Premier Dalton McGuinty says he hasn't ruled out harmonizing the provincial sales tax with the federal GST in Thursday's provincial budget.

Ontario has an eight per cent sales tax. The GST is five per cent.

However, the provincial tax currently exempts the following items:

  • new homes
  • books
  • heating fuel
  • children's clothing
  • diapers

"What I've said in the past is that the challenge is represents is for families," McGuinty told reporters at Queen's Park on Tuesday.

"It's not the kind of thing you'd want to pursue unless at the same time, you were going to find a way to protect families."

The Liberals drew criticisim when they brought in a health premium even though McGuinty promised during the 2003 federal election to not raise taxes.

People accepted that tax once they understood why it was needed, the premier said.

CTV Toronto's Paul Bliss said Tuesday that a harmonized tax could add $18,000 to the cost of a $350,000 home.

However, business groups such as the Canadian Council of Chief Executives have been calling for the move.

Bliss said business groups believe a harmonized tax would reduce the burden on business by more than $100 million per year, making the province a more attractive place in which to invest.

McGuinty has always said that he would look for some help from the federal government to make the adjustment, Bliss said.

The premier said he has been talking with Ottawa about harmonization, but won't make his position known before the 2009 provincial budget is tabled on Thursday.

However, McGuinty has revealed that the total deficit for the year ending and the new budget year to come will hit $18 billion.

Part of that is because of auto sector assistance, but the government also announced on Monday that it would be budgeting $27.5 billion for infrastructure spending.

The spending would help create or sustain 300,000 jobs, the government claimed.

With a report from CTV Toronto's Paul Bliss