Lower Tax Rates - More Dough

The decision by the Mike Harris government to reduce personal income taxes substantially had the desired effect of rejuvenating Ontario’s economy, says Bob Runciman, Leeds-Grenville MPP.

“People normally equate reducing tax rates with reducing revenue and therefore ending up with less money to meet the costs of providing necessary services,” said Runciman. “That belief, perpetuated by political opponents and the media, is not supported by facts.

“In fact, the reverse is true.”

When the Ontario Progressive Conservatives took office in 1995, the government was spending about $1.2 million per hour more than it was receiving in revenue.

“At that rate, the province was facing bankruptcy,” said Runciman.

Keeping the Tories election promise of reducing taxes was essential to turning around the finances of the province.

The Harris government has made a number of tax cuts since taking office and now the effective personal income tax rate (for citizens in the $30,000 to $60,000 income bracket) is 9.22 per cent compared to 18.10 percent in 1995 _ almost half.

Corporate tax rates have also decreased but not as substantially. Now tax rates for general corporate is 15.5 per cent, manufacturing and processing 11 percent and small business 6 per cent. In 1995, these rates were general corporate 15.5 per cent, manufacturing and processing 13.5 per cent and small business 9 per cent.

“We believed then and we believe now, that putting more money into the hands of individuals and businesses, encourages economic activity,” said Runciman. “With more money, individuals have more ability to make their own spending decisions. Relaxing the tax burden on business encourages more reinvestment and expansion … and more jobs.”

Since September 1995, Ontario has created 838,000 more jobs which represents 48.5 per cent of the national gain.

But at what price? asks critics.

Total revenue from personal income taxes in Ontario for the last fiscal year reached $18.6 billion compared to $14.7 billion in the 1994-1995 fiscal year. Other tax revenue has increased to $27.4 billion (1999-2000) from $19.8 billion in 1994-1996.

“Clearly our program of tax cuts has worked,” said Runciman. “They have created the positive environment for economic growth, allowed our companies to compete on a level playing field with their competitors, and have produced more revenue to meet the demands of providing increased services to our constituents.”