Friday, July 21, 2006

Saskatchewan income tax cuts: A look back

In 1999, the province was edging back in to surplus budget territory after years of deficits. Then-Premier Roy Romanow, in response to public pressure from groups like the CTF, established a committee to create a more efficient and competitive income tax system. They hired Jack Vicq, a former deputy minister of Finance under the Devine government, to head up the initiative.

Lo and behold, Vicq found Saskatchewan income taxes were way too high and recommended a series of tax reductions and realignment. Not all of the recommendations were accepted (harmonizing the PST) but the income tax-related recommendations were adopted in large part.
The government launched a three-year plan to cut taxes:

2001 Taxation Year
11.5% Up to $30,000
13.5% $30,000 - $60,000
16.0% Over $60,000

2002 Taxation Year
11.25% Up to $30,000 Basic/Spousal $8,000
13.25% $30,000 - $60,000 Per Child $2,000
15.50% Over $60,000 Senior supplement $750

2003 Taxation Year
11.0% Up to $35,000 Basic/Spousal $8,000
13.0% $35,000 - $100,000 Per Child $2,500
15.0% Over $100,000 Senior supplement $1,000

All in, the proposed tax reforms would save taxpayers $260 million per year -- a pretty significant cut. Of course, the usual suspects objected to the plan with overblown rhetoric. The Saskatchewan Federation of Labour was the most shrill. In a campaign brochure the SFL said the tax cuts would result in hospital closures.

This is really touching.

Did those dire consequences materialize? Did those tax cuts bankrupt the government, forcing it to close hospitals and kick little old ladies out on the street? Take a look at income tax revenues for the province since 2000:

$1.255 billion
$1.196 billion
$1.429 billion
$1.246 billion
$1.329 billion
$1.448 billion
2006-07 (forecast)
$1.494 billion

If income tax revenue growth had tracked inflation since 2000-01 (The first phase of the tax cuts took effect on January 1, 2001), and taxes had not been cut, we would expect forecast revenues for 2005-06 of $1.404 billion. Inflation over that period came in at 11.87 per cent. Instead, we saw Saskatchewan income tax revenue growth of 15.4 per cent.

It's like those tax cuts never happened.

I'm waiting for the apology from the SFL for the senseless fear mongering.


leftdog said...

You will be waiting for a LONG time because the SFL owes you nothing! Your shameless lobbying for the most extreme right wing nutbars in our nation is very sad. Get a real job! I hear Wal Mart is hiring.

Spakosky said...

I thought that you leftdogs hated Wal Mart?!

David MacLean said...

OK Leftdog, they don't owe me anything. What about the little old ladies they scared needlessly?

Justin said...

What about the oil revenue that made those tax cuts possible?

Had oil prices not been so high, it might have been a little different , no?

David MacLean said...

Oil prices weren't high back then. But the point is that INCOME TAX revenue increased faster than in inflation -- regardless of what other revenue streams did.

leftdog said...

spakosky - why are you so quick to defend a multi national GIANT like Wal Mart who have done more than any other corporate entity to put small mom and pop type operations out of business? I thought you were the BIG defenders of the entreprenerial spirit - 'the right of the little guy to open a business, work hard' - yada yada yada - there are a lot of reasoned and reasonable small business types who justifiable hate what Wal Mart had done to small business.

David MacLean said...

Talking point number 116.

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