Deficit Caused by Tax Cuts |
I write in response to Bruce Johnstone's Nov. 29 commentary on provincial finances. Johnstone predicts that, to balance the provincial budget, the government of Saskatchewan will increase revenues by raising the sales tax. In opposing this option, he approvingly quotes Canadian Taxpayers Federation (CTF) spokesmen David MacLean and former finance minister Janice MacKinnon as observing that the provincial government has a “spending problem.” Johnstone thereby argues that it should balance the budget by reducing expenditures.
However, he neither identifies any unjustified increases in provincial spending nor suggests which government operations should be cut back. Important public services are already strained in this province. Only two of the ten provinces devoted lower proportions of their gross domestic products to provincial spending than Saskatchewan in 2002/2003. Simply asserting that there is massive waste in government that could easily be cut back is not credible.
While Johnstone criticizes the government's depletion of the Fiscal Stabilization Fund, his only specific proposal is for the government to “scare up some money by selling off some non-core assets.” Does he really believe that selling off a finite body of Crown assets is a more sustainable source of revenue than drawing down the finite stabilization fund?
The provincial government has just delivered the largest income-tax cuts in Saskatchewan's history while also reducing resource royalties and business taxes. The CTF, MacKinnon, and Johnstone himself aggressively supported this approach despite their professed concern for balanced budgets. Most other commentators have chosen not to draw the obvious connection between deliberate decisions to forgo hundreds of millions of dollars of provincial revenues and the corresponding advent of provincial deficits of a similar magnitude.
The current provincial deficit is largely the result of overzealous tax cuts. In the recent provincial election, the people of Saskatchewan voted against tax cuts and for public services. While the government should consider raising additional funds through progressive taxes or resource royalties rather than through the sales tax, it would be entirely reasonable and appropriate to balance the provincial budget by increasing revenues.