Ontario Premier Kathleen Wynne’s fiscal performance: red ink and high taxes

Each year the Fraser Institute measures and ranks the performance of Canada’s premiers in terms of how well their governments managed provincial finances while in office. Premiers who managed spending more prudently, balanced the books, paid down debt, and maintained competitive tax rates, rank higher. Critically, the analysis measures the direction of fiscal policy under each premier’s leadership. This year, Ontario Premier Kathleen Wynne ranked sixth overall—last among sitting premiers (four of the ranked premiers are no longer in office).

A few key factors were responsible for Premier Wynne’s poor showing in this year’s ranking. Most important among them are:

• Ontario has run a budget deficit every year during her time in office. In fact, deficits under Premier Wynne’s government during the period analyzed (2013/14 to 2014/15) averaged 1.5 per cent of GDP. This is the second largest average annual budget deficit among the premiers.

• On a closely related point, provincial government debt has increased significantly in recent years. In 2012/13, the year Premier Wynne took power, Ontario’s net debt (a measure that adjusts for financial assets) was 37.1 per cent as large as the provincial economy. This year, that figure is expected to climb to 40.2 per cent.

• Ontario’s personal income tax system is uncompetitive in a few important respects. Firstly, the tax system is overly complex, with seven distinct tax brackets. Furthermore, tax rates on upper-earners in Ontario are comparatively high, with negative implications for economic growth and prosperity.

Primarily for these reasons, Premier Wynne fares poorly on this year’s ranking.

It should be noted, however, that upon taking office Wynne was dealt a tough hand. Under her predecessor, Dalton McGuinty, Ontario increased spending at an unsustainably rapid pace in the years before and during the recent recession. The predictable result was large budget deficits and massive debt accumulation.

On spending, there are some signs of preliminary progress. Wynne’s government has at least taken steps to slow the rate of spending growth. But, unfortunately, the steps taken so far have not been enough to solve Ontario’s fiscal problems, which is why the province continues to acquire debt at a rapid pace.

Hopefully Premier Wynne’s government will view Ontario’s tomorrow's budget as an opportunity to improve its fiscal policy record by prioritizing spending restraint, debt reduction and tax competitiveness.