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Liberals and NDP Reach Budget Deal and Avoid Election

McGuinty agrees to surtax on top earners, NDP agrees to back budget.

NDP leader Andrea Horwath on the day the budget was introduced last month.

Ontario, you have a budget deal.

At a final meeting today, Premier Dalton McGuinty and NDP leader Andrea Horwath discussed a proposal that would integrate some key NDP goals into the 2012 budget and avoid an election (which is automatically triggered if a government loses the budget vote). The biggest element of that deal: the Liberals have accepted NDP calls for a two per cent surtax on those who earn more than $500,000. Revenue from that tax will go to reducing the deficit, and it will be eliminated when the deficit is, in 2017. McGuinty has also agreed to provide additional financial support to hospitals in northern Ontario, support for some child-care spaces that were previously in danger, and some transitional funding for the horse-racing industry.

Speaking to reporters earlier today, McGuinty described the proposal as a “sensible compromise,” one that provides for key NDP goals while also respecting the fact that citizens aren’t clamouring for a return to the polls anytime soon. Several Liberal MPPs are also supportive of the surtax as a matter of policy, and have been urging McGuinty to accept it in caucus meetings.

Today is, without doubt, a big win for the NDP and for Andrea Horwath, who emerge from these negotiations with a stronger political voice than ever before. They won real concessions from the government that reflect core NDP values, but also showed themselves to be true to their word when they say they are committed to having the current minority government work. “I still have many concerns…for everyday people this budget still falls short,” Horwath told reporters, “but I feel that we serve the public better by working together in the legislature.”

It is something of a bitter pill, especially because the budget calls for a freeze on public sector wages and pension rollbacks that unions strongly oppose. It is also prudent, given that the NDP has a debt from the last election it has yet to pay off. But most of all it keeps the NDP at the centre of the debate, and is proof positive that they now have policy influence at Queen’s Park.

The Tories, by contrast, have been nowhere in evidence. Tim Hudak came out the day the budget was presented and said his party would be opposing it; in so doing, he put himself on the sidelines. (Whether the Progressive Conservatives reward the principle or condemn the politics of that move is yet to be seen.)

The Ontario Legislature votes on the budget tomorrow morning.


  • A Real Person

    Glad not everyone involved acted like an immature child as Hudak did.

  • Anonymous

    Will the cons finally get rid of Hudak, he is leading them to obscurity

  • Anonymous

    Looks like Occupy accomplished something after all.

  • Anonymous

    So how much is the new Buffet tax going to bring in?

    • Anonymous

      Depending on who you ask, between 400 and 600 million.

      • Anonymous

        That’s per year.

      • John Duncan

        I’m curious how the ratings agencies are going to respond. An extra $400 – 600 million per year dedicated to deficit reduction should make markets more confident in Ontario’s financial footing and ability to get back in the black.

        I have my suspicions that instead they’ll ignore it and downgrade Ontario for not cutting more services, in line with their ideological preferences.

        • Anonymous

          At $500 million, the new tax would take the projected deficit from $16 billion to $15.5 billion. So there’s not much value to it beyond the symbolic.

          • Anonymous

            The surtax expires in 2018, when the deficit is expected to be paid off, contributing ~2.5 billion.

          • John Duncan

            I suspect it will be closer to $3 billion when all is said and done, but even taking the more conservative $2.5 billion number, there’s some longer term benefits.

            Even with the new tax bracket set to expire in 2018, we’ll be paying $100 million less in debt-servicing charges every year after that.

          • Anonymous

            Clearly half a billion dollars is only symbolic :P

          • Anonymous

            If you were short $160 this month, but you managed to scrounge up $5, would you call that a huge accomplishment?

          • Anonymous

            “But I am saying it does very little to improve the province’s finances.”

            ~15% isn’t “very little”.

            “If you wanted to fix Ontario’s budget hole *solely by taxing the rich*,”

            That was never anyone’s plan.

          • Anonymous

            I’m curious where you’re getting 15%? The finance ministry’s numbers project $51.2b in deficits up to 2017-18. Over that time the new tax will add $2.5b, or about 5%.

          • Anonymous

            Where does the $15-16 billion figure keep coming from?

            Whatever the deficits of the next 5 years are expected to be, that $2.5 billion is money that doesn’t have to come out of services or tax hikes targeting the working poor or middle class, which has more real world value than mere symbolism.

          • Anonymous

            “If you were short $160 this month, but you managed to scrounge up $5, would you call that a huge accomplishment?”
            Probably be not, but I’d rather be $155 short than $160.

