Pre Budget Speculation

The provincial budget will be tabled tomorrow afternoon at Queen's Park.

This is an unusual budget for two reasons. The first is that the federal treasury is heavily dependent on transfer payments, which is a big unknown at this point because of the federal election. The province was unusually aggressive in their condemnation of the feds last week, which is notable considering McGuinty's gentle approach to federal-provincial relations.

Unusual also because it is an 'election budget' that probably won't contain many new spending initiatives considering the size of the deficit.... Nevertheless, the province still has a way of managing to pay for sizeable corporate tax reductions.

Socialist Anti-Tax Populism

In this new era of Rob Ford tea-party-esque populism, framing a message for an unapologetic socialist party is difficult. Martin Regg Cohn`s article in The Star makes mention of two concurrent debates at the federal and provincial level and how Liberals and NDPers deal with communicating tax policy:

Horwath has staked out her turf on corporate taxes to distinguish herself from provincial Tory Leader Tim Hudak, who largely owns the HST as a pocketbook concern. She too has tried to profit from discontent over the HST , but often sounds like a discordant echo of the taxfighting Tories or a socialist Tea Party.
And Horwarth`s HST taxtics have created tensions within Ontario’s house of labour. Ontario Federation of Labour head Sid Ryan complains that her rhetoric undermines public support for the taxes that fund social programs. And Canadian Auto Workers head Ken Lewenza once publicly lectured Horwath: “Andrea, the harmonized sales tax, as unpopular as it may be, cannot be an issue from the progressive side. . . . We do not want every Ontarian to think that taxes are bad.”

Sid Ryan`s comment could be echoed federally, as Jack Layton releases a new set of ads today that slam the HST in Ontario and British Columbia. What is surprising is considering the significant policy planks available for the NDP to mention under a right-wing government (affordable housing, gap between rich and poor, decaying infrastructure, unemployment, CPP, etc etc), they choose taxes.

As discussed in a previous post, this is a losing game for a left-wing party, especially the NDP. Tapping into anti-tax populism is both awkward from a philosophical standpoint for the NDP, but more importantly, it compromises the progressive movement generally, as it advances no social concerns, while moving a significant government revenue source (in this case the HST) into the crosshairs.

Ask and You Shall Recieve

Andrea Horwath asks for all-party hearings into the proposed TSX/LSE merger and two weeks later, Ontario's Minister of Finance agrees.

Unfortunately, there are no thank-yous to Ms. Horwath in the Ministry of Finance media release.

Free Market Mercantalism

The Federal Government has already blocked two big sales: most recently with the attempted takeover of Potash Corporation and the other in 2008 with the attempted takeover of a space division of MacDonald, Dettwiler & Associates by American Alliant Techsystems.

Recent news on the merger of the Toronto Stock Exchange with the London Stock Exchange is interesting because it again forces the Federal Government to consider what precisely constitutes a "net benefit to Canada".

Ontario's Minister of Finance, Dwight Duncan has already weighed-in with negative comments on the merger. With provincial jurisdiction in securities exchange, this allows the province to move into the murky waters of trade regulation, which is awkward for Ontario considering this is not a natural role for a province.

Two things to watch:
The first, this is similar to the Potash debate in that it pits a conservative minded stakeholder group which probably is probably pre-disposed to free market ideas and less government regulations (Bay Street lawyers and traders) to make protectionist arguments. Usually in this instance, the Federal Conservative's opt for the votes instead of ideology. However, Harper is recieving increasingly nasty editorials from his neo-conservative allies at the National Post which may continue to weigh on him.

Second development to watch is the jurisdictional battle between the provincial and federal governments, since both appear to have the ability to block the sale. Will both governments decide against the merger? Or is there an incentive for one government to pre-emptively declare the merger not a "net benefit to Ontario/Canada" while the other stands on the sidelines?

Democratic Mass Transit

The current policy-revamp by Metrolinx regarding the future of Transit City post- David Miller begs a few questions. Does a Mayor have the power to unilaterally declare the end of a transit plan when billions of dollars have already been committed by provincial and federal governments and millions already spent on Environmental Assessments and planning?

What I think is lost in this story is how dangerous it is to entrust long-term planning decisions to Municipal governments. I appreciate arguments that this is damaging to democratic decision making, but transit planning is inherinetly a technocratic exercise, where planning, construction and completion takes place over several governments with different ideological stripes. And I am not certain how democratic back-room meetings with Rob Ford's Chief of Staff and the Premier's Office is.

Which is why a centralized decision-making body like Metrolinx is a great idea because it takes decisions away from politicians and in the hands of provincial bureaucrats and business people who are less susceptible to short term political objectives. This is necessary if we are to see the building of any new transit lines over the next few years.

Also necessary is to reform the manner in which transit is funded. The Transit City battle demonstrates that direct government subsidization of transit should be kept to a minimum. Of course, there needs to be massive public funding, but this must be seperate from general government revenue and sustainable over long periods of time. The Toronto Board of Trade raises some very positive suggestions about long-term financing methods for TTC and Metrolinx to consider.

Managing Expectations - Stop Bashing the Public Service

I think this article demonstrates the problems centrist and left-of-centre governments face when they promise conservative reforms to the public service such as wage freezes and cutbacks and then under deliver on their promises. This is similar to Mayor David Miller's promise to roll-back union concessions within their collective bargaining agreement.

Perhaps only right wing parties should attempt to engage in this type of union demagoguery. Otherwise you are playing into right wing talking points while angering your core constituency.

Provincial Corporate Tax Rates - A Story of Policy and Media Indifference

The McGuinty move to lower corporate tax rates seems to have been done with very little public advertisement, looking at the 2009 and 2010 provincial budgets, announcements on corporate tax cuts are rare and buried within the documents. For an initiative that is estimated to cost around $2.4 billion annually in revenues, one would think that they would have attempted to receive more PR bang for their buck.

As a looming the federal election seems galvanized around the question of appropriate levels of corporate taxes in an era of record deficits, such a discussion has been muted in Ontario. Any opposition has been more or less marginalized to public sector unions and the odd media release from the NDP.

One would think that after having a corporate tax structure already significantly lower than the US would be sufficient for competitiveness. There is already a litany of data (from all over the ideological map) demonstrating how ineffective corporate tax cuts are as a stimulative measure.

Most troubling, is that the upcoming provincial budget seems to be framed around austerity measures, with minor departmental shuffling to shave off a few million dollars. Yet, the province is still planning on fulfilling multi-billion dollar corporate tax cuts.

As the Federal Conservative's are pressured from all sides to reverse the Corporate Tax Cuts, one wonders if there will be the same political momentum to reverse course in Ontario.