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Bill 71–The Education Property Tax Reduction Act

Thursday April 22, I spoke  at Second Reading on Bill 71 The Education Property Tax Reduction Act.  My comments (from Hansard) are below.

Bill 71–The Education Property Tax Reduction Act

Hon. Jon Gerrard (River Heights): Mr. Deputy Speaker, Bill 71 will reduce education property tax for homeowners and for those who own commercial property, or perhaps, more accurately, will give rebates to such property owners, which, in the case of residential homeowners, are 25 per cent of their prop­erty tax.

      In order to do this, the government is borrowing about $250 million to give property owners a tax break. While it's always nice for people to get a tax break, there are a number of important questions we need to ask. First, we need to ask: Is it smart to reduce taxes in this way at a time when the government has a large deficit and a large debt?

      The Minister of Finance (Mr. Fielding) says that this year the government will run a deficit of more than $2 billion. We have to take the minister at his word, because he provided a list of the expected gov­ernment expenses but failed to provide a list of the expected government revenue.

      We also know from the Minister of Finance that it's expected that Bill 71 will cost the government $248 million. However, this is not the total cost because this number doesn't include some of the costs involved; for example, the more than $1 million that it will take to deliver personal letters from the Premier with the rebate cheques.

      We also know that the Minister of Finance expects to take eight years to balance the budget. We have not been provided any estimate of the extra interest costs that need to be included during this period as costs for borrowing this money, which is to provide rebates to property owners.

      The government can only start paying the money borrowed back, which would cover the cost of this tax reduction, when it has balanced the budget, because until that time, it will be going further into debt. Thus, the total cost of the tax reduction is likely to be many additional millions of dollars.

      For example, if the interest rate paid were 2  per  cent, the cumulative cost of this year's initiative alone would be close to $300 million in eight years. If the interest paid was 5 per cent, then the cumulative cost of this year's initiative would be close to $400  million after eight years.

      These costs do not include the cost of the planned reduction next year by an additional 25 per cent, which would add significantly more dollars and more cost in terms of interest payments. Thus, the cost of the interest on this borrowed money is likely between $50 million and $150 million, depending on the interest rate to be paid. We need to assess bill 71 in terms of the total cost to Manitobans, not just the immediate cost.

      Second, we must ask: Is this a wise use of public money to give property owners a cheque using borrowed money at this time? When a government borrows money, it should be used either to address a crisis, as we are doing in addressing the COVID‑19 pandemic, or it should be used to put in place lasting infrastructure - capital expenditures. Or it should be used in programs which will provide a substantial return on investment for the government and for the people of Manitoba. Thus, borrowing money to spend on items which will provide a large and long-term return on investment–can be justified.

      To this point, as to what the return on investment for the Province and the government will be from this government's expenditure of hundreds of millions of dollars, the government has provided no analysis whatsoever. We would have expected any responsible government which plans to use borrowed money for an effort like this to have provided a substantive analysis on the return on investment. It is very disappointing that the government has not done so.

      If, for example, a person who gets a property tax break–for example, the Premier (Mr. Pallister)–uses the money to spend a lot of time in Costa Rica, for example, the money spent by the government will have little benefit to the people of Manitoba, as the money saved will be spent in Costa Rica and benefit people and employment and government revenues in Costa Rica.

      I'm not going to argue that the Premier shouldn't help the people of Costa Rica. They are no doubt deserving of his help, but these expenditures are clearly not a benefit to employment and to people in Manitoba.

      Similarly, providing property tax reductions for people who live outside of Manitoba but own property in Manitoba will likely not have a significant return on investment to Manitoba, as the money will likely be spent elsewhere.

      Now, the government has provided no analysis whatsoever as to whether individuals who are wealthy are likely to spend their money in ways that will benefit people in employment in Manitoba. So we don't know the answer to whether this is good use of borrowed money by the government. They have apparently done no surveys, no research as to how people who are well off will spend their money if they're given extra money.

      It is to be hoped that the government will provide this analysis before the bill comes to a vote, Mr.  Deputy Speaker. This is very important infor­mation, which should be available before MLAs have to vote on this bill.

      Third, we need to ask: Is this expenditure of hundreds of millions of borrowed dollars by the government fair to all Manitobans? From the govern­ment's analysis, fewer than half of Manitobans are property owners who will see a direct benefit from the property tax.

      The government says about 650,000 property owners will be better off. This means, with our 2021  population estimated at 1.3 million, that 700,000 Manitobans will not benefit in any way. It is reasonable to ask whether it is fair to borrow hundreds of millions of dollars to spend for the benefit of less than half of all Manitobans.

      The government has argued that renters may have some benefit from a rent freeze for two years. However, this is debatable, and there are other con­cerns with the way the government has analyzed this and made this assessment.

