Nova Scotia tax review is dead on arrival, says Graham Steele
Laurel Broten recommends a spending freeze, which Steele says will never happen
In the British political comedy Yes Minister, a controversial decision was one that lost votes while a courageous decision would lose an election.
The Broten tax review, released Wednesday by Finance Minister Diana Whalen, is very, very courageous. That's why the report is dead on arrival.
Its chances of being implemented are precisely zero.
I don't mean this to be a reflection on Laurel Broten. She is smart and experienced and I believe she won the assignment because Stephen McNeil's government considered her a safe pair of political hands.
Any decent discussion of taxation is going to be tough and Broten could be counted upon to recognize, and avoid, political landmines. Or so they thought.
To her credit, she didn't head for the usual escape hatch, which is, "If we cut taxes, economic activity will increase and total revenue will rise." Politicians love that one because it implies there's a magic scenario where everyone's a winner. It's wrong, but attractive.
Instead, Broten heads for a different escape hatch: a semi-permanent spending freeze. That's where almost all of the savings come from.
Let's be clear: There will be no spending freeze in Nova Scotia. This is not a question of discipline, or political will.
The cost drivers in government are mostly in health. The cost drivers are drugs, equipment, utilization and people. In most cases, the government is not free to fix prices.
Costs will continue to climb and there will be the same pot of money available to pay for them. So waiting lists will get longer, fewer drugs will be funded, malfunctioning equipment won't be replaced and doctors and other mobile professionals will leave.
True spending freeze would cause pain
No provincial government in Canada has ever succeeded in freezing health costs. It doesn't matter how rich or poor the province, nor the ideology or party stripe of the governing party.
A true spending freeze would cause pain, especially in health, education and community services, that Nova Scotians will not accept and that no government will impose.
But without a spending freeze, the Broten report ceases to make sense. Without a spending freeze, it is merely a recipe for growing deficits.
On the revenue side, the report makes a series of politically unpalatable recommendations. Among them:
- Lower taxes on the highest income earners.
- Lower taxes on corporations.
- Higher taxes on small businesses.
- Higher taxes on power bills, at a time when this government is desperate to convince Nova Scotians that their power bills are going down, even if only temporarily.
- Higher taxes on feminine hygiene products, diapers, children's clothing and books.
- A new pollution tax — which makes sense — but it's the same as the carbon tax that killed Stephane Dion's career as federal Liberal leader. And it would mean higher prices at the gas pumps — do you think Stephen McNeil's about to do that? No, me neither.
In short, the rich and corporations will pay less and the broad middle class — precisely the group that all political parties are courting — will pay more, more, more.
Report will be shelved, Steele predicts
If the Liberals actually adopted these tax measures, the opposition parties would feast on a smorgasbord of unhappy voters.
Politically, the best thing about the report is that it was written by an outsider. If anyone doesn't like what the report says, the McNeil government can say, "That was Laurel Broten’s recommendation, not ours."
At best, the report will be shelved. At worst, the government will cherry-pick the popular bits and drop the unpopular bits. All that will do is blow a hole in the province's finances.
So there will be plenty of talk, but make no mistake: This report is going absolutely nowhere.
As Sir Humphrey from Yes Minister might say, "It's very courageous, minister."