Premier David Alward’s Progressive Conservative government is proposing to make it easier to raise the harmonized sales tax or to impose highway tolls without holding a referendum.
The new Fiscal Transparency and Accountability Act is being promoted by the Alward government as a new means to rein in costly election promises and impose fines on cabinet ministers for failing to deliver balanced budgets or deficit reduction.
However, a provision in the proposed bill that has not been promoted will allow future governments to ignore the Taxpayers Protection Act if an annual deficit exceeds $400 million.
The Taxpayer Protection Act, which was brought in by former premier Bernard Lord prior to the 2006 election campaign, forces governments to either explicitly campaign on a tax increase or hold a referendum on creating new taxes, imposing highway tolls or increasing the HST.
'Blaine Higgs launched open season on the wallets of taxpayers with this provision.' - Kevin Lacey, Canadian Taxpayers Federation
Kevin Lacey, the Atlantic director of the Canadian Taxpayers Federation, who had been praising Finance Minister Blaine Higgs for the new accountability bill, said the provision is a terrible idea.
"Blaine Higgs launched open season on the wallets of taxpayers with this provision," he said.
"By putting this provision in, it is just a roundabout way of killing the Taxpayer Protection Act once and for all," he added.
The possibility of increasing the HST or imposing highway tolls has come up often in the last four years and Alward and Higgs had mused publicly about a referendum on increasing taxes.
The Alward government shied away from a referendum on boosting the HST, but Higgs did raise personal income taxes in his 2013 budget, despite a 2010 campaign promise by the Tories that said taxes would not be increased.
It is estimated that a two-percentage-point increase in the HST would yield $270 million in new revenue.
The $400-million deficit trigger would have been met at least four times in the last six years. The former Liberal government posted two deficits that easily surpassed that amount in 2009 and 2010 during the economic downturn and the Alward government has posted two budgets with deficits greater than $400 million.
Flexibility needed, Higgs says
Blaine Higgs said he is just being upfront with voters about what options will be on the table if the deficit grows out of control.
"If you're in a situation of a crisis, you want to have the flexibility, you want to have the opportunity to deal with the measures you need to deal with," he said.
But Lacey said the new no-referendum loophole goes against the goal of the rest of the finance minister’s bill by making it easier to raise taxes and taking pressure off governments to reduce spending instead.
"We like the other provisions of the act. Our group has long fought for punitive penalties for ministers that go over-budget," he said.
“Why the government chose to stuff in this piece which actually works against the goals of the other two provisions of the act doesn't really make any sense."