Cutting back to the bone

There are numbers coming in the provincial budget that I’m going to be very interested in seeing, and they are: expected revenues from sales tax, gas tax, insurance tax, lottery revenues and the Newfoundland Liquor Corporation.

Call it the blood-from-a-turnip index.

All — except for lottery revenues — saw increased rates or price hikes in the last budget. The question is whether the province is going to get the returns it’s expecting.

The NLC is already talking about weakening sales, saying it’s had 77,000 fewer transactions so far this fiscal year, with drops in beer, coolers and spirits sales. Wine sales are up slightly, but people are moving to cheaper brands. This, in a year when the provincial government was depending on a 15 per cent increase in profits of almost $25 million.

Gas tax? One early study showed a decline of as much as 10 per cent in gas sales in the province, just three months after the new 16.5 cent tax was imposed.

The retail trade? The provincial government talked cheerfully about a 0.8 per cent growth in the first 11 months of 2016, but six of those months were before the HST increase. Sales in October were flat, and year over year for November, the decline was a whopping 1.9 per cent. There was an increase in December, but in the three months leading up to Christmas, sales moved from $755 million in September to $747 million in November, and fell to $745 million in December.

Lottery revenues? The province was already forecasting a decline in those — but the Atlantic Lottery Corporation’s sales in this province are facing the bugbears of being an easy consumer cost-cutting item, fierce competition from online gambling sites and declining sales due to disinterested younger customers. I’d be surprised if the corporation makes the province’s budgetary benchmark.

What’s the threat to all of those revenue sources? The simplest cause is that families are reaching a financial tipping point.

There are plenty of people who don’t have any room left to find savings, who have already cut back as far as they can. And cost-cutting is moving up the economic chain.

In some ways, it takes money to save money. If you want to take advantage of volume purchasing on things like meat, you need big freezer space.

And I recognize that some of the changes I’m about to describe are at best first-world savings, but all of them take money out of the provincial economy.

Gym membership? Gone. Car insurance? My family has reduced the number of insured drivers on our policy and we’re looking at getting rid of an old vehicle to save registration, insurance, insurance tax and maintenance costs.

I now walk to work as often as possible; even the relative savings of a Metrobus pass over driving can be avoided, which saves me money but does nothing to support public transit. The savings on gas has been remarkable and not using the car in winter also saves on winter tires and maintenance.

We bit the bullet and installed a mini-split heat exchanger before the HST increase hit, and, judging by its performance and efficiency, it will pay for itself in less than two years, even before the price bump of Muskrat Falls power.

Strategic grocery buying, especially bulk purchases on highpriced items like meat, have lowered our food bills significantly.

Other changes take money out of specific sectors: restaurant meals are almost completely gone, including simple sandwichstore lunches. And now that the NLC has hiked prices to a critical point, I make my own beer and it costs roughly one-third.

Like I said, not everyone can cut back on spending. But many are, and those cutbacks are eroding government revenues.

I haven’t even mentioned the growing underground economy on big-ticket items like renovations — ask a contractor how often someone asks for an estimate for a “no-tax” job.

If the numbers don’t match up with government expectations, the provincial government should be extremely concerned.

And there are two other factors that could make the whole thing worse. An increase in the interest rates on mortgages, especially if it’s coupled with an almost certain increase in electrical rates, will make cutting back an absolute necessity.

I now walk to work as often as possible; even the relative savings of a Metrobus pass over driving can be avoided, which saves me money but does nothing to support public transit.