A New Budget Strategy
New Green Alliance Discussion Paper
2005 the New Green Alliance Party changed its name to be the Green
Party of Saskatchewan
the last twenty years we have seen a shift from the Keynesian welfare
state to the neoliberal regime of the free market and free trade. This
has called for privatization of state owned enterprises, deregulation
of the economy, drastic cuts in social programs, and a shift in the
taxation system away from the principle of progressive taxation based
on the ability to pay. Almost everywhere, taxes on corporations have
been reduced, taxes rates have been reduced on those in the high income
brackets, wealth taxes have been eliminated, and there has been a shift
to regressive goods and services taxes.
results have been predictable. The recent annual reports of the U.N.
Development Programme have documented the increase in inequality of
income and wealth between the advanced industrialized countries and
the less developed countries as well as the growing inequalities within
an example, the 1997 Survey of Consumer Finances by the U.S. Federal
Reserve Bank reported the increase in the concentration of wealth in
the United States in the 1990s. In 1995 the top 0.5% of the population
controlled 28% of the total net worth of the country, as much as the
bottom 90% of the population. The richest 10% of Americans owned 84%
of the stocks and 90% of the bonds. Income disparity has also increased.
Between 1992 and 1995 the income of the top 0.5% increased by 44% while
the incomes of the bottom 90% rose only 0.9%.
has been no equivalent study done in Canada in the 1990s. But a study
done for the Ontario Fair Tax Commission in 1990 revealed that in that
province the top 1% of households controlled 23% of household wealth
whereas the bottom 80% of households held only 26%.
is a hinterland economy. While manufacturing activity has certainly
increased over the years, we still rely heavily on the extraction of
non-renewal resources. While the volume of extraction of oil, natural
gas, potash, uranium coal and other minerals has steadily increased
over the 1980s and 1990s, the revenues (or rents) that the people of
Saskatchewan have received from this economic activity have continued
to decline. Unless we are willing to confront this issue, we will continue
to have cuts in government services and high personal taxes.
other key resource is agricultural land. This industry is very important
to the Saskatchewan economy, but it is a limited source of revenues.
According to the 1999 provincial budget, tax expenditures (exemptions)
for farm machinery and repairs, fertilizers, pesticides, feed, livestock
and horticultural facilities, and fuel total $261 million. Farmers and
individual businesses also benefit from the $500,000 capital gains deduction,
which is a loss of $24.5 million to the provincial treasury.
forestry industry is our most important renewable industry. Sales in
1993 were $489.3 million. But the total dues, fees and royalties paid
by the forest companies in that year amounted to a paltry $4.8 million.
Forest fire control alone in that year cost the province $26 million.
It appears that the taxpayers are actually paying these companies to
use up a natural resource that belongs to all the people.
In examining alternatives to the present budget and expenditures, we
should start with the Saskatchewan Alternative Provincial Budget of
Choice (ABC), prepared by the Saskatchewan Coalition for Social Justice.
A lot of excellent work has gone into this document. It demonstrates
that a different direction is quite feasible.
other major document of note is Tax Fairness for the 1990s, published
by the Saskatchewan New Democratic Party Caucus in January 1991 when
they were in the opposition. It is a good statement of the case for
progressive taxation and a critique of the tax policies of the Tory
government under Grant Devine. It stands in direct contrast to what
the NDP did when they became the government.
parties around the world have also proposed different environmental
taxes. The first tax widely supported was the carbon tax. After criticism
that this consumer tax would fall most heavily on the poor, many Green
Parties have dropped it. One alternative is now advanced by the Australian
Green Party. They are advocating a tax on the extraction and use of
natural resources. This is to encourage conservation and re-use and
recycling. But they have also seen this tax as a progressive tax to
help redistribute wealth. Their proposal is that the taxes collected
from this environmental tax be distributed annually as an equal direct
payment to every household. The New Green Alliance needs to do research
in this area.
purposes of discussion, this paper proposes an alternative direction
in tax policy and tax expenditures, following the general lines of direction
of the New Green Alliance.
Corporation Capital Tax. The province presently collects
$227 million from this tax. But it exempts all corporations with assets
under $10 million. The Alternative Budget states that if we were to
drop the threshold to the Manitoba level of $2 million, this would raise
an additional $120 million.