There are many ways property owners have found to get around rent freezes. This claim may turn out to be false for many who are renters. This is a major concern for all sorts of reasons, including the fact that many venters are less well off, many renters are on fixed income. And so this could be very detrimental and be very harmful for many renters.

      The money, of course, saved by landlords may go to their pockets rather than benefiting their renters. Only time will tell. But the government should have provided a much better analysis of this and done much better in the way of helping those who are renters, as well as those who are property owners.

      In this context, it's important to ask what will be the secondary impacts of the property tax reduction downstream. Now, one impact of a property tax re­duction is likely to be an increase in the price of property. I'm told that this has been very well estab­lished by economists.

      Thus, we can likely expect property prices to rise following the reduction in property tax. This will have all sorts of implications and may have some detri­mental implications in terms of property tax that some people on low income may have to pay. I will take you through this in a moment.

      We need to ask, as part of this process, whether the bill we are considering to reduce property taxes is  a good way to reduce poverty in our province. Property owners, with some limited exceptions, are individuals who are sufficiently wealthy to own property. This will not have a direct effect to alleviate property, because very few of the 650,000 property owners are poor.

      There could potentially be spinoffs. Those who benefit from this bill might decide to donate more to charitable organizations to address poverty. But the government has provided no evidence whatsoever that this will occur or is even likely, and nor have they even suggested that they will check whether the government-borrowed money provided to property owners leads to an increase in charitable donations to help those in poverty. For the moment, we can assume that at the extent that this might occur, it's probably going to be marginal and not have much of an effect on those in poverty.

      It is of interest that individuals who own a home and who have a low income may receive no benefit from the Pallister property tax reductions or may surprisingly even have to pay more in property tax.

      Let me take you through a potential example. Let us take the example of Joe Doe and calculate the property tax he will pay now and after the Pallister-style education tax reduction. In 2020, Joe Doe  on his house had an education property tax bill of $700. Because he received the resident $700 homeowner Education Property Tax Credit, he paid no education property tax in 2020.

      In 2021, as a result of the cut in education prop­erty tax, or what is, as I've said, really an education tax rebate, property values are going to rise. As a result of this rise in property values in 2021, his bill for his education property tax is now $750 instead of $700. This year, 2021, his Education Property Tax Credit is reduced to $525. Because he will get a rebate of $175 and a cheque from the Premier (Mr. Pallister), he will have a total of $700 in benefits.

      But this year, he will now have to pay $50 in education property tax. In other words, his property tax has gone up instead of down as a result of this bill.

      All the indications are that this is a bad bill for lots of people. And while it may benefit those who are well to do, it will have, from what we can see at this point, an adverse impact on many, many people in Manitoba.

      The resulting situation where an individual like Joe Doe can be paying more property tax after the tax reduction than before is the result of the mish mash of changes in the Pallister  government style education tax reduction.

      While tax experts will no doubt make more analyses, what is clear is that those property owners who have a low income will receive much less in benefit than those who have large incomes. The tax is anything but progressive.  

The  tax is anything but progressive. It is thus very likely to increase inequalities and increase the relative extent of poverty in our province.

      Is this property tax cut the best way to generate economic activity in Manitoba? We have no analysis from the government to suggest this.

      Is this property tax the best way to help children who are struggling at school? Again, the government has provided no analysis of the impact of the cut on children's learning.

      Are there alternative ways the borrowed money could be spent to help people in poverty and to get a very substantial short- and long-term return on investment? There are quite a number of ways in which the government could spend, which would provide very substantial returns on investment and where using borrowed money might be justifiable based on these major returns on the investment being made.

      Outside the Legislature, on a number of days, including yesterday, was a group of individuals, primarily with type 1 diabetes, who were arguing and making the case for the government funding of continuous glucose monitors for people of all ages.

      The government has increased the availability or the public funding of such monitors up to the age of 25. This may help, from what we can gather, about 50 people. But what really needs to be done is to cover all ages.

      Now, many people in front of the Legislature have come and they have done their homework and they have given evidence, including sources, on which they show that there would be a large return on the investment of supporting all those who have type 1 diabetes to get continuous glucose monitors and insulin pumps. Here's an example of an investment that could be quite reasonably made to save money.

Preventing diabetes is another option, particularly for type 2 diabetes, where we know that there is major potential for reducing and preventing type 2 diabetes. Indeed, 20 years ago, in talking with a physician who is an expert in this area, he pointed out that if the government wanted to have a sustainable health-care system, one of the things that was needed was to act to prevent diabetes instead of primarily acting to provide more and more dialysis to treat it, because it wasn't being prevented.

      Now, there was very little NDP action on this, and there's been no PC action on this. And such action could be saving hundreds of millions of dollars. It's another example where there could be significant savings from an investment. But in the case of this bill, you know, borrowing money to give people a rebate on their property tax, there's no evidence that it will provide that sort of return on investment.

