Paying the Piper

Up in Canada, in a province called Ontario, there’s a new government in place pulling a money-grab the likes of which haven’t been seen in 15 years.

This Canadian province is actually very similar to a state in the United States. We have 52 states, they have 10 provinces. Ontario, the most populated province, voted in a Liberal government last year. The city of Toronto, which is the capital of Ontario, is to Canada what New York is to the U.S. The major stock market is in Toronto… so are the most expensive stores, richest people, and priciest real estate.

The premier of Ontario, similar to a governor, made a promise to this effect during the election: “I promise I will not raise your taxes, but I won’t lower them either.”

But when push came to shove, and the Ontario government tabled its budget last Tuesday, it raised taxes big-time. Cigarette taxes went up, so did alcohol taxes. So did the cost of some government services like getting a driver’s license renewed. But the big pinch was a new special health tax.

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The government said that, due to rising health care costs, it needed to levy a special tax on all taxpayers to help defray higher medical costs.

Why did the government lie to its people? Why did it campaign with a promise it did not keep? This particular government complained that, when it took over, the province was in much worse financial shape than it had expected.

So the Liberal government made a choice. It decided to raise taxes in an effort to bring down its annual deficit and accumulated debt. When it looked at its budget, it saw health care as a huge government expense, and it concluded that the public should chip in to help health care expenses.

Depending on their income level, Ontarians can expect to chip in between $450 and $900 each per year in added taxes. They’ll start to see the money come right off their paychecks starting July 1, 2004. It won’t show up on an Ontarian’s pay stub as additional government remittances. Their income tax component will simply go up.

To me, the government can call it what it wants… but I see it as higher taxes with the government using health care as a scapegoat.

I figure this added tax will cost an average income family, with both spouses working, about $675. But here is the real kicker. This $675 is in after-tax dollars! So the real cost is about $1,000, because you need to make about $1,000 gross to have $675 in after-tax income!

Here are a few points:

— Who said inflation is under control? As far as I see it, even taxes in Canada are inflationary.

— Higher taxes tighten consumer spending. Consumers spend l ess, the economy grows less.

— With the record level of consumer debt in both Canada and the U.S., that $1,000 would have likely been money that could have gone towards consumer debt servicing, now it’s going to government debt servicing.

— This modern-day government is saying that it wants and expects its citizens to pay for the government’s ballooning debt. God forbid the government would try to cut excessive government spending!

Could the same thing happen in the U.S.? Well, it may not be a “health tax,” but a special “debt tax” to help state governments and federal governments reduce their debt levels may be unheard of today… but “no choice” reality tomorrow.