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Thursday, April 23, 2009

Hudak’s Economic Club Speech, “Rebuilding a Prosperous Ontario,” gets passing grade

Today, Ontario PC Party Leadership Candidate Tim Hudak gave a speech to the Economic Club of Canada in which he suggested several initiatives the Ontario government of Dalton McGuinty could implement to help middle-class families and improve Ontario’s economic future.

I did not attend the event in Toronto, but have read the speech—it’s available at his Website.

Mr. Hudak did an excellent job of summing-up Ontario’s strengths, opportunities and, especially, its challenges, pointing out that:

Our current premier has turned to the public sector to create new jobs. In fact, since he was elected, there are over 210,000 more government jobs in Ontario.

He [Premier Dalton McGuinty] thinks we can spend our way out of this recession by creating even more government jobs and through public works projects sponsored by the government.

Here are some of the other challenges he outlined:

Many of the challenges we face are global in scope, and not of our making. But it’s also true that this recession has hit Ontario significantly harder than other provinces—and that even when the global economy was strong, we were beginning to fall behind.

We’re losing more jobs per capita than other provinces. Our unemployment rate is now more than a full point higher than the average of the other provinces.

Our deficit is higher. Our debt is larger.

And Ontario is now a have-not province. We are receiving equalization payments from the federal government for the very first time in our history!

 

Then Mr Hudak offered what he dubbed were “… some concrete, tangible and affordable policy ideas that the McGuinty government could be implementing today—right now—to help Ontario families and our economy.”

  • A one-year payroll tax holiday on new hires;
  • Suspending the Land Transfer Tax for one year on all new and resale home purchases;
  • Stopping the planned PST/GST harmonization that he said will add a new 8 per cent tax burden on dozens of everyday items;
  • Immediately renegotiate more sustainable collective agreements with all public sector unions; and
  • A wage freeze across the Ontario Public Service for senior government administrators, non-unionized employees and MPPs for the duration of the recession.

Mr. Hudak also told the audience that short-term actions to kick-start the economy must be followed by a long-term plan focused on job creation and keeping government spending within our means.

I had mixed feelings as I read through the speech. On the one hand, I agreed with a lot of what he said are the problems we face. On the other hand, I found his solutions somewhat underwhelming and in one case, downright counter productive.

Mr. Hudak seems determined to roll back the plan to harmonize the PST with the federal GST. This is just plain bad tax policy. Lower the tax rate from the current 8 per cent, but combine the two taxes. The PST is a drag on business investment and a job killer; for heaven’s sake, get rid of it once and for all.

The only significant payroll taxes levied by Ontario are the Employer Health Tax and Workers’ compensation, so I assume the Employer Health Tax is Mr. Hudak’s target. A “one-year payroll tax holiday on new hires” may sound nice, but is relatively trivial, especially when stacked up against the 8 per cent tax on business capital that the PST represents—and Mr. Hudak wants to keep the PST in place. He is plainly wrong here.

Eliminate or significantly reduce the ill conceived Employer Health Tax across the board or leave it be—a “one-year payroll tax holiday on new hires” is almost a waste of effort, especially after taking into account the administrative costs to employers to implement it, and the government’s cost of policing it.

Good luck on renegotiating union contracts. When has this ever been successful on an across-the-board basis? I don’t think it ever has, nor will it be. The damage is already done. We must reduce the head counts represented by these contracts—the pay rates and benefits will stand. That’s one of the costs we have to pay for our party’s ineptness in the last couple of elections when our politicians couldn’t convince enough voters to let them govern.

Pay freezes are always useful during hard times, so I’d support any effort to implement them in Ontario.

All in all, the speech and the man making it deserve maybe a C, or C+ to be generous. Mr. Hudak will have to get a lot more creative if he hopes to get my vote for leader. And I don’t see this sort of effort carrying the day with non-Tories during the 2011 election—assuming he becomes leader.

5 comments — This is a moderated blog and comments will appear when approved. Please don’t resubmit if your comment doesn’t appear immediately, and please do not post material that is obscene, harassing, defamatory, or otherwise objectionable.

  1. ConservativeCanadianApril 23, 2009 at 5:12 PM

    I don't know, man. I just read the speech, too, and I thought Tim Hudak was trying to propose some practical solutions that Dalton McGuinty could go about implementing TODAY. True, it's no Contract with America or Common Sense Revolution, but I don't think that was his purpose.

    As you say, the PST is a killer, but Dalton McGuinty has had 7 years to tinker with tax reform. The proposed "HST" would go into effect in July 2010, just as the economy could be emerging from a tailspin. THIS is the time we want to hit the consumer with a 13% sales tax on a whole slew of new items???

    I would grade it at least a B+, especially given the context of where we're at today.

    ReplyDelete
  2. ConservativeCanadian, as I've written, the 13% rate is the problem, not harmonization--reduce the rate and I think we have a win-win.

    Cheers.

    ReplyDelete
  3. Interesting analysis Russ.

    What I find appealing about Tim Hudak's plan is that he is trying to convince McGuinty to act for the sake of Ontario today. It's rare to see the opposition give concrete ideas on how to solve the problem now. (think of the federal opposition and the budget for example)

    Regarding the payroll tax holiday, I remember reading a recent study that mentioned it was the main form of taxation burden preventing small and medium sized businesses from growing. That's significant, and clearly businesses are looking for that type of support. It's not that negligible.

    It might not be easy to renegotiate public sector contracts, but when they get about 15% more than their private sector counterparts, something isnt right. Everybody needs to tighten their belts and hopefully unions can realize that too. Give them that option or the other, reducing head counts, and they will probably want to negotiate.

    We've talked a lot about the HST lately, so I won't dwell on this point, but maintaining current taxation levels is better than increasing them at all. Period. Preventing this change is important. We all know Tim Hudak is for lower taxes, stopping the HST is only a first step, I believe.

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  4. Nathalie C., good points, but consider this:

    Yes, payroll taxes are significant, but federally levied taxes make up the bulk of these--a one-year tax holiday on the Employer's Health Tax for new hires only is not significant enough to influence business decisions. If you're really serious about helping businesses, harmonize the sales taxes and reduce/eliminate the Employer's Health tax across the board.

    Attempts to renegotiate public sector contracts will only be successful if the government is prepared to dismiss employees who illegally withhold services (as Ronald Regan did in 1981) in response to those attempts and we know Hudak will never do that.

    The public service unions will win--they have legally enforceable contracts and Ontario governments NEVER fire workers who go on illegal strikes. His is empty rhetoric.

    Thanks for sharing your views.

    Cheers

    ReplyDelete
  5. Tim Hudak's experience and knowledge of the financial sector is what we need right now for Ontario. Its important to remember that there might be a difference in policy from the leadership race to the actual election (anyone remember faith based schools?). Although a harmonized sales tax may save money down the road, is now really the appropriate time to hit Ontarians with another tax? I don't think so.

    ReplyDelete

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