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Manitoba mired in 50-year-old policy

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18Feb

By: Graham Lane
Posted 01/21/2016

Manitoba’s private sector is increasingly being overwhelmed by an ever larger and costly public sector. The private sector pays for a troubling disconnect between constantly rising public sector costs and worsening government services’ outcomes with ever-increasing taxes, utility bills, insurance premiums and other fees.

Manitoba needs a reboot. Once upon a time, under Premier Douglas Campbell’s Liberal government, Manitoba had both the most frugal public sector in western Canada and a vigorous and entrepreneurial economy. Today it is the reverse.

More than half our provincial economy is now dominated by government spending for mammoth, and frequently hide-bound, public services. Throw in nontransparent and highly politicized Crown corporations like Manitoba Hydro — borrowing with wild abandon to build unneeded transmission lines and dams, topped off with the NDP’s current desperate spending frenzy, and one wonders when voters will finally say “enough!”

The NDP’s government dominated economy and its unnecessary high costs are avoidable impediments to growth, particularly when the private sector everywhere is coping with the ongoing challenges of globalization, technological advances and mergers.

Consider recent major blows to Manitoba’s private economy. Pine Falls lost its pulp and paper mill, Flin Flon’s HudBay smelter closed, and Vale’s Thompson smelter and refinery are to close, Low resource prices are not helping our mining sector and the once-thriving garment and meat packing industries have shrunk.

Technology-driven firms and software startups would offer promise but are disadvantaged by the tax burden, particularly the relatively punitive taxes that hit owners and senior employees. And, broader success is penalized because growing revenue and payrolls trigger payroll tax, which most provinces don’t have. Finally, many of Manitoba’s bigger companies are now subsidiaries of firms headquartered elsewhere — they have the ability to move operations to more attractive locations anytime.

The public sector is paid in the end by private sector activities. Manitoba’s income tax system subjects anyone with a taxable income in excess of $67,000 to the highest rate. The highest federal tax bracket for 2015 comes into play only when the taxpayer exceeds $138,000 of taxable income. The NDP, ignorant to the fact that entrepreneurs and wealth creators may simply move away, now seeks an even higher rate. Everyone, except for the on-reserve indigenous population, is also hammered by a PST of 8% on a now wider range of purchases and services, along with high taxes on gasoline and alcohol. Now, even the once advantageous electricity rates are at risk.

On top of that, provincial government enterprises — Manitoba Hydro, MPI, WCB — levy bills that include payments made to the provincial treasury, transforming service bills into a form of hidden taxation.

Yet, Manitoba’s exhausted Selinger government remains enthralled with what once was seen as progressive policy thinking in the academic lounges of the 1970s, now nearing 50 years ago. The NDP is the poster boy for mediocre government — huge costs, failing outcomes — built upon an increasingly shaky foundation of increasing spending, borrowing and taxing. Eventually, the bills with interest will need to be paid.

It is long past time to recognize that It’s a much different and challenging world now. The need for restoring a more relevant, balanced and sustainable private-public balance has never been greater.

Graham Lane chairs Manitoba Forward (www.manitobaforward.ca), focused on sound public policy. Republished from the Winnipeg Sun online edition January 21, 2016.

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