Inside Queen's Park: New taxes likely as government battles financial mess

Things seem pretty quiet around Queen’s Park these days with the legislature on break until Feb. 17, but the majority Liberal government is busy setting the stage for its next big play: the spring budget.

Let’s get the bad news up front: There will be tax and fee increases and some program cuts but more of the former and fewer of the latter. When it comes to tough decisions, the Liberals have shown they’d rather take the path of least resistance.

The hard facts, however, won’t go away and something has to change. Last September, the Ministry of Finance pegged the provincial deficit for 2013-14 at $10.5 billion even as it predicted revenues would grow by 2.8 per cent while spending climbed 3.5 per cent. It was hardly a major austerity strategy.

The bigger issue is the accumulated debt, currently projected at $290 billion for 2014-15 and rising to $325 billion by 2017-18 when the government promises to balance annual spending.

So what will they do? Bet on a carbon tax. The federal government isn’t going there with an election this year and the odds are more provinces will go it alone as British Columbia and Quebec have already done.

The timing is perfect. Just as nature abhors a vacuum, so, too, do governments detest missed tax opportunities. The Liberals have already targeted the drop in unemployment premiums to launch their Ontario retirement pension plan, hoping those affected won’t actually feel the fiscal pinch.

Assuming gas prices stay soft, a new carbon tax will barely dent the rebate consumers are now getting at the pumps. It may even be the first step in a cap-and-trade system for greenhouse gas emissions, something that will no doubt bring great joy to the big law firms on Bay Street because it will trigger a bounty of new billable hours.

There may even be higher licence and vehicle-plate renewal costs since these are easy revenue targets, especially if there’s a pledge to put all of that money into transit.
The sleeper sting might just be estate taxes, which have remained the same since 1992.

The Liberals telegraphed the idea in 2013 when they tightened up the rules around reporting estate values. As of Jan. 1 of this year, estate trustees must provide a detailed list of all real estate, cash, vehicles, stocks, and investments to the Ministry of the Attorney General while beneficiaries have 30 days to report what they receive to the Ministry of Finance.

With new reporting rules in place, it looks like it would be an easy next step to raise those taxes.

The first step is already going to create a few headaches, says Toronto estate lawyer D’Arcy Hiltz.

“I haven’t seen the new forms, though I have a filing coming up that’s delayed so maybe I will soon,” he says, noting the change raises the stakes for executors.

“You can make an honest mistake and it’s no big secret most tend to have filed lower valuations. Now, though, you’d want to get a professional appraisal. At the end of the day, I’m the guy responsible, so it may not be acceptable to just have a letter of valuation from a realtor.”

All of this means additional costs, and relying on an amended valuation doesn’t help because it all adds to the client’s tab, he says.

With these and other unpalatable changes looming, there’s going to have to be some sugar to help the bitter medicine go down. My guess would be a trimming of some agencies and selloffs, but it will be mostly cosmetic. More dramatic would be a restructuring of the deal with those international conglomerates that run the Beer Store. The government may even make small changes to the Liquor Control Act of Ontario to allow microbreweries to collaboratively operate boutique stores as wineries do now.

The Toronto Star’s Queen’s Park columnist Martin Regg Cohn has done a great job of hammering at the Beer Store and its cozy relationship with all sides of the legislature.
The spotlight is getting a tad hot.

No politician needs reminding that there’s nothing more populist than beer. Last year, an Angus Reid Survey found 69 per cent of Ontarians wanted to see more private sector competition with the Beer Store.

Despite the upside, how far the Liberals will go in changing the status quo at the LCBO and the Beer Store may well depend on how far they want to reach into Ontarians’ pockets.

Ian Harvey has been a journalist for more than 35 years writing about a diverse range of issues including legal and political affairs. His e-mail address is [email protected].

Correction: The regulation change as of Jan. 1 2015 as enacted requires trustees to file an estate information return to the Ministry of Finance within 90 days after the issuance of the estate certificate by the courts, not 30 days as reported. Also, there's no requirement for beneficiaries to report what they received from the estate.

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