Focused on austerity, the government appears to be ignoring tax policies that have the potential to bring in billions to the provincial treasury.
The ruthless slashing of public sector funding – including the current freeze on base funding to Ontario’s hospitals – appears to be more ideologically based than on sound economic policy.
As we have previously noted, cutting public spending also creates a fiscal drag on the economy. Public sector workers spend their earnings in the community, generating economic activity. When government puts the squeeze on them, it puts the squeeze on everybody by reducing economic growth.
We have seen how both the Harris and McGuinty governments reduced revenues by slashing the corporate tax rate. Less discussed are substantial exemptions to the Employer Health Tax (EHT), introduced in the late 1980s to replace the previous OHIP premiums.
When the EHT was introduced, it featured a graduated rate structure – the only one of its kind in Canada. For employers with annual payrolls of less than $200,000, the rate was 0.98 per cent. For employers with more than $400,000 in payroll, the rate increased to 1.95 per cent.