Manitoba·Analysis

Brian Pallister's pre-budget tax surprise: The premier giveth, the premier taketh away

For those of you trying not to follow along at home — and who can blame you — Brian Pallister's Progressive Conservative government planned to bring in a $25-a-tonne carbon tax in 2017, cancelled that plan the following year and has now brought it back as a "green levy" that will partly mitigate another PST cut.

The PST is going down again, the carbon tax is back and nobody quite knows what happens next

Premier Brian Pallister was all smiles on Thursday when he announced plans to bring back Manitoba's carbon tax as a 'green levy.' (John Einarson/CBC)

If there's one thing you never need to explain to Manitoba football fans, it's the need to compete with Saskatchewan.

Winning a Grey Cup was a big deal for Winnipeg Blue Bomber fans last fall. A playoff victory over the Saskatchewan Roughriders on the way to the CFL championship made the end of a long Cup drought even sweeter, not to mention the fact the Riders' season ended when quarterback Cody Fajardo struck a goalpost.

Manitobans overall tend to be less obsessed with competing with our western neighbours, who tend to be just as nice and polite as we are, if not more.

Nonetheless, the eternal struggle with Saskatchewan seemed to be a factor in the development of a significant piece of Premier Brian Pallister's fiscal policy.

"Manitoba's level of sales tax now makes us tied with Saskatchewan. We were two behind them before," Pallister said Thursday as he announced Manitoba's provincial sales tax will drop another percentage point on Canada Day.

"It makes us essentially tied with Minnesota and it moves us within one per cent of North Dakota," he added, drawing further attention to regional sales-tax rivalries that never seem to make the top of the highlights packages on TSN's SportsCentre.

In all seriousness, sales-tax differentials are a big deal in western Manitoba towns like Russell and Swan River, where shoppers are said to scoot across the border to buy groceries or bigger-ticket items in the retail mecca of Yorkton, Sask.

For the second straight year, the Saskatchewan Roughriders' season ended with a home-field playoff loss to Winnipeg. Competing with Saskatchewan is also a motivation of sorts for Manitoba's premier. (THE CANADIAN PRESS)

This does not, however, seem to be the main reason Pallister doubled his 2016 election campaign pledge to cut the PST by one percentage point.

Rather, this second PST cut effectively serves as a partial rebate for the other big policy plank he unveiled on Thursday: the resurrection of his carbon tax.

For those of you trying not to follow along at home — and who can blame you — Pallister's Progressive Conservative government announced plans to bring in a $25-a-tonne carbon tax in 2017 and then cancelled that plan the following year.

Pallister was and remains indignant over Ottawa's insistence on imposing a carbon tax that would eventually rise to $50 a tonne in Manitoba, all the while allowing leeway for some other provinces.

Now, the $25-a-tonne carbon tax described by Pallister as "flat like the prairie horizon" is back, albeit with a new name. It's now a "green levy," a moniker that may be easier to sell to the PC party base than a carbon tax.

Except, it is a carbon tax. Pallister made that clear when he repeated his pitch to Ottawa to cut Manitoba some carbon slack as the only western, Tory-led province willing to play ball on greenhouse-gas reductions.

The revenue from this tax — $285 million a year, based on what the PCs said Thursday — will not be earmarked for environmental initiatives, including what Pallister described as "record new green investments" that will be announced on Wednesday when the 2020-21 provincial budget is unveiled.

Instead, the revenue from Carbon Tax Two: The Levy Strikes Back will flow into general revenues as a partial backstop for that PST cut.

Canola blooms in a field near Portage la Prairie last summer. Grain-drying would not be subject to Manitoba's resurrected carbon tax. (Riley Laychuk/CBC)

How precisely this will work, in terms of money in and money out of the provincial books, is up in the air for now.

On April Fool's Day, Ottawa will impose a $30-a-tonne carbon tax on Manitoba. This is not a joke, despite the date.

Then on July 1, Manitoba is set to institute its green levy. At that point, Ottawa could claw back its tax by $25. The feds could also choose to ignore the Manitoba tax altogether.

In the meantime, Manitoba and Ottawa could work out some form of carbon tax deal. Or the Supreme Court could make a ruling in Manitoba's legal challenge of Ottawa's right to impose a carbon tax.

In other words, anyone who claims to know precisely what Manitobans will be paying in terms of carbon taxes this summer is a gambler or a fool or both.

COVID-19 fears loom large over the economy

This is only some of the fiscal uncertainty facing the province, whose budget season coincides with increasing uncertainty about the worldwide economy.

A long-expected stock market correction appears to have arrived, hastened if not triggered by fears about COVID-19, the illness related to the new coronavirus spreading across the planet.

If the correction marks the start of a recession, Manitoba may have more trouble balancing its books in the coming years, as Pallister promised to do.

The province is expecting real gross domestic product growth of 1.3 per cent this year, based on a fiscal update earlier this week. The Conference Board of Canada is less optimistic about Manitoba as it predicts the provincial economy will only grow by 0.9 per cent.

Both of those projections were formulated before COVID-19 fears led to stock market selloffs. If a prolonged economic slowdown is coming, Manitoba may not be as immune as it was in 2008-09, thanks to the increasingly interconnected nature of global supply chains in a product-on-demand world.

In other words, Manitoba may yet regret a decision to forgo hundreds of millions of dollars in PST revenue this year in particular. But the PC government says we need not worry.

Earlier this week, Finance Minister Scott Fielding noted his government usually exceeds its revenue and expense targets.

There are a number of football analogies that could serve that assertion, but the best involves a moving goalpost — like the one that jumped in to block Cody Fajardo's attempt at a touchdown pass last fall, dashing Saskatchewan's Grey Cup hopes in the process.

 

About the Author

Bartley Kives

Reporter, CBC Manitoba

Reporter Bartley Kives joined CBC Manitoba in 2016. Prior to that, he spent three years at the Winnipeg Sun and 18 at the Winnipeg Free Press, writing about politics, music, food and outdoor recreation. He's the author of the Canadian bestseller A Daytripper's Guide to Manitoba: Exploring Canada's Undiscovered Province and co-author of both Stuck in the Middle: Dissenting Views of Winnipeg and Stuck In The Middle 2: Defining Views of Manitoba. His work has also appeared in publications such as the Guardian and Explore magazine.

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