Hectoring from Ottawa won’t solve Ontario’s fiscal woes

Posted on June 23, 2014 in Equality Policy Context

TheStar.com – Opinion/Commentary – Federal Finance Minister Joe Oliver should butt out of Ontario’s affairs.
Jun 22 2014.   By: Carol Goar, Star Columnist

Federal Finance Minister Joe Oliver lost no time delivering his first post-election lecture to Ontario Premier Kathleen Wynne. Four days after the vote, he called for an aggressive attack on Ontario’s deficit. “We hope that her government will follow our lead toward a balanced budget,” he said. “Canada cannot arrive at its potential if the biggest province remains in difficulty.”

Apart from the fact that he has no jurisdiction over provincial finances, Oliver’s intervention was unhelpful in three ways. He ignored the fact that Ontarians had just rejected his formula, championed by defeated Conservative leader Tim Hudak. He ignored the fact that Ontario is struggling to replace its manufacturing base. And he ignored the fact that Ontario, unlike Ottawa, doesn’t have resource revenues pouring into its coffers.

But there was a bigger oversight in Oliver’s unsolicited advice. He did not offer to lift a finger. He did not identify a single step he could take to lighten Ontario’s fiscal load and get the Canadian national economy firing on all cylinders.

So the Star will. To be as fair as possible to the minister, these measures are consistent with his party’s ideology and compatible with his commitment to balance the federal budget next year.

Close the multitude of tax loopholes that allow the country’s wealthy elite to stash income in shell companies that pay low corporate taxes; hide assets in offshore tax havens; write off personal expenses and exploit all the tax credits, deductions, refunds and allowances in Canada’s 3,236-page Income Tax Act.

The late Jim Flaherty began to tighten the rules. In his 2013 budget speech he said: “Tax fairness is important to ordinary hard-working Canadians. They know that when everyone pays their fair share, it helps us keep taxes low for everyone. To that end, we are taking additional actions to close loopholes.”

Eighty-five tax loopholes are now gone. If Oliver picked up the pace, billions of foregone dollars would flow into federal and provincial coffers. Not only would this ease Ontario’s fiscal woes; it would narrow the gap between rich and poor, which impairs Ontario’s efforts to channel money into productive uses, create jobs and get its economy moving.

Restore Canada Mortgage and Housing Corp.’s original purpose. The Crown corporation was created after the Second World War to help veterans buy homes and build subsidized housing. But over the years it has drifted into providing mortgage insurance to buyers of luxury homes who didn’t have a 20-per-cent down payment. This has driven up the cost of housing, pushing middle-income families out of urban housing markets.

If the federal government made it clear that CMHC’s first job is to make housing affordable, it would alleviate the need to build social housing, remove some of the risk from the real estate market, encourage residential construction and boost employment — all of which would benefit Ontario.

Fortunately, the agency’s new chief executive, Evan Siddall, is already moving in this direction.

Pay as much attention to Ontario’s mineral wealth as Alberta’s oil reserves.

Oliver is one of the biggest boosters of pipeline construction to get Alberta’s landlocked bitumen to foreign markets. He has displayed far less enthusiasm for unlocking the vast deposits of chromite, nickel, copper and platinum deposits in Ontario’s Ring of Fire, the treasure chest in the James Bay lowlands. He is clearly aware of its potential; he has mentioned it in a couple of speeches. But when it comes to supporting the transportation infrastructure needed to open up the remote region, he has done nothing.

Fix Ottawa’s unfair equalization system.

Oliver ignored Ontario’s claims that it was being shortchanged by hundreds of millions under the convoluted formula Ottawa uses to ensure the financial burdens of all the provinces are comparable. But now Parliamentary Budget Officer Jean-Denis Frechette has confirmed Ontario is being underpaid by $640 million this year. That revenue would allow the province to knock 5 per cent off its deficit.

There is much more the federal government could do — from expanding its restrictive employment insurance program to making good on its promises to improve job training. But that doesn’t seem to be Oliver’s priority. His intent is to hector, not help.

< http://www.thestar.com/opinion/commentary/2014/06/22/hectoring_from_ottawa_wont_solve_ontarios_fiscal_woes_goar.html >

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