Recently, Ontario's Finance Minister, Dwight Duncan, announced his government's intention to backtrack on meaningful mandatory debt repayment. Currently, by law, 100 percent of any surplus is applied against the debt. Instead, Duncan proposes that if/when a surplus exceeds $800-million, the first $600-million will go to debt and the rest to municipalities for roads, bridges and highways. This clearly is an indication from the Minister that either a large surplus is coming or he is making an empty promise for spending on municipal infrastructure. Regardless, taxpayers can expect to be the loser when we find out the truth on budget day.
Of course, all of this talk about how to deal with a surplus misses the fundamental point that surpluses are structured over-taxation and should be returned to taxpayers in the form of tax relief or debt relief and then permanent tax reductions through a tax-back guarantee, as is done by the federal government.
Despite years with a hot economy under the McGuinty government, provincial debt has climbed from $149-billion in 2003/04, up to $162.9-billion in 2007/08. This amounts to $12,656 for each man, woman and child in Ontario. Interest on the debt eats over $9-billion per year ($24.8-million per day or $1-million per hour) and erodes government's ability to spend where necessary and to provide meaningful tax relief. To resolve this, starting in 2009/2010, 1 percent of total revenue should be mandated to go to debt repayment. Instead of this meaningful debt relief, the McGuinty government will change the law so it can spend away the surplus on infrastructure. Moreover, by capping the maximum amount the government can put toward the debt each year at $600-million, it will take nearly 272 years until our provincial debt is paid-off.
This change in plans amounts to little more than a sop to municipalities for infrastructure funding. So far, many Ontario mayors have responded positively to this new approach, which makes little sense. First, with an economy contracting revenue will be restricted. Second, there will only be a surplus if the government does NOT shovel cash out the door in year-end spending, which, as the Auditor General points out, the McGuinty government usually does. Finally, if there is any money left over at year end it won't be much for cities and infrastructure.
When the federal government announced it would provide guaranteed, permanent, long-term funding through the transfer of gas taxes to cities for infrastructure, Ontario mayors cried that it is not enough. Yet, with Mr. McGuinty's promise of only a possibility of some money, they cheer. Instead of McGuinty's smoke and mirrors approach to infrastructure funding, Ontario mayors should be demanding a Gas Tax Accountability Act as there is in Manitoba and Saskatchewan. By law, it would allocate 100 percent of fuel tax revenues to roads, bridges and highways increasing infrastructure spending by $2-billion - of guaranteed funds, not empty promises.
Mr. McGuinty has repeatedly abandoned the taxpayer. First, when after promising not to, he imposed the Health Tax without a referendum. Second, when he ran deficits and did not penalize cabinet ministers for doing so. These were key provisions of the Taxpayer Protection Act. Now he is abandoning debt reduction as a priority, saddling future taxpayers with centuries of debt.