We know that in child care and early childhood education there's many studies which show that the return on investment can be sevenfold. For each dollar invested, there can be a return of $7.

      Here's another example where expenditure could be quite reasonable using borrowed money because of the major and substantial return on investment, preparing for and preventing crises. We need to ask, you know, did the government actively prepare for the COVID‑19 pandemic?

In all the planning around the government's changes, starting in 2016, I don't remember anywhere where the government planned to have the surge capacity needed for the COVID pandemic. The result has been major shortage of health-care workers, compared to what has been needed.

And today, as we all know, we have a severe shortage of nurses and other health-care workers, because of the lack of adequate foresight and planning by the government for the surge, which we have seen in the need for health care during the COVID‑19 pandemic. To add to this, the government failed to ensure in the years 2006 to 2019 that the funding for public health was robust enough to have adequate preparation for this pandemic.

      Another area where expenditures might be justifiable using borrowed money and might have major returns on investment would be in preventing and mitigating climate change. We have a global crisis looming, resulting from the increase in global temper­atures, and yet this government has brought in a budget with a lot of infrastructure spending, that very little of which will make any significant impact to reduce climate change.

      Basic scientific research can have very large returns on investment. Take an example, the research of Dr. Kati Kariko. This research on mRNA laid the groundwork for the mRNA vaccines, which has been so important for the development of  vaccines against the corona virus, SARS-CoV-2, which has increased and caused the COVID‑19 pan­demic. It's to be mentioned that the funding that she received she struggled for on many, many occasions. And, certainly, it's an example of where government support can make an early difference by supporting scientific research.

      Another example would be helping individuals with disabilities. We all know that invention of the telephone resulted from a person, Alexander Graham Bell, trying to help an individual with a hearing dif­ficulty.

      There are countless other examples, of major examples, resulting from work to help those with a disabilities. Individuals with learning disabilities are an example. Our education system should be able to learn better to help those with learning disabilities. And this could make a big difference. And in learning, we can have a better education system instead of what the government is trying to do which is to change the overview, get rid of school boards, make them scape­goats and get rid of some of the attention which has been so valuable from school boards to help indi­viduals who are struggling.

      I have brought up recently the potential for benefits from investing to eliminate lead water pipes and reduce the lead exposure of children. President Biden wisely recently announced a major investment in infrastructure which will replace all the lead water pipes in the United States and reduce lead exposure and lead poisoning of children.

Newark, New Jersey, is an example of a city that's acted. It is now almost replaced its thousands of lead water pipes. Regina in Saskatchewan has announced that its goal is to replace all lead water pipes by 2025. But Manitoba is missing in action.

      So there are many ways–and I will mention a couple of others. Investment in major issues related to addiction and mental health if properly done would have a major beneficial income–impact. One could even look at minimum basic income, because money given to provide a minimum basic income will likely all be spent in Manitoba, will help the Manitoba economy instead of being spent in Costa Rica.

And providing that minimum basic income will help some, as has been shown in Dauphin, get better education, it will help others so that they have less mental illness and are more healthy. So it could be an example of a very beneficial financial investment that would give a substantial return on investment.

      Before I wind up, I want to make a brief comment on the fact that the Minister of Finance (Mr. Fielding) and other members of his government say they haven't raised taxes. But, of course, we have a bill before the Legislature at the moment, Bill 5, which puts a new tax on the sale of cannabis. The government has called it a social responsibility fee but has given not any evidence that it will do the studies needed to provide the knowledge and basis for understanding the net harm and the net benefits from cannabis, and it's unsure that the money raised will actually address the issues arising for cannabis use.

This so-called responsibility fee is a tax, and the government shouldn't try and cover this up. The government needs to be forthright with people in Manitoba instead of using words to try to cover up what they're really doing.

So the honest assessment of this tax reduction–property tax reduction is that there's no evidence that this is a wise use of borrowed money. There's no evidence that this will address poverty or help any of the social issues that we have in Manitoba. There's no evidence at this juncture that it will provide economic benefit to all Manitobans and increase economic growth, or that it will benefit climate change.

Mr. Deputy Speaker, the bottom line is that the government should have done more home­work on this, they should have provided much better analysis of what's going to happen with this rebate. But so far as we can see at the moment and so far as we can judge right now, this doesn't appear to be a very good decision by this government. It appears to be more motivated by trying to win votes rather than do things which are sensible and benefit Manitobans.

      So with these comments I await the presentations at the committee, and we will see what happens with the next steps, whether the government will decide to make some major revisions or whether they want to continue to pursue an avenue which doesn't appear to be optimal for Manitoba.

      Thank you.


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