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Tax-cutting never provided a great party, and the hangover is a long way from being over. In the current binge of mutual recrimination – the city blaming the province for its fiscal woes and the province the feds – the least political leaders could do is tell the truth.
Instead, they’re deflecting attention from the basic issue: thanks to nearly a decade of tax cuts, we’re no longer raising enough money through taxes to pay for the public services we want and need.
In the late 1990s and the early 2000s, our governments – all of them – fell all over themselves to buy votes by cutting taxes. The Ontario Conservatives systematically destroyed $14 billion in revenue-raising capacity at the provincial level, cutting taxes 228 times. They also froze every property tax in Toronto except the tax on single-family residences.
Former Toronto mayor Mel Lastman joined in with a three-year freeze on the only Toronto property tax that Harris didn’t freeze. If, instead of those freezes, Toronto’s taxes had just kept up with inflation, the city would have $160 million more for public services this year.
And although Paul Martin arrived late to the party, he made a spectacular entrance with his 2001 promise of $100 billion in tax cuts over five years. This year, his previous cuts reduced federal government revenue by more than $30 billion.
Martin likes to point out that Ontario’s transfers from the feds have increased in the past five years, conveniently forgetting that as finance minister, he was responsible for dramatic cuts to those grants and that, rather than reverse them when the budget had been balanced, he set them in stone.
As political theatre, it was hopelessly dishonest. All of this was brought in as if the taxes we pay had nothing to do with the services for which they pay.
So we’ve got crumbling roads, failing water pipes, cash-starved colleges and universities and struggling students, deteriorating elementary and secondary schools, a childcare non-system that is a generation behind the standard in Europe, a housing crisis of massive proportions and a system of income security that should be an embarrassment to a community that prides itself on its belief in social justice.
And what are our governments doing? Showing every sign of an acute form of amnesia. Dalton McGuinty goes on the attack against the federal government, ignoring the fact that without the tax cuts that he opposed while he was in opposition (but refuses to reverse), Ontario wouldn’t have a fiscal problem.
He also rails against cuts in federal transfers, ignoring the fact that Ontario just passed those cuts on to local governments, downloading responsibilities without funding.
The city, for its part, complains mightily and sticks doggedly to an arbitrary tax increase limit of 3 per cent, ignoring the ongoing corrosive impact of the Lastman freezes, opting to shuffle money from pocket to pocket, sell off the furniture and squeeze services rather than confront the revenue problem directly.
We do have a strange beacon of reason in Mississauga.
What is it about the politics of Mississauga that allows that notorious left-wing radical Hazel McCallion to get a tax increase north of 5 per cent to fund its services while Toronto treats anything more than 3 per cent as political suicide?
Yes, it’s going to take a long time to recover from the hangover.
Hugh Mackenzie is an economist and principal with Hugh Mackenzie & Associates. He co-chairs the Ontario Alternative Budget Working Group and is a research associate with the Canadian Centre for Policy Alternatives.
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