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Monday
Feb152010

Austerity first, then tax hikes if needed 

IT’S A CLASSIC political manoeuvre — hold public meetings, float an unpopular idea and then pronounce that the public is willing to go along with the government’s plan.

That seems to be the tactic taken by Nova Scotia’s government, whether it wants to admit it or not.

Following a meeting in Dartmouth on Monday, Finance Minister Graham Steele suggested that Nova Scotians may be ready to accept a sales tax increase.

He failed to add that a tax increase would break one of his government’s election pledges but, as they say, desperate times call for desperate measures.

Monday’s public meeting isn’t the first time the idea of raising taxes has been floated and probably not the last. Steele is holding more than 20 such meetings across the province in an effort to gauge public opinion on the province’s financial crisis and, cynics might suggest, manipulate public opinion.

There has been a slow build to the NDP government’s efforts to soften up the public in advance of a tax increase since last fall, when its economic advisory panel came out with a report on the province’s dire financial situation.

The panel of four economists stated that Nova Scotia’s finances were so bad the government should consider raising the HST by two percentage points, bringing the harmonized federal and provincial consumption tax to 15 per cent.

It has been estimated that the government would be able to raise about $345 million with such an increase, but that’s just a prediction. It doesn’t account for the negative effect such a tax would have on the economy in general.

Another report for the NDP government by the consulting firm Deloitte predicted the provincial deficit would increase to $1.4 billion by 2013 if the government failed to do something to address the problem.

The people attending Steele’s meetings are coming up with a bunch of ideas for the government to consider aside from raising taxes, but that is the one that seems to have resonance with the government.

I haven’t heard too much about what the government plans to do to cut government spending, although I know a number of ideas have been suggested.

Here’s one more. Rather than holding meetings to discuss the overwhelming topic of the province’s finances, let’s just accept that Nova Scotia has a huge financial headache.

Instead, separate meetings should be held, first to discuss what government programs and services should be cut and what government could do to spur investment in the province. Those conferences could be followed up with public gatherings focused on the possibility of raising taxes.

It seems only logical to discuss raising revenue once it is determined how much the government will be spending.

I don’t doubt that Steele and his government have a difficult job, but that doesn’t mean the public should accept government raising taxes without first demonstrating a serious austerity program.

Although it is still hosting gatherings around the province to talk about deficits and taxes, Steele has left many people with the impression that a tax increase is a fait accompli.

Considering the federal government’s poor financial position, someone reminded me it is possible that Ottawa could also decide to increase its portion of the HST.

If the federal government decides to reclaim the two percentage points it cut from the HST a couple of years ago, Nova Scotians could be looking at a raise in the harmonized tax that no one wants.

No matter what Steele decides to do, there is little doubt that setting taxes is an inexact science and there will be unintended consequences.

( rtaylor@herald.ca)

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