As Ontario faces an “uncertain” economy, the Ford government is revealing millions of dollars in new tax cuts for small businesses and increased support for low-income workers while plunging the province back into a deficit.
Finance Minister Peter Bethlenfalvy tabled the fall economic statement (FES) on Monday – an update to Ontario’s $198.8-billion budget – and signalled the province is preparing for tougher times that are “beyond the government’s control.”
To pad the province’s finances from a potential recession, the government is putting away $4 billion in a reserve fund over the next three years, and will record a cumulative deficit of $21.7 billion over that span.
“An economic slowdown in the near term is very real,” Ontario’s finance minister said in the legislature.
But while cost-conscious Ontarians may have been hoping for new measures to help with skyrocketing bills and high grocery costs, the economic statement offered little in the way of sweeping government-funded support.
Instead, the Ford government focused on measures targeting drivers, owners of small businesses, recipients of the Ontario Disability Support Program and seniors.
The Ontario NDP blasted the fall economic statement, calling for further spending on health care and education.
“Ontarians should be able to count on high-quality health care and education, and it takes investments to make that possible,” Ontario NDP finance critic Catherine Fife said.
“Not only do we need action to protect our precious public services, but we need action to help people keep up with the bills. There’s plenty we can do to tackle the crushing cost of living — from helping people reduce their heating bills to making investments in affordable housing and restoring and expanding rent control.”
Gas tax
The signature affordability promise in the fiscal document will give millions of drivers a break on gasoline taxes until 2024 – a measure Premier Doug Ford revealed at an Etobicoke gas station on Sunday.
The government will extend the 5.7-cent-per-litre discount, which was set to expire at the end of 2022, until Dec. 31, 2023.
The province said the measure will save the average household $390 over the course of a year – costing the government roughly $1.069 billion.
Small businesses
The government will spend $185 million over three years to help small business owners offset their tax burdens – which, the province hopes, will cushion smaller companies from recession pressures.
Under the new program, thousands of businesses would now qualify for the small business Corporate Income Tax rate, allowing them to save tens of thousands in taxable income.
Previously, businesses with a taxable capital of between $10 and $15 million would be phased out of the CIT rate. The Ford government is increasing the phase-out limit to $50 million in income, which the province says would impact 5,500 businesses.
Ontario Disability Support Program
Months after increasing the ODSP rates by five per cent, the government is raising the ceiling for how much a recipient can earn before their support payments are clawed back by the province.
Currently, an ODSP recipient is only allowed to net $200 in monthly pay before their provincial payments are reduced by 50 per cent.
The Ford government’s economic update is raising that earnings threshold to $1,000 per month, while also increasing the percentage of support money that’s clawed back.
The fiscal document says once an ODSP recipient has crossed the $1,000 earnings exemption, the province will take 75 per cent of every additional dollar earned.
The province estimates an additional 25,000 ODSP recipients would be encouraged to “participate in the workforce” while helping the province address the labour shortage.
Guaranteed Annual Income System
Ontario will double the Guaranteed Annual Income System (GAINS) payment throughout 2023, the province announced in its fall economic statement.
The move, officials say, will “keep costs down for low-income seniors.”
Maximum payments for single seniors will increase, temporarily, to $166 per month, while payments for couples will jump to $332. The doubled rates will be in place for 12 monthly payments.
Economic turbulence on the horizon
The economic document is also bracing for a difficult financial future, including the potential for the economy to shrink.
Three growth scenarios are included up to 2025: a faster projection, the plans the province is working based on and a slower pace. The slower growth projection estimates the Ontario economy could shrink by 0.9 per cent in 2023.
Ministry of Finance officials are treating all three scenarios as possible scenarios rather than best- and worst-case outcomes.
The projections are lower when compared with the 2022 budget document released in the spring.
Spending estimates have remained relatively unchanged in the new document, with most new plans funded through existing planning contingencies.
Housing market feeling the effect
Ontario’s cooling housing market has resulted in lower tax revenue as fewer home sales have occurred.
Revenue from the province’s land value tax is projected to decline by 25 per cent next year compared with 2021-22. Revenue from the tax is $514 million lower than projected in the current year.
The slowdown is also affecting the number of new houses developers are building in Ontario, as the province attempts to create 1.5 million new homes over the next decade.
The fall economic statement has revised the number of project housing starts down from a projected 84,000 for 2022 to 76,900. New housing starts in 2023 are projected down from 87,300 in the budget to a lower estimate of 77,800.