WATCH: Liberal Finance Minister Charles Sousa delivers highlights from the Ontario Budget
The countdown to a possible Ontario election started Thursday, as the minority Liberals tabled a spring budget and gave the New Democrats a week to decide whether they’ll support it or send voters to the polls.
Premier Kathleen Wynne asked to meet with NDP Leader Andrea Horwath by May 8 to discuss whether the NDP will support the $130.4-billion spending blueprint.
Horwath is expected to comment Friday.
With the meatiest items largely leaked in advance, there were few surprises in Thursday’s Ontario budget. In what may prove an electoral platform, Wynne’s Liberals opted to raise taxes and spending over more austere measures despite of the province’s towering debt load and widening deficit.
This budget directs tens of billions of dollars toward much-needed infrastructure projects, notably $15-billion to unclog snarled Toronto area roadways and public transit systems over the next decade.
There’s also more money for old-age care, hospitals and child care.
It will come at a higher cost, though, specifically for Ontario’s highest earners, cigarette smokers and frequent flyers – all of whom face tax increases.
This budget touches the personal finances of virtually all Ontario households, though. A new pension scheme guarantees that, with the plan dipping into most private-sector workers’ incomes.
Here’s a snapshot of the five most pressing pocketbook issues Ontario consumers face from Thursday’s budget:
1. Padded retirement – but it will cost you
By far the most important financial proposal for average households in the budget is the creation of the Ontario Retirement Pension Plan.
The mandatory savings scheme would begin in 2017, at which point 1.9 per cent of personal incomes for all workers not already enrolled in a company pension plan will be taken by the government and invested for their future – a “first of its kind” scheme that would apply to the 70 per cent or so of workers who are currently without a pension (not including CPP and Old Age Security).
That means an annual deduction of about $790 for a worker with average income of about $45,000; For individuals with average earnings of about $70,000, that figure is over $1,200 a year skimmed off income.
Come retirement, however, the ORPP will represent about about 15 per cent of the average retiree’s income, the Liberals hope, and will effectively double the average government payout for a retiree when combined with the Canada Pension Plan and Old Age Security.
As it stands, about three million Ontario workers face a “significant” downgrade to their quality of life if left to rely solely on CPP and OAS, Sousa said.
The ORPP is “intended to assist individuals most at risk of under-saving, particularly middle-income earners without workplace pensions,” the minister said.
Those already enrolled in a workplace pension scheme would be exempt from ORPP. Companies would also be responsible for matching the 1.9 per cent income contribution.
2. Two per-centers dinged
For Ontarians with incomes greater than $150,000 – or the top two per cent of tax filers – income taxes are going up.
The effective tax rate for such high-earners moves up a percentage point, to 12.16, and for those who earn above $220,000, their tax rate moves to 13.16 per cent.
That hike applies to only about 220,000 Ontarian tax filers, the Liberals say, but will boost government coffers by $635-million in the first year.
The remaining 98 per cent of Ontario income tax payers won’t see any change in tax rates.
3. Relief on hydro bills
To help alleviate the pain of soaring hydro bills, the Liberals are proposing to scrap the so-called Debt Retirement Charge, a line item in residential hydro bills that shows how much of your bill is going toward paying off long-term debt accumulated by the province’s power authorities.
That debt load has come down and the Liberals are in a position to axe the fee from your bill, they say.
How much will that save you? Not much: about $70 for the average rate payer a year.
4. Up in smoke
At midnight Thursday, a carton of smokes in Ontario will cost $3.25 more, representing a 14 per cent increase in retail prices, or about a penny and half per cigarette.
The minister has the power to push through the hike immediately, Liberal officials said, without the need to pass the budget bill.
“Tobacco tax is an important component of the campaign to reduce smoking,” budget documents said.
5. Cleared for (pricey) takeoff
Frequent flyers – or anyone else purchasing a plane ticket – will be hit with higher costs as a result of a plan to more than double taxes on jet fuel.
The Liberals are proposing to raise the jet fuel tax—the biggest cost component in an average airline ticket—to 6.7 cents per litre of fuel from the current 2.7 cents over four years.
The tax proceeds will be directed into public transit and infrastructure.
Plans to provide “relief” to remote or northern communities in Ontario who could well see airliners withdraw flights would be worked out between the Ministry of Finance and Ministry of Transportation.
© Shaw Media, 2014