4 surprising things about the Ontario government's finances
CBC News has uncovered some revealing trends in Ontario government revenues that provide significant insights into the provincial economy.
The fiscal-year-end numbers are contained in an annual document called the Public Accounts of Ontario. The 2016-17 version tells a story of an overall economic boom, but with some uncertainty about how widely it's being felt.
1. Personal income tax revenue dropping
For the first time since the recession in 2009, the province's revenue from personal income tax actually went down, It was $30.67 billion this past year, a drop of 1.5 per cent from the 2015-16 figure. Perhaps more significantly, the income tax take was 4.6% lower than what the finance minister had projected in his budget for the year, a difference of $1.5 billion.
"This is highly unusual," said Sheila Block, senior economist with the Canadian Centre for Policy Alternatives, a left-leaning think tank. "We don't see a drop in personal income tax revenues generally at any point except when we're in a recession."
"It seems quite counterintuitive that personal income tax would decline in the context of a growing economy," said Robert Hogue, senior economist at RBC.
The Finance Ministry's explanation? Many high-income earners declared more income in 2015, once the Trudeau government flagged that it would increase the tax rate for the top income bracket in 2016.
"Most other provinces and the federal government have reported similar experience regarding their personal income tax revenues over this period," said Jessica Martin, communications adviser to Finance Minister Charles Sousa, in an email to CBC News.
2. Corporate tax revenue soaring
The province's revenue from corporate taxes in 2016-17 was $14.87 billion, a 30 per cent jump from the previous year. Since the corporate tax rate didn't change, it's a sign that Ontario's companies are doing rather well for themselves.
"The magnitude of that rise is a little surprising," said Hogue in an interview with CBC News. "Those revenues tend to be quite volatile from year to year, so it might be also a reflection that it came from an abnormally low base the year before."
"What that tells us is that corporations are profitable and are actually more profitable than had been anticipated in the budget," Block said.
She said the figures also bolster the arguments in favour of hiking the minimum wage. "This is further evidence for us that it's long overdue and that really, the private sector can afford to pay those increased wages," said Block.
The Wynne government is pushing the minimum wage to $14 an hour on Jan. 1 (a 21 per cent jump from the current level), then it's due to rise to $15 at the beginning of 2019. The Liberals have signalled they're willing to consider some form of tax relief for businesses to make up for the looming increases.
3. Real estate windfall
The crazy rise in house prices across southern Ontario in 2016-17 was a big money maker for the government. The Public Accounts show the province earned $2.73 billion in land transfer tax, a 29 per cent jump from the previous year.
The surprise here is that the province is projecting it will bring in even more land transfer tax in the current fiscal year, $3.14 billion, which would be a 15 per cent jump from last year's record haul.
"The government cannot rely on this type of increase; it's not sustainable," said Hogue. "We've seen a significant correction in the housing market."
Given that house prices and sales have dropped since the foreign buyers tax was introduced in April, Finance Minister Charles Sousa may be forced to revise that estimate downward in the fall economic statement, expected next month.
4. Booze revenue poised to top gambling revenue
The provincial government cashes in on Ontarians' vices to the tune of billions of dollars each year. Since its creation, Ontario Lottery and Gaming has been a bigger cash cow than the LCBO. But that is about to change.
The government is forecasting that in 2017-18, LCBO revenues will for the first time surpass OLG profits. The Public Accounts show that almost happened last year, as LCBO revenues jumped to $2.35 billion, while income from OLG was $2.36 billion
OLG has pointed to millennials not buying lottery tickets as a reason why its revenues are flat-lining. Meanwhile, with craft beer sales booming and booze being sold online, the province's take from the LCBO keeps going up and up.
- Wynne open to corporate tax breaks to offset $15 minimum wage
