Time for realistic budgeting
The sharp decline in the price of oil that has governments in Saskatchewan and Alberta scrambling to fend off budget disasters for 2015-16 — and federal Finance Minister Joe Oliver delaying his budget until at least April — underlines the need for realistic taxation policies to pay the bills.
While Premier Brad Wall has floated the notion of paring back the share of provincial sales tax revenues his government has promised to municipalities, making big city mayors nervous about the impact on their budgets, which are already set, Alberta’s Jim Prentice isn’t writing off the hitherto unthinkable idea of reintroducing a PST in his province.
Meanwhile, Oliver is twisting in the wind because his electionbound boss, Prime Minister Stephen Harper, already has announced an array of targeted tax cuts meant to curry favour with certain voter groups likely to back the Conservative party — the cost of which is likely to put the federal books in the red.
The overarching problem, of course, is that politicians of all stripes in recent years have convinced citizens that “tax” is a bad word and that it’s possible to keep reducing the rate at which earnings and purchases are taxed, even though the cost of providing the services people have come to expect keep rising.
As long as the governments’ take from export commodities such as oil kept rising, it was possible to cut or maintain tax rates, even though if one stopped to think about it, using up all the revenue from finite non-renewable resources to cover ongoing expenses isn’t a particularly wise strategy.
With oil revenues on the skids, governments face the prospect of having to cut current services, take on more debt or revisit tax policy — including raising some taxes and removing some writeoffs.
While it’s always possible to “find efficiencies within government” — for instance among “communications” operations that have ballooned across the bureaucracy and Crowns in Saskatchewan — staff reductions can only go so far before they affect public services. Just ask anyone who has tried to phone Service Canada recently.
Taking on more debt, as Alberta has done while counting on a revenue shift as Ottawa did with its economic stimulus spending after 2008, simply transfers the burden to future taxpayers.
However distasteful the idea has become, hiking taxes and eliminating loopholes need to be part of the mix for governments coping with a loss of revenue.
It simply makes no sense that governments cut public services or rack up debt while they maintain “boutique” tax breaks provided to woo select groups of taxpayers, such as parents who enrol children in arts or sports programs.
And the practice in Saskatchewan of using every cent in resource revenues to pay for programs enjoyed by current residents without anything put away for future generations is indefensible, especially when they also inherit an accumulated debt that was not paid off at the height of this province’s economic boom.
Pay as you go needs to be the principle, even if politicians find it hard to swallow.