Tuesday, March 01, 2005

Fiscally unbalanced

I rarely pay much attention to budget debates. This is largely because a) I don't pay a heck of a lot of taxes yet, and b) I see them more as suggestions of how a government might spend its money, rather than hard and fast rules.

One aspect that I do follow, as does Paul Wells, is the manner in which research and education are treated by Ottawa. I'm always keen to see if more money is being spent on universities and scholarships. The later Chretien years were good for this, as Millenium Scholarships and Canada Research Chairs were created, SSHRC (and the other granting councils) were expanded, and tax deductions for scholarships were increased. I have heard of no such good news in the latest budget, which is a shame. I feel this way more notably now that I live in Quebec. Last year, paying taxes here for the first time, and having been forewarned about the high taxes in this province, I got a wonderful surprise. All scholarship, fellowship and bursary money is exempt from provincial taxes. Wow! While the federal government has been slowly creeping up it's exemption (which was a pathetic $500 not too long ago), the Quebec government has made a solid commitment to its scholarship winners. Would that Ottawa could get on this bandwagon.

This segues me into another topic. The fiscal imbalance. There has been much talk recently from provincial governments about the so-called fiscal imbalance - the idea that Ottawa's taxing powers are disproportionate to its responsibilities, and that these should be devolved to the provinces. This seems a little too convenient to me. If provinces (read: Quebec), want to increase their revenues, they have the option of increasing the taxes that they control. Indeed, that was what Maurice Duplessis did back in the 1950s when he thought that Ottawa was getting a pit bold with its taxing. There were fears at the time that this would be politically unpopular, as Quebecers would be doubly-taxed. Not so. Ottawa dropped its tax rates (or at least remitted a portion of what was collected in Quebec back to the province). It seems to me that if the provinces could collectively agree that they wanted more revenue coming directly to the provincial governments, they could all raise their taxes, which would apply pressure on Ottawa to drop federal ones. Anyone think that is going to happen? No, I think that this is really a convenient exercise in federal scapegoating so that provinces don't have to take the politically unpopular step of increasing their existing taxes to get the revenue they want.

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