Wynne’s balanced budget plan relies on rosy projections for tax revenue growth: watchdog
Given the government’s spending plans, maintaining a balanced budget relies critically on an optimistic revenue forecast and, in particular, on very strong growth in tax revenues, sayd Ontario’s independent Financial Accountability Office.

TheStar.com
Aug. 17, 2017
Rob Ferguson

Premier Kathleen Wynne’s balanced budget plan is based on rosy projections, says Ontario’s independent Financial Accountability Office, echoing concerns raised previously.

“Given the government’s spending plans, maintaining a balanced budget relies critically on an optimistic revenue forecast and, in particular, on very strong growth in tax revenues,” the office said in a report Thursday.

“There appears to be significant downside risk to the government’s forecast.”

The report from the FAO warns that maintaining balanced budgets after this fiscal year will require “additional fiscal policy measures” such as new sources of revenue or lower spending.

Wynne’s Liberal government, which has embarked on a multi-billion dollar plan to build new transit and is bringing in pharmacare for Ontarians under 25, has promised to balance the budget before next June’s election.

Finance Minister Charles Sousa’s office said the government is confident a strong pace of economic growth, which has seen Ontario outpace growth in other G7 countries for three years, will keep fuelling provincial coffers.

“Our government has a strong track record of beating our fiscal targets,” spokeswoman Jessica Martin said. “We do so by taking a prudent approach to fiscal planning.”

The Financial Accountability Office warned that the government is forecasting tax revenue growth in the next four years to average 5.5 per cent annually, higher than the average 4.4 per cent annually in the previous four years.

“If the government maintains the spending plans laid out in the 2017 budget, a large shortfall in future tax revenues…could lead to renewed deficits,” said the nine-page report.

About 70 per cent of the government’s tax revenue comes from the personal income tax, corporate taxes and the HST, which are all tied closely to the general health of the economy.

“The 2017 budget forecasts significantly stronger growth in these three tax revenue drivers than the FAO or the average of other economic forecasters,” the report added.