Inflation is pushing past three-decade highs and pump prices are shooting toward $2 a litre, creating real financial pain for many Canadian households – and potential political pain for Canadian governments.
Responding to that peril, several provinces have unveiled measures to put more cash into their voters’ pockets. But those approaches vary wildly. And some are likely to stoke inflationary pressures.
Quebec was first off the mark, in November, when it introduced $275 payments to low-income individuals. On Tuesday, the province expanded that largesse, saying in its 2022-23 budget that it will give a one-time payment of $500 to every adult in the province who earns less than $100,000 a year.
Earlier this month, Alberta said it will temporarily suspend its fuel excise tax of 13 cents a litre starting on April 1, as well as paying out rebates on electricity bills. Those measures are on top of a possible rebate for natural-gas costs starting this fall.
Ontario, Saskatchewan and British Columbia are helping out drivers through a different route. In Ontario, the Progressive Conservative government said in late February that it would stop charging for licence-plate renewals, and refund any such fees paid since March, 2020. That could save drivers up to $120 a year. Saskatchewan will issue a rebate of $100 to provincial residents for each vehicle they have registered. And on Friday, B.C. said it will issue rebates on public auto-insurance premiums, $110 for individuals and $165 for commercial customers.
And then there is New Brunswick, which announced in its budget last week that it is increasing its basic personal income-tax exemption levels to return carbon-pricing revenues to its residents.
All of those moves are being touted as measures to help offset the increased cost of living. But some could make the problem worse. Alberta’s excise-tax cut, in particular, blunts the price signal of higher crude prices. And it only benefits drivers, of course – those who don’t buy gasoline or diesel don’t get anything. The rebates and refunds offered in Ontario, Saskatchewan and British Columbia are even more narrowly targeted. You need to both operate and own a vehicle to benefit.
So, low-income families struggling to make ends meet in B.C. can take comfort, as they trundle along on public transit, in knowing that the drivers of luxury SUVs have caught a break.
Quebec’s moves are more broadly targeted – perhaps too broadly, given that a two-person household with a total income of close to $200,000 could still receive $1,000. But the measures announced in the fall are more tightly focused on low-income earners.
Of all the provinces, New Brunswick has the least splashy announcement, but arguably the most sensible. Its changes apply to all taxpayers, with an additional increase in the exemption for low-income earners. The initial savings for taxpayers are modest; the increase in the basic personal exemption on top of inflation indexing will put about $61 into a taxpayer’s pocket. But those savings are permanent, and likely to stack up as time goes on.
Taxing questions
In a recent Tax and Spend on the leisurely timing of the federal budget, two readers debated the size of Ottawa’s debt, and assertions that Canada’s debt burden is sustainable. One reader made the point that the national debt picture is much more onerous once the debt loads of the provinces are added in. And another countered that point, saying that provincial balance sheets have improved because of the federal government’s spending during the pandemic.
Both make fair points, but the first reader is on more solid ground. The Organization for Economic Co-operation and Development uses a broad measure for national debt that includes all levels of government (and does not include the assets of the Canada Pension Plan). Using the OECD’s measure, Canada’s debt picture is rather dismal, ranking 30th out of 38 countries, with a gross-debt-to-GDP ratio of 142 per cent.
By contrast, Ottawa’s preferred measure (of only its own net debt) amounted to just 50.8 per cent of GDP in fiscal 2020-21.
It is correct to point out that some of Ottawa’s debt helped to buttress provincial spreadsheets. For the most part that didn’t lower their debt ratios in absolute terms, but rather prevented them from growing even faster, with the exception of New Brunswick, which managed to record surpluses during the pandemic.
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Quebec (red) Inc.: Spending in Quebec has been on a tear for a couple of decades, rising by an annual average of 5.4 per cent between 2000 and 2021, says a new analysis from the Montreal Economic Institute that urges the province to restrain further spending growth. The pandemic-fuelled surge in spending has had only a minimal effect on that long-term trend, Miguel Ouellette, the institute’s director of operations, wrote in an e-mail. The institute is recommending that Quebec limit future increases in spending to the rate of inflation and population growth. If that approach had been in place over the past 20 years, annual average spending growth would have been just 2.5 per cent – less than half of what it was in reality.
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