For anybody looking to take a strip off me for suggesting some kind of provincial personal tax harmonization – put away the pitchfork – I am not calling for this. What I am saying is that in my opinion the fiscal gap is going to widen in Canada and provincial governments in places like New Brunswick and PEI, for example, are going to be under increasing pressure to raise taxes to pay for boomer health care. Of course, you will say the equalization program was set up to ‘equalize’ but in fact it is a set dollar amount each year and it is unlikely to be the vehicle to flow a pile of new money to pay for the public services needed by our aging population. Harper has already ruled out any special funding for provinces with older populations like in the Maritimes and will be capping health transfers in line with GDP growth later on in this decade.
So, it is not completely crazy to think that provincial governments will have to raise taxes and further erode tax competitiveness between the provinces.
And, as I say in the piece, this didn’t matter as much when it was grumbling local populations but NB, NS, PEI, etc. will have to attract tens of thousands of workers from outside their borders in the coming years and the level of taxation matters.
So I will reiterate my main point. I am not calling for provincial tax harmonization across Canada. My point is that in a fiscal union like Canada, all provinces have to understand that the economic trajectory in other provinces will impact their own fiscal situation and when Ontario joins the have-nots – it could start to get really interesting.