Saskatchewan taxpayers should brace for the risk of future tax hikes
The untold story about the provincial budget is real risk that Saskatchewan families will get hit with future tax hikes like the one that blindsided them this year.
Taxes are going up by $442 for an average Saskatchewan family in order to tackle the deficit, yet the operational deficit is still $685 million this year.
The government has a twopronged plan to balance the budget. First, it’s hoping to slow spending, even though spending will continue to rise. Second, it’s counting on more money from higher taxes and resource revenues. The budget includes a few concrete measures, but many elements are based hope, and if those hopes don’t materialize, tax bills will go up.
The most concrete budget cut was the closure of the Saskatchewan Transportation Company bus line. Critics were vocal, but, after losing more than $100 million in less than a decade, the only real surprise is that the Crown bus company wasn’t closed sooner.
The bulk of the government’s budget trimming plan remains a best intention. While many people in the private sector have been working through wage freezes and rollbacks for a few years, the province is just now planning to start trimming salary expenses for government employees by 3.5 per cent. It’s counting on saving $250 million per year. It remains to be seen whether the government has the fortitude to follow through.
Staying on budget has not been the government’s strength in recent years with spending going over budget by $525 million last year and $137 million the previous year.
Despite the province’s struggles, the government plans to spend more this year than it planned to spend last year and plans to increase spending in each of the next three years.
Saskatchewan is already one of the biggest spenders in Canada with $12,938 in program spending per person compared to $11,524 in Alberta and $11,609 in Manitoba.
Big tax hikes are dwarfing the government’s attempts to control spending. The province is trimming personal and business income taxes by a half point to spur growth and that has clearly paid off before, but those benefits may be overwhelmed by a PST that is 1 point higher and applied to many more products ranging from children’s clothes to construction labour. In total, Saskatchewanians will pay $908 million more in higher taxes.
The higher taxes are a certainty, but the government’s other revenue bets are far from sure things. The province is counting on oil prices of $56 per barrel this year and rising steadily for the foreseeable future. It’s counting on an average of $14.7 billion in total revenues per year over the next three years even though revenues have averaged $13.8 billion over the last thee years. The province is again placing a big bet on rising revenues and perhaps it’ll win this time, but if it loses like it has the last few years, there could be big budget holes.
Soaring debt is the final certainty in this budget. Saskatchewan’s taxpayer-supported debt was $7.2 billion in 2007. Even if the government’s best budgetary hopes happen, debt is projected to be $7.7 billion this year with that number soaring to $11.9 billion in 2021. Saskatchewan will pay $381 million just to cover the interest payments on the existing debt this year; that’s $85 million more than last year. Government debt is a delayed tax hike and rising debt is casting a long shadow over future taxpayers.
The Saskatchewan government has been betting on rising revenues and vague promises of “transformational change” to balance the budget. It’s lost those bets and that’s now costing average Saskatchewanian families $442 in higher taxes. What happens if the government’s belated efforts to control spending and best hopes for higher revenues don’t materialize? Time will tell, but the 2017 budget sends taxpayers a clear message: this government isn’t afraid to raise taxes.