Could Sask. tax its way out of a $1.2B deficit? (Yes, but you will pay and pay)
Raising the PST 3 percentage points might net an extra $700M — at least on paper
Is it possible to bring Saskatchewan's budget close to balance without layoffs, rollbacks or forcing workers to take unpaid days off to save on wages?
Facing a billion-dollar deficit, the provincial government has been talking about various austerity measures lately.
But could massive tax hikes by themselves also be a way to eliminate all the red ink?
Here's the short answer: Technically, it could work, but it would cost a lot of people a lot more in the pocketbook.
Here's one (admittedly hypothetical) look at how Saskatchewan might raise nearly $1 billion through raising taxes and not cutting the workforce.
Simon Enoch, Saskatchewan director for the Canadian Centre for Policy Alternatives, says any increases to income tax rates should be borne by the people who can most afford them.
For example, he says, there could be a 5 per cent surtax for the province's highest earners. Some U.S. states have taken that approach, he said.
"I think there's room to increase the corporate income tax that currently sits at 12 per cent," he said as another option. "I think we could consider even raising it to 14 per cent."
"I would want a PST increase to be a last resort. My problem with raising the PST is it hits low-income earners the most.- Simon Enoch, Centre for Policy Alternatives
The government could also raise more than $700 million by just increasing the provincial sales tax by 3 per cent to 8 per cent, the same rate as Manitoba.
All in all, big tax hikes aren't a good solution to Saskatchewan's deficit woes, he says.
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"In an economic downturn, it's really not a good idea to raise taxes," Enoch said.
"I'm of the opinion that the province should wait to get rid of the deficit until we're in a positive growth environment," Enoch said.
In particularly, big sales tax hikes would be unfair to many people, he said.
"I would want a PST increase to be a last resort," Enoch said. "My problem with raising the PST is it hits low-income earners the most."
Cutting wages and laying off people en masse doesn't work for Enoch either.
Instead, he said, the Wall government should just ride out the downturn.
"When your economy is in a downturn, the last thing you should be doing is reducing people's wages, eliminating jobs," he said.
"Historically what it's shown is that when you make deep cuts during an economic downturn it tends to contract the economy even more."
Enoch has a message for the provincial government as it continues crunching the numbers ahead of the March 22 budget.
"I don't think there's any need for immediate panic and immediate deep spending cuts when those cuts might actually contract the economy and make an already bad situation worse," he said.
Saskatchewan Finance Minster Kevin Doherty told reporters this week that all options are on the table to reduce wages, including wage rollbacks, capping of overtime or giving workers unpaid days off.
In November, he said officials were looking at possible tax increases, changes to existing tax exemptions or even new taxes on things that aren't currently taxed in order to get spending under control.