It is one of the first rules of governing: when a new government is elected, it must never eliminate a tax cut brought in by a predecessor, even if that tax cut was a bad idea and the revenue is needed for more worthy causes.
This isn’t applicable just in Manitoba. Political history has shown repeatedly that tax cuts are truly the lobster traps of public policy: once you’re in, there is no way to get back out.
However, instead of trying to escape the lobster trap, what if you tried to change it to make it more — for lack of a better word — progressive? That is the controversial question that Premier Wab Kinew and Finance Minister Adrien Sala have posed in their first provincial budget.
The NDP has taken two of the hallmark accomplishments of the former Progressive Conservative government — changes to the income tax system and the education property tax rebate — and reimagined them.
The Tories introduced two significant income tax changes in their last year in office: bumps to income brackets that are above and beyond normal indexing, and an increase in the basic personal amount — the threshold of earned income amount allowed before tax is levied.
The NDP is keeping the bracket bumps as the Tories designed them: the first will increase from $36,845 to $47,000, and the second bracket goes from $79,625 to $100,000.
However, for the basic personal amount, the NDP is introducing a major change.
The government will allow it to rise, as planned by the Tories, but now it will start to be clawed back for anyone making $200,000 in net income. It will be fully clawed back for anyone making more than $400,000 in net income, which means high-income earners will pay an additional $1,700 in tax.
Provincial officials said Manitoba appears to be the first province in Canada to fully claw back the basic personal amount.
There are also some fascinating adjustments being introduced to the Tories’ prized property tax rebate program.
Instead of giving property owners a cheque for 50 per cent of the total education property tax levy, rebates will be capped at $1,500, regardless of property value.
The rationale behind the tweak is an intriguing combination of cynical politics and a slightly more progressive tax strategy.
The NDP government has been under siege from progressives inside and outside its party for keeping the Tory tax cuts at a time when health care and education are in desperate need of investment. Undeterred, the NDP has stuck to its pledge with the knowledge that keeping the cuts takes a major arrow out of the PC opposition’s quiver.
And if the rebate is to remain, there is a fairly strong argument that it should go to a flat rate so that the people who really need it get a bigger benefit. Kinew and Sala claimed that 82 per cent of property owners would get more under the new program.
Of course, the other 18 per cent of homeowners who own more valuable properties will be getting less; in some instances, considerably less.
On a go-forward basis, the NDP will maintain the straight 50 per cent rebate for agricultural land, but eliminate the rebate completely for commercial properties.
The end result, once all of the tweaks have been taken into account, is that government will pay out almost $150 million less in rebates. Those savings, Kinew said, will ultimately benefit every Manitoban through investments in health care and education.
The changes also allow Sala and Kinew to claim, with a reasonable degree of credibility, that they are refocusing the rebates on lower-income Manitobans who own less-expensive homes and, in doing so, bringing “affordability” measures to the people who truly cannot afford the higher cost of living.
But does this one change transform an expensive and ill-timed tax rebate into a legitimately progressive tax measure? As is the case with the changes to the basic personal amount, the NDP is trying to make a nuanced argument at a time when it’s facing blunt-force criticism from the Tories every day in question period.
The Tories will ramp up the histrionics to position these changes as tax increases. Although they are technically correct, it is important to remember the cuts introduced by the PCs overwhelmingly benefited high-income earners who own larger homes.
In their opposition to the NDP changes, the Tories will have to somehow explain how giving lower-income Manitobans more help is somehow a bad thing. That’s unlikely because, if the Tories had a salient argument about how tax cuts for the rich are better for the province overall, they might not have lost the last election.
While the PCs figure out their angle of political attack, the NDP will be working on specific messaging to progressive forces in the political debate. Kinew and Sala must somehow convince the disillusioned within their own party that building a fairer and more progressive lobster trap is better in the long run than escaping the trap altogether.
And if they can do that, the NDP may have partially rewritten the rules for new governments.
dan.lett@winnipegfreepress.com
Dan Lett
Columnist
Born and raised in and around Toronto, Dan Lett came to Winnipeg in 1986, less than a year out of journalism school with a lifelong dream to be a newspaper reporter.