At the same time as kids are preparing to open their school books, the government of Ontario just closed its books for the last fiscal year 2007-2008. A review of the these books - the Public Accounts of Ontario - should worry taxpayers, as they reveal the McGuinty government has much to learn about managing public money. They subscribe to the school of 'if you send it, we will spend it'. Instead, a better lesson plan they should follow should be 'a penny saved is a penny earned'. If the government would get its spending under control it would have ample room for tax relief and debt reduction.
Imagine your child expects to earn $91.50 for some small job but instead gets more, receiving $97.10. What should be done with the $5.60 extra? Responsible parents might suggest that such a windfall be invested in reducing the debt burden or putting it in savings. One thing is certain, the student will not get ahead by running to the candy store with their windfall.
This is the situation Premier McGuinty's government found itself in over the last year. It took in much more money that it had budgeted - $5.6 billion to be exact. Sadly, like a kid in the candy store, Premier McGuinty spent an extra $5 billion beyond what was originally budgeted and put only $600 million towards the debt. Importantly, there was no broad-based tax relief.
All tax revenues climbed having fueled government over-spending, which is why there should be in place a law banning governments from spending beyond budgeted amounts, except for emergencies. Here is where the extra tax cash came from. The loathed health tax took in more cash than planned. It is now taking over $2.7 billion a year out of the pockets of Ontarians. All told, the government took in $4.1 billion more from taxes alone than it had projected. This is an increase in excess of 6% year over year. Personal income tax revenues continued to climb, taking $883 million more from people this year than last; up to $24.5 billion from $23.7 billion. The Provincial Sales Tax (PST) took $748 million more than last year, up to $17.9 billion. On top of all this, the federal government gave Ontario almost $600 million more than forecast.
Expenditure limitation laws have worked wonders for taxpayers in the state of Washington. Spending may not exceed inflation and population growth. With such a law in place in Ontario, with last year's windfall of tax revenues, there easily would have been room to provide broad-based tax relief by eliminating the health tax.
Ontario's debt lesson shows total debt of $162.1 billion - $12,664 for each man, woman and child in the province. To service the province's debt, last year $8.9 billion was taken away from revenue and spent on interest charges. This amounts to just over $1 million per hour in payments ($25 million a day) to service the debt. Ontario's debt should be reduced though a mandatory debt repayment program and the interest savings returned to taxpayers through personal income tax reductions.
Cracking Ontario's books reveals lessons need to be learned by the current government; that spending must be reined in to provide needed tax relief, and that a mandatory debt reduction program would free up money in the long term. Perhaps Mr. McGuinty should join the kids back in school to pick up a lesson or two, taxpayers would benefit.
