Mike Harris’ Common Sense Revolution Essay, Research Paper

On June 8 1995 the Mike Harris Conservative government was elected to power in the Province of Ontario. Harris throughout his campaign at the time talked of tax cuts, job creation among many other promises in the overall goal of balancing the budget and making Ontario a better place to live. As such, through Harris’ “Common Sense” revolution platform, he outlined how it was going to be done and what he wanted to do in order to achieve his objectives. Since Bob Rae’s NDP government created an $11.3 billion deficit during his administration, Harris had a lot of work to do and the people of Ontario wanted him to go through with his plan. It is interesting to point out that with the $11.3 billion deficit that was created, the NDP government was spending $1 million an hour more than what it brought in. Bob Rae’s government hiked taxes sixty-five times and the welfare role was jam packed with 1.3 million people on the role. This chaos that was created was going to be fixed and Harris knew how to do it. Ernie Eves, the Minister of Finance played a large role in that game plan with the budgets that came down once a year. The most recent one was one of the final steps in Harris’ plan to reduce the deficit, cut taxes and create jobs. With the proposed budget, Harris called an election the following day and if this recent budget is to be implemented, he will have to be re-elected.

The biggest thing that is on people’s minds when a budget speech is made is tax cuts. People in today’s society pay a lot of taxes through Federal, Provincial and Municipal coffers. Between 1985 and 1995, the Provincial government raised personal income tax eleven times. That caused a lot of chaos and it was one of the biggest problems in Ontario’s deficit. Earlier on in Harris’ administration, they promised a thirty percent drop in personal income tax over a few years. In this recent budget Harris’ promised a further twenty percent reduction in personal income taxes over the next five years. The first installment of this plan will come July 1 with a five percent drop that will put personal income tax at 38.5%. To show these savings, Eves pointed out

that in 1999, a couple with two children, a net income of $60 000 from two earners will pay $1430 less in Ontario income tax. That same family has saved $3595 since 1995 and with the new tax cut to take place on July 1 they will save an additional $625 a year. With all of these tax cuts, it means that people will be able to spend more money in the economy and will inhibit many great things for the Province. Jobs will be created and sales will rise. The only negative side that will come out of these tax cuts is the rise of inflation. With this new money, the Harris’ government projects that inflation will rise 0.5% by the year 2000. This means that the cost of living could go up and the money that some of the money that was saved, will be spent on inflationary costs. Meaning if they regularly paid $2000 for a television, with inflation that television will cost around $2100. That $100 difference would be considered an inflationary cost.

With this new proposal, 30 000 Ontarians will be eliminated from the tax role and will further reduce taxes for 550 000 Ontarians. In this budget the government also outlined it’s wishes to establish an advisory panel to examine concerns that have been raised about the treatment of one-earner and two-earner families. It will examine and make recommendations to the government about how this demographic of the population should be dealt with in terms of tax cuts. The government has also proposed to enrich the Ontario Tax Reduction Program that takes low-income families off the tax role. The treatment of these two areas has been the biggest flaw in the eyes of the opposition. They believe that the Harris government is doing nothing for low income earners and that the tax cuts are designed to make the well-off richer and the not-so-well-off poorer.

Education property taxes were also on the cutting board for the Harris government. His predecessors raised education property taxes 42% between 1985 and 1990 and a further 20% between 1990 and 1995. In 1995 Harris put a freeze on those rates and is now beginning to reduce them. He proposed that this particular tax rate should be reduced by 20% over the next five years. The first installment of this plan will begin January 1, 2000. To show the savings through this cut, Eves gave the example that an owner of a typical single-family detached home will save $150 from this tax cut. With this tax cut however, it is predicted that this new money will have to be down-loaded onto the municipalities for their property taxes. One would then have to wait and see how the savings will turn out and if these families will actually benefit from these savings. The Land Tax Transfer Refund Program will also be extended for another year and the maximum refund will be raised to $2000 for agreements of purchase and sale entered into after March 31, 1999.

