Ontario government should finally keep its promises in upcoming budget

Printer-friendly version
Appeared in the Toronto Star, March 18, 2024
Ontario government should finally keep its promises in upcoming budget

According to the old adage, insanity is doing the same thing over and over again and expecting different results. Premier Doug Ford has often criticized his predecessor’s fiscal approach, yet the Ford government has consistently employed the same approach while in office. When the government tables its next budget March 26, it should finally back up the tough talk and change its approach to fiscal policy.

First, some quick history. From 2008/09 to 2017/18 (the last year before Ford was elected), Ontario governments had run 10 consecutive deficits totalling $103.3 billion, due in part to a substantial increase in spending—during this period, annual program spending (total spending minus debt interest) increased by 41.6 per cent. In other words, by 2017/18 the Ontario government was spending $1,207 more per person than in 2008/09 (after adjusting for inflation).

Meanwhile, the government refused to enact broad-based tax relief. Despite a minor tax cut for low-income residents in 2010, the government raised taxes on upper-income earners in 2012 and 2014 while middle-income earners saw no reduction to their personal income tax rates.

This approach has hurt the province’s economy. Growing government debt can increase the cost of borrowing in the private sector, which reduces capital investment, while high and increasing tax rates reduce the incentive for people to work and invest by lowering the rewards for these activities. Both of these effects limit economic growth and produce lower living standards than there otherwise would be. Indeed, in recent years growth in per-person GDP, a common measure of living standards, has slowed in Ontario relative to the rest of Canada.

In 2018, on the campaign trail, then-candidate Ford criticized the Wynne government’s “reckless spending” and continued deficits, and promised if elected to cut taxes and find “efficiencies” in the provincial budget. In its first budget in 2019, the Ford government promised to “fix Ontario’s inherited fiscal mess… before it hurts the economy” by balancing the budget, reducing the debt burden and cutting taxes.

Yet, while the Ford government has talked a big game, it’s employed the same approach to government finances as its predecessors—increased spending, deficits and no broad-based tax relief.

By the end of this fiscal year, deficits under the Ford government will have totalled a projected $41.7 billion over six years. Although the Ford government did run a $2.0 billion surplus in 2021/22, this was due to an unexpected surge in revenues as opposed to spending restraint. The following year the government promptly increased spending and returned to deficits. Due to this unwillingness to restrain spending, the government has been unable to keep its promises to reduce debt and lower taxes.

It didn’t need to be this way. For example, had the Ford government simply maintained the Wynne government’s level of per-person spending, rather than increase spending, it would have accumulated $27.8 billion less debt (which equals roughly $2,000 for every Ontarian). The government could have used these savings to reduce income taxes by an average of $888 per tax filer in 2023.

With Ontario’s economy (and subsequent living standards) falling behind the rest of Canada, in its upcoming budget the Ford government should quickly change course and finally keep its promise to restrain spending and deliver meaningful tax relief for Ontarians.