In A Balancing Act, economist Don McIver critiques the government’s own “Getting Back to Balance” report dismisses the suggestion that a five percent annual increase in expenses is simply the status quo. McIver says neither economic facts nor public opinion support the suggestion that resolving the dilemma requires higher taxes and more intervention, in addition to expenditure restraint.
McIver says if the government is serious about providing fiscal leadership, it is better advised to take three steps.
The first is to institute an expenditure and program review in which nothing is considered too insignificant, nothing is exempted and no recommendation is circumvented. As an example, in the two big ticket areas of education and healthcare, the question is; in a province of less than a million people, do we really need all of these managers?
Other areas of likely savings include the Industrial Expansion Fund and reorganization or closure of the multiplicity of regional development authorities; elimination of the duplication of departments; moving to defined contribution pension plans for public servants and MLAs; and selling or privatizing non-essential government assets.
As McIver explains, “Every new program, every new tax (or tax cut), and every existing program should be subject to a sunset clause and an automatic review after no more than five years. Priorities change, clearly government must be required to adapt.”
The second is that government streamline or eliminate regulation. McIver suggests people take a look at the Ministry of Justice regulatory website directory:
“The seemingly interminable alphabetic list is an eye-opener for those who dispute the degree of regulation under which Nova Scotians labour,” says McIver. “Many are absolutely necessary, a good number are esoteric, and some are doubtless downright stifling and curtailing.”
The third is that government institute a revenue-neutral reform of the taxation system. With both New Brunswick and Newfoundland & Labrador cutting income tax, Nova Scotia can’t afford not to follow suit. Without going into specific detail, McIver does say tax reform needs to adhere to several key principles:
- That the burden of taxation should fall on consumption, not earned income, and where that places a burden on low-income taxpayers, the impact should be offset by credits and deductions
- That corporate taxes should be the most aggressive in Canada
- That the tax system should ensure employment is always more rewarding than social support and that welfare traps which effectively tax every additional dollar earned in the transition from welfare to work should be eliminated
- That adequate child support/benefits should help parents return or stay in the labour force
- That levels of support should be increased for those unable to fully participate in the labour force.
“The simple fact is we cannot continue to do what we are doing,” says AIMS President & CEO, Charles Cirtwill. “Simply increasing taxes and slowing the growth in spending will not solve our fiscal woes. This paper provides real steps, based on years of research, that are needed to provide a path back to balance, not just for today, but for tomorrow and the day after.”
To read the complete Commentary, click here.