Other tax cuts included the elimination of capital taxes for 45 000 businesses and reducing it for another 15 000. Capital taxes will be completely eliminated for Credit Unions to help them increase their community financing role. For farmers, the retail sales tax rebate for farm building materials will be made permanent. Harris will also create a Business Tax Revenue Panel that will look at what effect personal, corporate and property taxes has on job creation. With this budget there was a total of thirty tax cuts bringing the total number of tax cuts given by the PC government to ninety-nine.

Infrastructure was another element of the 1999 PC budget. With all of the new money being spent on health care, new buildings and equipment will have to be built in order to develop these new programs. They pointed out that highways and education is important to spend money on but Health Care is a priority in this budget. As such, Harris is creating a SuperBuild Growth Fund which will spend $20 billion over the next five years for new health care infrastructure. This means the money will be spent on building hospitals, renovating existing hospitals, expanding other health care facilities to meet the needs of Ontarians. The first installment of $2.9 billion will be spent this year. This new money is positive for the growth on Ontario’s health care system. With the number of people needing health care rising everyday with the aging of the baby boomers, more health care services are required in order to maintain a standardized level of health care quality. It should be noted that not all of the $20 billion will be spent on health care however the majority of it will be spent in this area. Money will also be spent on roads and bridges, new schools and so on. This new money will provide a positive outlook for Ontarians as many industries will benefit through this program with new jobs and increased revenue. Construction companies, engineers, material suppliers and so many other industries will benefit from this new program. Tied into this, Harris will also reconvene the Ontario Financial Review Commission to examine the current accounting and reporting practices including capital funding and financing.

Within the 1999 PC Budget, it talked about innovation in the workforce and innovation in the business. Innovation is extremely important in today’s competitive world. Technologies are changing everyday, new ideas are coming out and there are more businesses trying to oust it’s competitors. As such companies need help to keep up with the competition, the government has created the Ontario Innovation Trust that will provide $250 million for research into innovation. This will create new partnerships between the private sector and other research facilities including post secondary institutions. They have also decided to put more money into the Smart Libraries program to help libraries get on to the internet. With this new technology and help from the government, Ontario can remain competitive in today’s capitalist market.

For businesses in the Province who are innovative and are helping the economy, the government has provided a series of tax credits to help them relocate those funds that would have been spent on taxes to new projects. The government has changed some of the regulations for the Ontario Securities Commission that will help smaller businesses get access to financing easier. They want to assist in creating more Community Small Business Investments Funds to increase access to capital for small and growing businesses. They want to extend the Ontario Innovation Tax Credit to public corporations and companies with up to $25 million of taxable capital. Further extend the Ontario Computer Animation and Special Effects Tax Credit to include freelance labour costs. The extension of the Ontario Interactive Digital Media Tax Credit will also help in freelance labour costs. Finally, they want to create The Innovators Alliance that will help private sector-led organizations help small innovative businesses exchange ideas on-line and through networking events. All of these tax credits and programs will encourage businesses to be more innovative. Since innovation breeds success and success breads a strong economy it is apparent what the goals of this government are.

Innovation in the workforce, as it was already mentioned, was also an element of this budget. Innovation in the workforce means giving the workers the proper skills needed to fulfill the objectives of the company and be innovative for the Province’s economy. They introduced eight new programs and tax credits that will help in this respect. They have introduced the Ontario Research Employee Stock Option Credit to help Ontario’s R & D companies attract and retain highly skilled knowledge workers. From the SuperBuild Growth Fund that has been created to enhance innovation, $750 million will be used to help universities and colleges deal with the influx of students that will be created due to the double cohort year in 2003. They have expanded the Access to Opportunities program to create 23 000 new computer science and high-demand engineering spaces. Extend by a $100 million the Strategic Skills Investment program. Intensify the Cooperative Education Tax Credit for leading technology apprentices. The Federal and Provincial governments have worked to harmonize student loan programs by August 2000 to better meet the needs of 200 000 students and limit student debt. Providing funds for better distance education, new technologies and assisting teachers use them in the classroom. And finally providing $35 million for tuition scholarships for 10 000 top students with financial need with the hopes that the private sector will meet their financial commitment therefore doubling the amount of students who receive help. All of these programs are used to help people retain the skills that will make Ontario’s businesses innovative.

