Ontario Budget 2002 ONTARIO'S PROSPERITY: Lower Taxes

ONTARIO'S PROSPERITY: LOWER TAXES

Since 1995, the Government of Ontario has dramatically reduced the tax burden on people and business. Tax cuts have been broadly based, and have played an important role in the government's comprehensive economic policy, which has been designed to support and promote job creation, innovation, entrepreneurship, economic growth and prosperity.

Economic growth, spurred by tax cuts, has enabled this government to invest in priorities, such as health care and education. Ontarians of all ages, backgrounds and income levels have benefited from the tax cuts delivered since 1995:

• over 893,000 new jobs have been created in the past seven years;
  
• Ontarians' real disposable income has increased by 18.5 per cent since we began cutting taxes;
  
• tax revenues to pay for programs and services are up by nearly $14 billion; and,
  
• the economy has grown almost 27 per cent since 1995, compared to 20 per cent in the rest of Canada.
  

The global economic slowdown of 2001 affected Ontario's economy, but the effects would have been far more dramatic had it not been for the economic strategy in place in Ontario. The situation would have been worse without the earlier growth in jobs and prosperity, and without the tax cuts implemented in previous years.

Ontarians Benefit From Personal Income and Corporate Tax Cuts

Personal income tax cuts leave more money in Ontarians' pockets to spend, save or invest.  Lower-income earners have particularly gained from the government's tax cut plan, as the highest percentage savings are concentrated on taxpayers with the lowest incomes. In total, 695,000 lower-income earners are currently not required to pay Ontario income tax, but still pay federal income tax.

Corporate income tax cuts, and taking the first step towards eliminating the capital tax, have helped boost Ontario's competitiveness and have made the province a more attractive place for investors.  Reducing corporate taxes builds on the goal of making Ontario the best-performing economy in order to provide the highest quality of life in North America. Ontario has led by example and shown that tax cuts work.

Tax Cuts Are Key to Prosperity

The 2002 Budget will continue this government's tax cut strategy. Tax cuts are important for sound economic management and maintaining Ontario's foundation for prosperity. In addition, tax cuts will help build a healthy and growing economy capable of sustaining the revenues needed to invest in essential services.

The 2002 Budget will maintain the schedule for implementing previously announced tax reductions for small businesses. Similarly, planned reductions in the rate of mining tax, and the phase-out of the Retail Sales Tax on automobile insurance premiums and repairs and replacements made under warranty will continue as originally scheduled.

In addition, the government is proposing to enrich the Ontario Tax Reduction program. With this proposal, approximately 50,000 lower-income taxpayers would be removed from Ontario's income tax rolls, and 620,000 additional taxpayers with modest incomes would pay less Ontario income tax. This brings to 745,000 the number of Ontarians who would not pay Ontario income tax but will still pay federal income tax.

While the government remains committed to cutting education property tax rates, personal income tax and the general and manufacturing rates of corporate income tax, the Budget proposes to implement these reductions one year later than currently scheduled. Similarly, the next step of the Equity in Education Tax Credit would also be delayed. These proposed delays are a prudent response to a temporary fiscal situation.

The Province's long-term goal remains the same. The proposed one-year delay in implementation would not impair Ontario's tax-cut plan. As a result of past cuts, the province's economic foundation is strong, and consumer confidence is high. By 2004, Ontario's additional 20 per cent personal income tax cut would be delivered, as originally promised, and by 2006, Ontario's corporate income tax rate cuts would be fully implemented.

Supporting the Environment

The Budget also outlines tax incentives in support of the government's commitment to the environment, including:

• a proposed extension to the Retail Sales Tax rebate of up to $1,000 for alternative fuel vehicles to include qualifying electric-hybrid light trucks and sport utility vehicles delivered after June 17, 2002; and
  
• a proposed exemption from the 14.3 cents per litre fuel tax for biodiesel fuel.
  

Farm Taxation

To help support the farming community, the government intends to provide municipalities with the flexibility to lower municipal property taxes on farm properties. Beginning in 2003, upper-tier and single-tier municipalities would be able to lower the municipal portion of the tax rate below 25 per cent of the residential tax rate.

Prosperity for The Future

Over the coming months, the Minister of Finance will be seeking advice on charting a new multi-year tax reduction plan, including the next steps towards eliminating the capital tax and Ontario's income tax surtax, with a view to announcing this in next year's Budget.