The minority Liberal Government in Ontario survived a budget vote today. While the Conservatives refused outright to support the budget, the New Democrats (NDP) agreed not to vote against the budget if certain conditions were met. The key item they were asking for is an increase in the provincial income tax rate for people earning more than $500,000 annually. To keep his government from falling, Liberal leader Dalton McGuinty agreed to NDP leader Andrea Horwath’s proposal and introduced the tax hike into the revised budget.
According to Reuters:
Premier Dalton McGuinty said the extra revenue from the tax hike, which he pegged at around C$470 million, will go to reducing Ontario’s deficit, estimated at C$15.3 billion for 2012-13. But the revenue estimate met with skepticism from some analysts.
“The actual net revenue take will almost certainly be less (possibly quite a bit less) than the static, nobody-changes-their-behavior estimates of C$450-C$550 million per year,” BMO Capital Markets said in a note to clients.
Many media outlets are calling the tax increase a bad tax plan, citing concerns that the impact will be greater than two percent (since the surtax some Ontarians already pay will also increase as a result) or that rich Ontarians may just leave the province and invest somewhere with lower tax rates. The fact that the additional taxes will be used to help lower the deficit (instead of paying for social programs) is also controversial. Some are supportive, calling it fiscally responsible, while others note that the additional taxes will not actually help the Ontarians most in need of financial assistance.
In the Toronto Star, Columnist Linda McQuaig noted that “it’s hard to fight a class war without a billionaire onside”, noting that at least President Obama has Warren Buffet on side. While they may not be on the list of richest Ontarians, Horwath does indeed have some top earning Ontarians fighting with her. Just last month, the Canadian group Doctors for Fair Taxation called on the Canadian and Ontario governments to increase the taxes of Canadians earning more than $100,000, with a sliding scale tax increase for the top 10% that would bring in an additional $3.5 billion annually for the federal government and $1.7 billion for the province of Ontario.
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