McGuinty Should Keep His Hands Off the GST Cut

Dalton McGuinty sent a strong signal this week with his new cabinet appointments that he intends to continue with his tax and spend agenda. He signalled what could amount to expensive moves by growing cabinet to 27 people, appointing a Minister for Aboriginal Affairs, creating a new cabinet committee on 'poverty', and entertaining municipal requests to increase the PST. These moves demonstrate that he is ignoring all economic indicators that the Ontario economy may be in for a rough ride.

---

Shortly after Mr. McGuinty introduced his new and larger cabinet the federal government announced tax relief for businesses - small and large; and relief or individuals both in the form of income tax relief and GST relief. The last thing the premier should do is short circuit federal tax relief that will help Ontario's economy. The size and scope of cabinet has grown during Mr. McGuinty's tenure, exceeding even that of his predecessor, Ernie Eves. When he first took office in 2003, Mr. McGuinty sensibly reduced the size of cabinet from 26 to a more modest 23 members. Since then, he has grown it back beyond what he inherited. Not surprisingly, with a larger cabinet, Ontarians can expect a more activist approach to government. Sadly, activist is code for 'expensive'. This means bigger government with more spending. Such a course comes at the wrong time and runs the risk of putting the government back into deficit. A PST hike should not be used to pay for this activist agenda. The GST cut is a fulfillment of Mr. Harper's election promise to cut the GST by two points from 7% to 5%. Good for him for keeping his promise. Economists are all complaining that a GST cut is not the best kind of tax cut. While that may be true, it was a promise and it is good to see a politician keeping a tax promise for once. Ontario doesn't have much experience in the area of politicians keeping their promises on taxes. Mr. McGuinty should follow Mr. Harper's lead and keep his latest tax promise. During the recent election campaign Mr. McGuinty again promised not to raise taxes. Yet, already, he is being pressured to break this promise. With municipalities demanding that 1 cent of the GST be transferred to them, many are now suggesting that Mr. McGuinty take up the GST point reduction by increasing the PST and transferring the revenue to municipalities. Given his record of broken promises not to raise taxes, Ontarians should be worried about how the GST cut will be handled by Mr. McGuinty. He should keep his promise: the PST should stay as it is, if not reduced. Cities should get their fiscal houses in order and avoid coming after the taxpayer for more cash. There seems to be little prospect in the near future of the Ontario government offering any tax relief. So the least the government can do is keep its promise not to raise them. Mr. McGuinty could start his second term off on the right foot by denouncing plans to grab the GST break just given to Ontario consumers.

---