The Harris government has lead Ontario to one of the strongest economies ever seen. Harris has proved to Ontario that tax cuts do in fact create jobs. With new jobs there is a snowball effect that is created. With jobs more people are off social assistance, more tax revenues, more spending by the people, more competition and smaller businesses. At the beginning of Mr. Eves’ budget speech he gave some statistics regarding Ontario’s economy. In 1998 the economy expanded 4.2% doubling the rate in the rest of Canada and beating all G-7 nations. Retail sales grew by 6.9% which is four times better than the rest of Canada. We had the highest exports as a share of the GDP than any Province or G-7 nation. And the Conference Board of Canada says that Ontario’s economy is forecasted to continue growing faster than any G-7 nation. All of these statistics prove that the Harris governments budget plans have worked.

In terms of job creation Ontario led the way again. Since September of 1995 539 000 new jobs have been created in which 96% of those were full-time. There are 374 000 fewer people on welfare thanks to the new workfare program. And with the re-election of another PC government, it is predicted that another 825 000 new jobs will be created in the next five years. No other government in the world has been able to create such economic boom than that of the Harris government.

As it was already mentioned above, the Harris government inherited an $11.3 billion deficit. It was Harris’ goal to balance the budget by the fiscal 2000-2001 year and he is on his way to doing it. In 1998-99 Ontario’s deficit was $3.2 billion, $1.6 billion better than their original projections. The deficit for 1999-00 will be $2.1 billion, $0.5 billion better than originally expected. With the deficit eliminated and a renewed fiscal responsibility, Harris will now be able to tackle the $121 billion debt that has accumulated throughout the past couple decades. In order to ensure that the debt does not increase, Harris (if re-elected) will introduce new legislation that will punish government leaders for producing a budget deficit.

The Province of Ontario can no longer afford to act irresponsibly, set double standards and spend more money than it receives. When a child grows up, it’s parents teach them how to budget their money, act responsibly and take on new initiatives that will aid them in their personal growth. By the time the child grows to be an adult, the parents hope that they have taught their child the right morals, how to be fiscally responsible and how to be an active member of society. With that said, we must ask ourselves how a government can do the complete opposite of what the parent was trying to teach it’s child? How can a government be responsible and accountable to it’s people by spending more money than it has and act irresponsibly? We cannot set double standards by teaching one thing and doing another. This was something that government of the past have been doing and it has obviously stopped with the Harris government. Through Mike Harris’ leadership and visions, the PC government has brought Ontario to new heights and fiscal responsibility. We will have a balanced budget by next year and jobs are being created everywhere. People have more money in their pockets with the new breaks in income tax. Companies have more money to spend on R & D in the aims of becoming more innovative. Everyone who believes that Harris must be stopped has obviously not taken the time to sit down and think about all of the great things that he has done since his tenure in office. If they only realized that what they are doing in counter-productive and that Ontario can no longer afford to be an irresponsible state. I believe that the projects that have been introduced in this most recent budget and budgets of the past are paving the way for a better Ontario. An Ontario with fewer people on welfare, more people with jobs, more money in the hands of the people, less red tape and a booming economy.

Bibliography

Eves, Ernie, Q.C., 1999 Ontario Budget: Budget Speech. Toronto: Queen’s Printer for Ontario, 1999.

Eves, Ernie, Q.C., 1999 Ontario Budget: Budget Papers. Toronto: Queen’s Printer for Ontario, 1999.

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