The 2018 election has started, Cohn,
The 2018 Ontario election is underway today, two years early.
The first campaign announcement: Hydro bills will be reduced 8 per cent by January as an HST rebate, just in time for a positive pre-election impression.
It’s a sop to those who hate the HST. And a victory for opposition politicians who have long goaded the government to cut taxes.
Which is precisely what this latest (and recurring) giveaway is. A tax cut — not a hydro rebate.
Pocketbook politics is back. And everything old is new again, courtesy of Monday’s speech from the throne laying out the government’s new (old) agenda — more of a reprise than a reset.
The Liberals have been down this path in the past, just before hitting the campaign trail in 2011. With hydro bills rising inexorably and the opposition clamouring for tax relief, the government dreamed up the “10-per-cent-off!” Ontario Clean Energy Benefit in 2010.
Environmentalists and economists urged the Liberals to wean themselves from such shameless givebacks. And after profiting from two election victories, the Liberals let it lapse last year — mindful of their desperate fiscal straits.
Now, in desperate political straits, the Liberals have revived it.
Everyone knew it made for good politics but poor policy: Not only bad for cash flow, but bad for carbon flow because it reimbursed people for energy consumption, diminishing the disincentive of price signals.
It’s a quick and dirty fix, not an enduring solution. If hydro costs are too high, try reducing subsidies for (renewable energy) producers upstream — not introducing subsidies for consumers downstream.
But everyone loves a tax cut. Even a pretend one.
Like Leon’s, the Liberals are touting a tax holiday anew. Their rebate corresponds to the 8-percentagepoint provincial portion of the 13per-cent HST (the other 5 percentage points are Ottawa’s business), averaging $130 a year per household.
The Progressive Conservatives proffered an HST exemption in the 2011 election campaign, but had second thoughts about their gimmick and dropped it in the 2014 campaign. Now, PC Leader Patrick Brown is all for it.
The New Democrats first dreamed up the so-called HST holiday in 2010, sounding like old-time Tory tax cutters. Even when the PCs abandoned it, NDP Leader Andrea Horwath re-offered her idea this summer and now gets bragging rights for forcing the government’s hand — if piling on debt merits credit.
As shell games go, it’s awfully hard to follow. A frequent criticism of the old 10-per-cent Clean Energy Benefit was that it merely transferred the burden of electricity costs from hydro ratepayers to taxpayers at large (it was described as transitional relief for the heavy expense of ridding Ontario of coal-fired power).
Now it’s getting even sillier. The new measure is being sold as tax relief, but remember that the HST on hydro doesn’t actually go into the coffers of local electricity companies, but is remitted to the provincial treasury. Conceptually, that means ratepayers aren’t really getting relief from their hydro bills, just the tax they pay on hydro.
In that sense, it’s a shell game within a shell game. The treasury is bankrolling this tax cut, so we’ll ultimately be making it up through other income and other provincial taxes.
The Liberals giveth with one hand and taketh with the other.
Thanks to a steady economic recovery — Ontario’s growth exceeded that of the U.S. this year, and our unemployment rate is at an eightyear low — tax revenues are surging rapidly enough to cover this new hydro subsidy while still balancing the budget. But it’s still a shell game, any way you subsidize it.
Far better for the government to address the realities of rising electricity rates, rather than proffering pretend tax breaks.
The same can be said for the opposition, who focus mostly on HST cuts and stopping the privatization of Hydro One, neither of which are remotely related to the underlying costs of generating power (and the ultimate price set by our independent regulator).
Stripped of its lofty pretensions, the latest manoeuvre is about digging the Liberals out of a political hole — by digging a trench against opposition attacks and laying the groundwork for the campaign trail. All at our expense, any way you cut it. Martin Regg Cohn’s political column appears Tuesday, Thursday and Saturday. mcohn@thestar.ca, Twitter: @reggcohn