Ontario will be fortunate to collect between “$200 million and $300 million, tops,” the former TD Bank executive and author of a report on Ontario’s financial situation said Friday in his first public comments on Premier Dalton McGuinty’s fiscal blueprint.
Drummond delivered his massive report in February, urging 366 ways to cut costs and warning the province was on track to a $30 billion annual deficit in a few years if proper steps weren’t taken.
The tax of two percentage points on incomes above $500,000 was proposed by New Democrat Leader Andrea Horwath in exchange for help passing the budget this week, averting a summer election.
The problem is it’s “fairly straightforward” for an estimated 25,000 Ontarians making that much money and more to shelter it elsewhere and avoid the tax, Drummond said in an interview, echoing concerns raised in a recent report by the C.D. Howe Institute.
“People who make that much money typically do not have it as employment income. It’s typically from investment income . . . you create a trust account, you put it in Alberta,” where the top marginal income tax rates are lower, he added.
Horwath pitched the tax to narrow the widening income gap between rich and poor and wanted the revenues from it spent on social programs. But in her deal with McGuinty the cash will be used to reduce the deficit, slated to be $15 billion this year.
Drummond acknowledged the tax — popular according to a recent poll — is “fascinating” as a political phenomenon but said in the end “all they ended up with was a surtax . . . that’s a bad move.”
As for the budget as a whole, Drummond said “it is on the right track” but noted “the jury is still out” because the government must still restructure high-cost services like health care.
“If they accomplish the (public sector) compensation freeze … that gets a long way toward the balanced budget but it doesn’t get you a sustainable health-care system.”
Original Article
Source: the star
Author: Rob Ferguson
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