Going forward, the P.E.I. premier can’t count on massive revenue windfalls. His election platform should show prudence and outline a plan to stay in the black. Photo credit: The Canadian Press/Brian McInnis
Rather than present a budget, Prince Edward Island Premier Dennis King has plunged his province into an election.
While the election call was only six months ahead of schedule, King’s snap election has deprived Islanders of an opportunity to evaluate budget 2023 to see whether the government truly is on the on the side of taxpayers.
That makes King’s Progressive Conservative election platform all the more important.
There are three key things taxpayers are looking for as King seeks a second term: a commitment to balanced budgets, ending bracket creep and sales tax relief.
Last year, the King government posted a surprise surplus of $83.8 million. That’s a big turnaround from an earlier projected deficit of $26.5 million.
But that surplus wasn’t from prudent spending management: it was fuelled by a $288 million jump in revenue.
The fact that the King government only managed to squeeze out a surplus less than one-third the size of increased revenue shows King is far from a penny pincher. Government spending increased by a whopping 8.3 per cent just in the last year alone.
Going forward, King can’t count on massive revenue windfalls. His election platform should show prudence and outline a plan to stay in the black.
King’s next major task is to eliminate bracket creep.
Along with Nova Scotia, P.E.I. is one of just two provinces that refuses to adjust its tax brackets to account for cost-of-living pay raises in an era of rampant inflation. That means taxpayers are pushed into higher tax brackets even though they’re not earning more in real terms. That’s what economists call bracket creep.
Because the King government failed to adjust tax brackets for inflation, a Canadian Taxpayers Federation report shows a P.E.I. taxpayer will be dinged for up to an extra $263 in income taxes this year.
That’s a week’s worth of groceries for a family of four.
King has hinted at eliminating bracket creep in the past, but now is finally the time to get it done. As Islanders are facing a cost-of-living crunch, the last thing taxpayers need is the province profiting off of inflation.
Finally, King needs to slash the sales tax.
Along with the three other Atlantic provinces, P.E.I. has the highest sales tax rate in the country: 15 per cent.
Especially now, governments can afford to lower sales tax rates because they’re raking in more cash through higher prices. Sales taxes are charged as a percentage of the final sales price of a good. When prices rise, so too does sales tax revenue.
King could cut the HST by two percentage points and still keep the books balanced, provided he keeps government spending in check.
P.E.I. has the highest inflation rate of Canada’s ten provinces. Islanders are the taxpayers in Canada who need sales tax relief the most.
Earlier this year, P.E.I. sent out $500 relief cheques to most Islanders to help taxpayers confront the challenges of inflation. But a one-time cash payment simply doesn’t cut it.
As King asks Islanders for another four-year mandate, he needs to lay out a compelling agenda to lead the province into the future. Islanders face some of the highest tax and inflation rates in the entire country. Taxpayers need relief, and it’s time for King to deliver just that.
Jay Goldberg is the Ontario Director at the Canadian Taxpayers Federation. He previously served as a policy fellow at the Munk School of Public Policy and Global Affairs. Jay holds a Ph.D. in Political Science from the University of Toronto.