Manitobans are anticipating a provincial election as early as September 2019 and while it has yet to be called, the campaigning has begun with flyers now making their way into residential mailboxes.
It is no surprise that Conservative candidates are highlighting the Pallister governments 1% reduction in the Provincial Sales Tax (PST) by 1%, which they say will be a “saving of over $500/yr. for the average family of four.”
The cut in PST was a major election promise in the 2016 election and the Pallister government made good on its promise in Manitoba Budget 2019. The PST is scheduled to drop from 8% to 7% in July 2019. While it is important to voters that politicians follow through with their promises it is also important that the implications are broadly understood.
As shown in Table 1 below, Budget 2019 outlined the Pallister governments estimates of what Manitoban’s can expect to ‘save’ as a result of the 1% cut in PST.
Manitoba Budget 2019
Illustration of Household Savings, 2019 to 2024
|Single Person||Person household|
Fact Check: How realistic are the projected savings – and at what cost?
A savings of $500 a year will require a household to spend $50,000 on PST taxable goods. According to census 2016, the average income of “couple economic families with children” in 2015 was $99,399. After factoring in the cost of non-PST taxable expenditures, such a rent/mortgage, basic groceries, children’s clothing, day care services, prescriptions and many medical supplies, it is unlikely that the average family will have $50,000 to spend on PST taxable goods. The NDP government in British Columbia and the conservative Saskatchewan Party government in Saskatchewan have far more conservative estimates as shown in Tables 2 and 3.
Provincial Sales Tax Estimates for Manitoba – Government of B.C. Estimates
B.C. Budget and Fiscal Plan 2019-20
|At 8%||Spending on PST goods||At 7%||Savings|
|Two incomes family of 4 90,000||$1,610||$20,125||$1,409||$201|
|Two income family of 4 60,000||$1306||$16,325||$1,143||$163|
|Two income family of 4 30,000||$971||$12,138||$850||$121|
|Unattached individual $25,000||$465||$5,813||$407||$58|
Provincial Sales Tax Estimates Winnipeg: Government of Saskatchewan estimates
Saskatchewan Budget 2019-20
|At 8%||Spending on PST taxable goods||At 7%||Savings|
|Family at $75,000||$2,248||$28,100||$1967||$281|
|Single person at $40,000||$932||$11,650||$816||$117|
And then there are the costs
Individual savings aside, the bigger concern is what we collectively lose. Manitoba Budget 2019 shows what we can expect in revenue that is lost from a 1% cut. It’s significant. The government estimates $237 million in 2019/20, $325 million in 2020/21. The total loss in revenue between 2020 and 2024 will be $1.36 billion. That’s hundreds of millions of dollars a year that could be spent on things like healthcare, childcare, supports for low-income households and education.
While Brian Pallister boasts that his PST cut will “put money back on the kitchen table for families, seniors and households across the province” he neglects to talk about the other side of the ledger. Many Manitoban’s will now have to dig deeper to put food on the table. For example, university students are paying upwards of more in tuition – the direct result of cuts to universities, and the elimination of the $300 a year job seekers allowance makes life more difficult for the poorest Manitobans who benefit the least from a PST cut.
Populist campaign promises like tax cuts can be appealing to voters. But while they might save us a few dollars at the checkout, the costs are great. So, when Conservative candidates come looking for our votes at election time, boasting about the cut in the PST, we might want to pay closer attention to what the 1% cut has really saved us and compare that with what we lose.