Will Ontario join the have-not provinces?

During Finance and Economic Affairs Committee hearings, we were made aware Ontario, once the economic engine of Canada, has become one of the slowest growing provinces in the country. Ontario’s growth in 2007 was the slowest in the Canada, for the first time since the 1991 recession

The question now surfaces – are harmful policies driving Ontario to the have-not status of being one of Canada’s equalization provinces?

According to Don Drummond, of TD Bank Financial Group, Ontario’s economic performance brings it closer to federal-handout status. As he stated, “It’s not so far from being an equalization province,”.

Canada itself is in a period of global economic uncertainty. The combination of a stronger Canadian currency, a slowing U.S. economy, higher energy prices, and increased competition from emerging markets – obviously China -  have posed significant challenges to many sectors of the national economy. However, the impact on the Ontario economy, particularly the manufacturing sector, has been acute.

While other provinces have adapted to these challenges through forward - looking economic policies, the present Ontario Government has pursued an outdated agenda of higher taxes, bigger government, increased red tape and higher energy prices through reduced supply. Put simply, Ontario has become the economic laggard of Confederation.

A competitive tax environment is one of the key factors that will attract the scale and quality of business investment that Ontario requires.

However, the present government has raked in unprecedented revenue from taxes. Tax revenues have skyrocketed by $17.3 billion since the fiscal year 2003-04—a 35% increase. In fact, one of this government’s very first bills in the Legislature was the biggest tax hike in the history of Ontario.

Clearly this government does not understand that its fiscal and tax policies have hurt capital investment and, therefore, harmed Ontario’s productivity. Taxes have a dramatic impact on where businesses choose to locate.

In periods of economic slowdown when businesses are losing money and have to search for ways to cut costs, the capital tax forces them to cut in areas where they have flexibility, which is chiefly wages. Therefore, the capital tax leads to greater job losses in economic downturns.

As a result, misguided economic policies of government are driving Ontario toward have-not status and it is now increasingly possible that Ontario will soon become an equalization province.

As Opposition we submitted motions to address these competitiveness issues—such as the immediate elimination of the capital tax, phasing out the health tax—however, the Liberal-dominated Standing Committee voted each of them down.

However we continue to recommend the following steps to restore Ontario’s position as Canada’s economic leader: 

Slower growth means fewer economic opportunities for all of us locally and provincially. A slower growing economy also means less tax revenue for government to fund badly needed social services like health care and education. It is imperative that government take initiative to reverse the current economic trends in Ontario.

Now is the time for a different approach