Changes in Spending

As the graph below indicates, the greater the fiscal stress as determined by the change in unemployment rate, the greater the increase in spending as a percentage of total budget. Indeed, it seems that most provinces took at least moderate measures to increase program spending, infrastructure and development, or both. Saskatchewan and Alberta, provinces which reduced spending from FY2009 to FY2010 both have plans to increase spending over the long term.[47] [48] This behaviour is indicative that Canadian Provinces, in contrast to their American counterparts, have a more marked tendency to increase spending in response to economic stress. This could be due to a less conservative fiscal outlook as well as less stringent balanced budget requirements.

Figure 2.1

Change in Provincial Spending from FY 2009 to FY2010 by change in unemployment from June 2008 to 2009, for Canadian Provinces.

Source: Statistics Canada and TD economics (http://www.td.com/economics/gov_finances.jsp)<

Changes in Taxes

On the whole, Canadian Provinces appear to be lowering their taxes in response to recent economic problems. Most provinces have raised the small business income threshold to 500k and many have decreased Education property taxes for the upcoming years. Other measures include lowering the General Corporate tax rate and increasing tax credits (see table 2.2). Quebec is the only province that has not taken tax relief measures in their FY2010 budget. In regards to tax increases, three provinces have not raised taxes at all; Saskatchewan, Manitoba and Newfoundland. The remaining provinces have plans for mostly very moderate tax increases, mostly either back-end loaded or on Tobacco and or Liquor Sales. The exceptions are Quebec BC and Ontario: Ontario and BC plan to widen the base of its value-added sales tax as of July 2010 and Quebec, for its part, has planned for an increase in the sales tax rate of 1% , as well as an increase in fees, and foresees the need for more revenue measures as well. Interestingly, Quebec, which already has some the highest tax rate in the country, is the only province where tax measures tend more towards increasing revenue than relief. It is probably the effort to maintain Quebec’s extensive public services that has outweighed the implementation of more counter-cyclical tax measures or fiscally conservative measures in its budget. All other provinces appear to be leaning towards counter-cyclical measures including tax relief for businesses and citizens, as well as fiscal relief for the education sector.

Table 2.2

Date: 2016-04-22; view: 621