Ontario's deficit for 2011-12 drops to $15 billion
Published Wednesday, April 25, 2012 4:09PM EDT
TORONTO - A planned tax on the rich that helped keep Ontario's minority Liberal government alive will also help lower the province's deficit before it's even implemented, Finance Minister Dwight Duncan said Wednesday.
The deficit for the 2011-12 fiscal year fell to $15 billion from the $15.3 billion projected in the 2012 budget in part because the government agreed to a two percentage point surtax on incomes over $500,000, said Duncan.
"Some of the tax will accrue in the previous year because of the way the tax system is set up," Duncan told reporters.
The Liberals agreed Monday to introduce the new tax bracket so the NDP would not vote against the minority government's budget and trigger another election. The Conservatives had already vowed to reject the budget, even if it meant defeating the government.
The federal budget introduced in March two days after the Ontario budget was also credited with lowering the provincial deficit.
"We did our changes before the federal government this year, (and) there were some changes in the federal budget that actually had a positive impact on Ontario's bottom line," Duncan said.
Documents from the ministry of finance say there is no impact on the 2011-12 deficit from the federal budget, and show $250 million of the $300 million in deficit reduction came from a contingency fund in the Ontario budget.
The new surtax on high income earners will help stem the flow of red ink sooner than planned, added Duncan.
"There's a whole variety of factors that go into it, the expenditure reductions that are built into the plan, but yes that tax does get us there more quickly," he said.
"If you look at the 2012 budget we projected balance in 2017-18. We now have a half-a-billion dollar surplus in that year."
The Liberals estimate the tax on the rich will bring in $470 million a year in revenue, and "every nickel" will be used to pay down the deficit, said Duncan.
During question period, the New Democrats accused Duncan of low-balling revenue projections in the budget so the Liberals can paint a rosier picture later and claim to be good fiscal managers.
"This minister changes his numbers more often than most people change their socks," said NDP finance critic Michael Prue.
"The fact is this minister's credibility is fading fast. Will we be hearing more surprise good news about these deficit projections from this minister?"
The shot from the NDP just two days after their budget deal with the Liberals seemed to catch Premier Dalton McGuinty off guard.
"I thought we were friends," McGuinty said before Duncan could even respond to Prue's question.
Moody's put Ontario on credit watch following last fall's election, and the Liberals have maintained deficit reduction must be a top priority to keep the economy on track and help create jobs.
The government rejected across the board cuts to programs and services, preferring to protect gains it has made in health care and education, but that has meant spending reductions in other areas.
The Progressive Conservatives agree the deficit needs to come down, but said introducing a new tax on the rich will only take money out of the economy that could have helped create jobs.
"Reducing the deficit's a great idea," said Opposition finance critic Peter Shurman, "but there are other ways to reduce the deficit and our prime method is you stop spending like a drunken sailor."
The new tax bracket and a cap on government spending will help take $3.5 billion off Ontario's debt by 2017-18, said Duncan. The surtax on the rich will be eliminated when the books are balanced.