Corporation Incomes Tax. The tax rate in Saskatchewan
is 8% on small companies and 17% on larger corporations. The 1999 budget
projects collecting $193 million from this source. However, the provincial
tax expenditures in this area amount to $99 million. These could be
eliminated. Some of them did not exist before the Romanow government
Corporate Minimum Tax. There are many profitable corporations
in Saskatchewan who pay no income taxes. Unpublished date for 1992 revealed
that there were 3,648 of these with profits totaling $410 million. If
they were taxed at the 17% rate, this would bring in an additional $70
Individual Income Tax. Provinces have now been granted
the right to create their own income tax structure. The present flat
taxes could be made more progressive by re-introducing more tax brackets,
with those with higher incomes paying a higher rate. The Alternate Budget
suggests that a very moderate change could raise an additional $14 million.
Sales taxes. The present 6% PST is expected to raise
$669.5 million in 1999. This is one of the most regressive taxes in
the province. An alternative would be to shift the PST to the Value
Added Tax system found in Europe. Luxury goods are taxed at a rate of
20% to 25%. In turn basic necessities are exempted from all sales taxes,
as well as the sale of all used goods. This would make this consumption
tax more progressive. It could be revenue neutral or designed to raise
additional revenues. It has the advantage of encouraging local recycling
Wealth Taxes. All industrialized counties except Canada,
Australia and New Zealand have taxes on wealth. Most European countries
have an annual 1% or 2% tax on household net worth. Many U.S. states
used to have this tax. Saskatchewan could introduce such a tax, but
set a threshold level, e.g., required of those who report an income
of over $250,000. In 1997 only 7.4% of Saskatchewan families had a reported
income over $100,000, and only 8.2% of unattached individuals had reported
income of over $50,000. This tax might raise $2 million.
Inheritance and Gift Taxes. All provinces once had
such taxes. If we restored the tax we had in 1976, this would bring
in an estimated $30 million.
Municipal Taxation. The provincial government has responsibility
for establishing the municipal taxation system. The property tax is
one of the more regressive taxes, as the NDP pointed out in its 1991
paper. For tax fairness, property assessment must be based on market
value. To be more equitable, the province should shift the municipal
business tax to a revenue tax. This system is in widespread use in the
United States where it normally takes the form of a 2% annual tax. But
it should be a progressive tax, kicking in at a threshold level and
then have brackets like an income tax. This would have the effect of
increasing taxes on the huge retail corporations while effectively exempting
local small business.
Royalties and taxes on Non-Renewable Resources. No
serious change in the direction of government taxing and spending can
be made without confronting the loss of revenues in this area. The drastic
reduction of revenues here by the Devine government created almost all
of the present provincial debt. After promising while in opposition
to increase these revenues, once in office the NDP government actually
further reduced some royalties. The facts are as follows:
Royalties and taxes as a percentage of resource revenues:
Blakeney government ( 1979-82) 26.3%
Devine government (1987-91) 10.3%
Romanow government (1992-7) 11.3%
Resource revenues as a percentage of total government revenues:
Blakeney government (1979-82) 32.6%
Devine government (1987-91) 16.0%
Romanow government (1992-7) 10.0%
If we look at the NDP budget presented in March 1999, we can get a perspective
on the shortfall in provincial government revenues. Eric Cline projects
that in 1999 royalties and taxes on non-renewable resources will bring
in $551 million. If the royalty and tax rates had remained the same
as they were during the Blakeney government (1979-82), royalties and
taxes would have brought in $1,439 million. That is a shortfall of $888
million. That figure not only explains why we have the debt of $7.9
billion, but it also explains why taxes on individuals have increased
to their present levels.
The New Green Alliance platform has pledged to raise royalties and taxes
on non-renewable resources at least to the levels they were under the
Blakeney government.This could be phased in over a three year period.
It would raise an additional $290 million each year.
Any movement in this direction will bring strong opposition from big
business and their supporters. This could bring a capital strike, as
the Blakeney government faced during the crisis over potash royalties
and petroleum and natural gas royalties. The NGA must also have the
will to use the state. Blakeney promised to bring in new taxes on any
gas and oil wells which were shut down. And Sask Oil was there to step
in. When the potash companies refused to pay the royalties, around 60%
of them were nationalized.