          • Anonymous

            took the words right out of my mouth. /methinks Andrew97 has little respect for money.

          • Anonymous

            Relative figures are a Red Herring.

            How many people can you feed for 5 dollars?

            How many people can you feed for 500 MILLION dollars?

            Thought so…

          • Anonymous

            “then watch as they all flee your jurisdiction, leaving you back where you started”

            Unproven and full of BS. We hear this all the time, but nobody’s fleeing the country.

            ” you’d have to raise the marginal tax rate over $500k to something like 100%”

            No, you only have to bring it back to where it was pre-Reagan and we’re golden. Funny, nobody fled the country then.

            Giving tax breaks to the rich was a HUGE factor in The Great Depression.

      • Anonymous

        Depending on who you ask? Who did you ask?

        Prof Kevin Milligan at UBC reckons that at 3.12% (2% Income Tax + 1.12% Ontario Surtax) this would raise $250m at elasticities assumed by Paul Krugman, with $402m as the maximum assuming nobody over 500K has a good tax planner. Not saying that $250m isn’t worth getting but governments tend to overestimate tax raisings and spending cuts, and there is rarely accountability for error.

        Here’s Prof Milligan’s spreadsheet which is being edited as new information comes forward:

        Source: Prof Stephen Gordon (Laval), ‘Taxing the rich: “Part of this complete breakfast”‘

        • Anonymous

          During last week’s negotiations, the Liberals said $400 million, the NDP said $600 million. Thanks for the links — I agree that the real number might be lower, as I don’t think either estimate accounts for tax avoidance. But as I argued above, even at the high end of the estimates it doesn’t put much of a dent in the deficit.

  • Anonymous

    Great news!

  • Anonymous

    I wonder what the NDP will ask for next year.

    • Anonymous

      Hopefully an extra 2% above $1 million per year income.

  • Edith Prickly

    yay! keep them honest, Andrea

  • James Murdock

    COMMON GROUND: Create & protect Ontario jobs! Lower energy bills! Generate net-positive tax revenues!
    HOME ENERGY RETROFITS (NDP Election Promise 2011)

    McGuinty and Harper budgets devastate Ontario energy savings industry. Hundreds of Ontario energy savings companies will be forced to downsize, lay off staff, or shut down altogether. Ontario is currently the only province in Canada without home energy retrofit incentives.

    Renewal of Ontario Home Energy Savings Program (OHESP) will save thousands of Ontario jobs which are to be lost in the energy retrofit industry.

    OHESP creates and protects jobs in Ontario: the retrofit industry employs Ontarians and is not reliant on foreign or migrant labour. Furthermore most products used in energy retrofits are manufactured in Ontario (lumber, insulation and windows, to name but a few), and installed by skilled local labour.

    OHESP is a revenue positive program for governments. The provincial government receives approximately $2.40 income from various tax sources for every $1.00 spent on retrofit incentives.

    OHESP helps reduce the carbon footprint of our existing housing stock and reduces our reliance on energy from all sources (conservation before generation).

    92 per cent of Ontario homeowners think government should create more incentives for homeowners to make environmentally friendly and energy efficient renovations to their homes (according to recent Ipsos Reid poll undertaken for the Ontario Real Estate Association).

    NDP Election Promise 2011
    Ontario’s New Democrats have promised nearly $1 billion over four years in retrofit programs to reduce electricity use and move the province away from its reliance on nuclear power. (Canadian Press – Aug 3 2011)

  • Mossey

    Way to go ANDREA you threw the horses under the bus lets see what makes more cents the surtax that might make the government 500 mill or the slots at reacetrack program which gives them 1.3 million mmmmm let me think lets put 60,000 people out of work . Mad Protester

    • Paulrlacroix

      Agreed, a lot of smoke and mirrors for the people in the standardbred industry. If the public really new what other shortcomings that come with casinos and slot machines I think that Mr. McGuinty would be singing a different tune. How many people are losing their houses and committing suicide which is swept under the table everyday. This Gov. wants the easy way out and not have to grow jobs which helps us all. Do we really believe that casinos are healthy and the answer to our problems. Perhaps Mr. McGuinty should answer that question himself.

      • Mossey

        The liberals are pushing the lcbo to sell another 100 million in sales this year they want Ontario people to be drunk so they will go and buy more lotterie tickets and go to the casino to put there pay cheques in

  • Anonymous

    I wonder how many of those taxed will be exempted?