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Sask budget takes one step forward on spending restraint; triple jump backwards with $908 million in tax hikes

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72% of small biz support reduced spending; only 7% support tax hikes

Regina, March 23, 2017 –The Canadian Federation of Independent Business (CFIB) says the 2017 Saskatchewan Budget takes one step forward on spending restraint, but a triple jump backwards in our overall competitiveness by introducing massive tax hikes.

“Saskatchewan entrepreneurs were looking for three things in this Budget; significant spending restraint, a clear plan to get back to balance without increasing taxes to collect additional revenue,” said Marilyn Braun-Pollon, CFIB’s Vice-President, Prairie & Agri-business.

Spending Restraint: The Budget includes a $250 million reduction for total public sector compensation funding. When surveyed on what options the provincial government should implement to balance the budget, 72 per cent of Saskatchewan small business owners supported significant spending restraint,” noted Braun-Pollon. “We are therefore pleased this budget begins to bend the cost curve, but don’t think the province went far enough to reduce the size/cost of government.”

Instead of hiking taxes, CFIB would have preferred the province continue to reduce the size/cost of government through attrition, further narrowing the wages/benefits disparity (20.4%) between public and private sector employees, and eliminating costly provisions like banking of sick days and introduce affordable short-term disability plans for public sector workers to better align with those in the private sector.

Getting back to balance in three years: A deficit of $685 million is forecast for this year. A shortfall of $304 million is projected for 2018-19, followed by a $15 million surplus in 2019-20 and a $183 million surplus in 2020-21. “While pleased the province outlined a plan to balance its budget, we are disappointed it will be balanced on the backs of taxpayers through tax hikes,” said Braun-Pollon.

Tax increases: The Budget introduced $908 million in tax increases; including the Provincial Sales Tax (PST) rate being increased from five to six per cent, which will increase revenue in 2017-18 by $242.1 million. The PST base was also expanded, which will increase revenue by an estimated $647 million and now applies to a number of items such as children’s clothing, restaurant meals, snack foods, insurance premiums and contracts for the repair, renovation or improvement of real property. A number of PST exemptions were also eliminated such as the fuel tax exemption for bulk purchases of gasoline. However, many of the current PST exemptions were maintained for basic necessities, including basic groceries, heating fuels, residential electricity, prescription drugs and reading materials. Indexation of the Personal Income Tax System is being suspended for the 2018 taxation year and the 2017 Education Property Tax is increasing to provide 40 per cent of funding to K-12 education.

“With only seven per cent of entrepreneurs supporting tax hikes to balance the budget, we are disappointed the government decided to increase taxes by $908 million. With small business optimism lagging and hiring plans at record lows, we worry this will jeopardize our overall competitiveness,” added Braun-Pollon. “As the province’s finances improve, we expect government to reduce the PST.”

Tax Relief: The Budget reduces personal income tax rates in half-point increments effective July 1, 2017 and July 1, 2019, saving taxpayers $82.2 million in 2017-18. The general corporate income tax rate will be reduced in half-point increments effective July 1, 2017 and July 1, 2019, saving Saskatchewan businesses $25.3 million in 2017-18. “We certainly welcome this tax relief and understand Saskatchewan will have among the lowest income tax rates in the country, when implemented. However, these changes will be more than muted by the massive tax hikes introduced in this budget,” noted Braun-Pollon.

Investing in Saskatchewan's infrastructure: “Business owners recognize the importance of infrastructure investment to the province’s long-term growth and are pleased $3.7 billion in capital investment is planned for 2017-18,” said Braun-Pollon.

Municipal Revenue Sharing: Budget 2017-2018 provides $258 million for municipal revenue sharing to Saskatchewan municipalities. “We are pleased the Budget maintains the formula based on one point of the PST and represents a 103 per cent increase since 2007-08. Municipal leaders need to use this revenue wisely and avoid annual property tax increases,” noted Braun-Pollon.

“While pleased the Budget takes one step forward on spending restraint, we are disappointed to see taxes increased by $908 million, which will further erode business confidence,” concluded Braun-Pollon. “CFIB will continue to lobby the government in the coming months to implement additional spending restraint measures that will further reduce the size/cost of government.”

CFIB plans to survey its 5,250 small business members in the coming days to solicit their feedback on the impact of the measures introduced in the 2017 Saskatchewan Budget.

To arrange an interview or for further information, please contact Marilyn Braun-Pollon at (306) 757-0000, 1 888 234-2232 or email [email protected]. You may follow CFIB Saskatchewan on Twitter @cfibsk.

As Canada's largest association of small- and medium-sized businesses, CFIB is Powered by EntrepreneursTM. Established in 1971, CFIB takes direction from more than 109,000 members (5,250 in Saskatchewan) in every sector nationwide, giving independent business a strong and influential voice at all levels of government and helping to grow the economy.