VANCOUVER, BC/ Troy Media/ - January 22, 2015 ---- How governments manage their finances matters a great deal. Spend and borrow too much and the result is a spiral of increasing deficits that create ever higher debt. Then ever-more tax dollars end up spent on debt interest – not on education, healthcare, administering provincial courts, or other areas in which provincial governments are involved.
Spending more than you can afford often results in higher taxes but tax too much and economic growth will suffer and entrepreneurs and jobs will be driven to other jurisdictions.
Government finances are “big ships” that take time to turn around, so holding premiers to account for choices made by their predecessors isn’t much help. But the direction a premier is taking his or her province is critical and we can glean important insights about their performance by comparing them with premiers in other provinces.
Has a premier balanced the budget or did they allow their province to sink deeper into red ink? Are they dealing with government spending in a prudent way or letting money flow out of the public treasury frivolously? Raising taxes or lowering them?
In a recent study examining how well Canada’s premiers are managing government spending, taxes, deficits and debt, it turns out Ontario’s Premier Kathleen Wynne has one of the worst records in the country. In contrast, now-departed Newfoundland and Labrador Premier Kathy Dunderdale ranked above all her counterparts on as the most fiscally prudent, in relative terms.
Why? Partly because Dunderdale kept Newfoundland and Labrador’s spending increases below both economic growth and the combined rate of inflation plus population growth. Put simply, if a premier can ensure government spending remains below such guideposts, that means government spending is more affordable – and prudent.
For Ontario, the story is both different and depressing. In her short time in power, Wynne scores poorly relative to other premiers. She ended up in eighth place out of 10 in overall fiscal prudence (10th is the last and worst ranking).
Wynne has a poor ranking because Ontario’s spending increased faster than economic growth and also more than inflation plus population growth. She also ran the largest average deficit among the premiers and increased government debt. On the latter, Saskatchewan’s Brad Wall is the positive contrast, who ran a surplus and actually reduced debt, on average, over his tenure (Wall performed second best overall).
The Ontario premier has a middling score on taxes, having increased taxes on Ontarians in 2014.
In last year’s budget, Wynne applied the top tax bracket to a much lower income level ($220,000); the previous threshold was $514,090. She also introduced a new tax bracket on those earning between $150,000 and $220,000. In so doing, the Ontario premier sent this message: Are you a physician or an entrepreneur? Well, Ontario will tax you for the results of your long years in university and medical school (the doctor) or for your long hours at work (the entrepreneur).
Wonder which premiers did the worst overall on managing government spending, taxes, and deficits and debt? Answer: Ninth place goes to former Nova Scotia premier Darrell Dexter; the 10th and worst-place finish is Prince Edward Island’s outgoing Premier Robert Ghiz.
The premier of Canada’s smallest province demonstrated a rather big appetite for unaffordable, government spending. Wynne, of course, is the premier of Canada’s largest, most populous province; continued fiscal imprudence on that large of scale is simply reckless.
By Charles Lammam
Charles Lammam is Associate Director of Tax and Fiscal Policy and Mark Milke is Senior Fellow at the Fraser Institute. Measuring the Fiscal Performance of Canada’s Premiers, 2015 is available at http://www.fraserinstitute.org.
and Mark Milke
The Fraser Institute