The NGA must also be willing to create and use crown corporations. Indeed,
one of our original convention resolutions calls for public (social)
ownership of non-renewable natural resources. At such a time, the NGA
might consider the creation of a Saskatchewan Development Corporation
to raise capital from the people of Saskatchewan to help establish new
crown corporations or buy controlling interest in some corporations.
New Energy Policy. The financing of a new energy policy
can be achieved through Sask Power corporation, which has the ability
to borrow on money markets and finance the repayment of debt. There
is no need for this policy to be paid for out of general revenues. This
is the practice of all U.S. energy corporations. This would include
energy conservation, demand management, wind and solar power. Sask Power
can also enter into joint ventures or contracts with private companies.
Northern Development Strategy. While not in the NGA
platform, the NGA should at least promise to restore the Northern food
subsidy, perhaps eliminate the subsidy on alcohol, and seriously consider
involvement in a housing strategy. The previous food subsidy would only
amount to around $3 million. A serious housing policy would involve
a significant investment. This could easily be financed through increases
in royalties and taxes on non-renewable resources.
Agriculture and Food. There are some very good proposals
for new programs in the Saskatchewan Alternative Provincial Budget of
Choice. An NGA government would shift present research and subsidies
from corporate agriculture to ecological agriculture. The NGA would
want to provide start up grants and loans for organic food processing
and distribution firms, with emphasis on co-operatives. Loans would
be made to help maintain the rural RR and elevator system. We would
re-direct the investment orientation of SOCO, Sask Water and the Agricultural
Credit Corporation. The present budget for agriculture and economic
development is only $48 million. The NGA might want to add $100 million
to that total.
Reduce Poverty. Raising social assistance rates to
the basic need level would require around $50 million for basic needs.
An additional $25 million should be added to the shelter allowance.
The present budget for child care services is only $17 million, to cover
operating grants, wage enhancement, and subsidies to low income single
parents. The NGA would need to triple this budget to around $45 million
to bring child care facilities up to the Canadian average.
A serious housing policy would required re-establishing the
Saskatchewan Housing Corporation. Its budget in 1990 was $65
million. Such a crown corporation could raise additional funds in the
market for investment in social housing, home ownership programs, and
co-operative housing. The NGA budget could allocate $100 million from
Aboriginal Rights. The only proposed cost here is to
increase funding to Aboriginal institutions. This could be covered under
grants to post-secondary institutions.
Grants to Municipalities and School Boards. The 1999
provincial budget provides only $407 million. Grant Devine's 1990 budget
allocated $518 million. To bring the school grants up to the level of
the Blakeney period, an NGA budget would need to add $95 million. In
addition, the ABC calls for the spending of $10 million to eliminate
school fees, $30 million to abolish university and SIAS tuition fees,
and $20 million additional for post-secondary institutions.
Health Budget. Building on the proposals of the ABC,
the NGA could add an additional $10 million for Home care, $50 for assistance
in establishing Community Health Centres, $15 million to re-establish
the School-based Dental Program, and $80 million to restore funding
the Pharmacare program.
Gambling. The NGA proposes a province-wide plebiscite on gambling.
The 1999 budget projects revenues of $485 million from the Liquor and
Gaming Commission, almost as much as the revenues from resource royalties.
$311 million comes from liquor, and $187 million from VLTs. If the plebiscite
was passed, the NGA budget would have to find an additional $187 million.
III: Summary of the Budget.
Capital Tax $120
Corporation Income Tax 90
Corporation Minimum Tax 70
Individual Income Tax 14
Wealth Tax 2
Inheritance Tax 30
Sub total: $326
and Taxes, Non-renewable
Resources (based on a three
year phase in of total) $290
Additional Revenues $616
Food Subsidy $ 3
Agriculture and Food 100
Social Assistance 75
Child Care 28
Municipalities and Schools 95
Eliminate School Fees 10
Eliminate Post-Secondary Tuition 30
Post Secondary School Grants 20
Home Care 10
Health Care Centres 50
School Dental Program 15
Additional Expenditures: $616
by John W. Warnock
Copyright 1999, 2000 New Green Alliance