Wall right about now.
WALL IS FIGHTING FISCAL DISREPAIR BY RAISING CONSUMPTION TAXES.