Sometimes it’s hard for taxpayers to imagine anything will change, but Premier Brian Pallister’s PST cut proves the people have a powerful voice.
Before diving into the details, let’s remember how far we’ve come. Former premier Greg Selinger promised not to raise the PST, but broke that promise. Manitobans were incensed. Legislative committee meetings that are typically sleep-inducing were suddenly flooded with angry taxpayers.
Voters registered their anger at the ballot box where they booted Selinger and backed Pallister’s promise to cut the PST.
But, since becoming premier, Pallister’s top priority has been to get the province’s runaway deficit under control.
Throughout all of this, Manitoba taxpayers paid about $300 million every year because of the PST hike.
In this year’s budget, Finance Minister Scott Fielding is cutting the PST from eight per cent to seven per cent, effective July 1.
That one-point change is huge. The government projects the move will save Manitobans $325 million every year. More concretely, the government estimates the average Manitoba family will save $500 per year.
That’s money Manitoba families can put into home renovations or retirement savings. It’s money entrepreneurs can use to reinvest in their businesses and hire more workers. It’s tax relief that will make Manitoba more competitive.
At the same time, the deficit is shrinking. Last year, the government projected an operational deficit of $521 million. This year, even with the PST cut, the government is projecting an operational deficit of $360 million. Reducing the deficit is an important accomplishment that means the Manitoba government is leaving a smaller bill for future generations.
However, the shrinking deficit in the operational budget is not the whole story. Balancing the operational budget just means the government has enough money to keep the lights on – to cover its annual expenses and debt payments.
The government projects the province’s debt will rise from $25.2 billion to $26.1 billion. The operational deficit is part of that. But borrowing for infrastructure makes up most of that money. And, while governments like to differentiate between types of borrowing, it all increases the debt.
It doesn’t matter if you use your credit card to buy groceries or a new snow-blower – you still have to pay the bill and the interest.
That increasing debt leads to increasing interest costs. This year the province will pay $1.1 billion to cover interest charges on the debt. To put that number into perspective, the Winnipeg School Division’s entire annual budget is about $416 million. That means Manitobans are sending two-and-a-half times more money to bond fund managers on Bay Street and Wall Street than they send to schools in Winnipeg.
Lowering taxes and shrinking deficits leave governments open to accusations of cuts. It’s true that things are tight. However, it’s also true that the Manitoba government’s overall spending is going up – not down – this year.
We also know that money simply can’t solve every problem.
Manitoba has the second highest per-person health spending among the provinces, at $7,354 – higher than Saskatchewan at $6,931 and Ontario at $6,584, according to the Canadian Institute of Health Information.
Manitoba has the second highest per-student education spending at $14,499 – higher than Ontario at $13,276 and much higher than British Columbia at $11,216, according to the Fraser Institute’s analysis of Statistics Canada data.
Manitoba needs to continue finding more efficient ways to deliver services.
The numbers matter, but remember what this means to Manitoba taxpayers beyond the dollars and cents.
When taxpayers lined up at those committee microphones to denounce the PST hike, they wondered whether what they said mattered. Every time they got hit with that higher PST in the following years, doubts fed cynicism about broken political promises.
But this year, when Premier Pallister honours his commitment to cut the PST, he’ll do more than save Manitobans money. He’ll prove the people can drive real change.
Todd MacKay is the Canadian Taxpayers Federation Prairie director and vie-president of communications.