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Opinion Patrick Brown’s fiscally risky, economically dubious plan for Ontario

Give Ontario Progressive Conservative Leader Patrick Brown full marks for salesmanship with his "People's Guarantee" election manifesto.

The 147-promise program, unveiled over the weekend, is loaded with new spending and tax breaks for virtually everyone. There are billions of dollars for health care, subways, hydro rebates and even free WiFi on Go Trains, plus tax reductions for individuals, small businesses and a smattering of special interests.

"With our platform, you will pay less and you will get more," Mr. Brown vowed.

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And it even comes with a guarantee: if he doesn't deliver on his main commitments, Mr. Brown said he wouldn't stick around for a second term as Ontario premier. To hammer the point home, he signed a written pledge before roughly 1,500 cheering delegates at a party convention in Toronto on Saturday.

The problem with the "People's Guarantee" is that it's a bit too clever, fiscally risky and economically incoherent.

That's unfortunate because there are some good things in the platform, including a substantial investment in mental-health care and lower tax rates for individuals, particularly middle-income earners.

Running against two parties that are to his political left, Mr. Brown is strategically putting the progressive banner in the store window and soft-pedalling his more conservative side.

But he's relying on a little fiscal sleight of hand by seemingly promising both lower taxes and higher spending. The platform would actually add $2.8-billion to the provincial deficit in 2018-19, before generating savings in subsequent years, according to a one-page fiscal plan contained in the document.

Yes, he's lowering taxes for individuals, small businesses and offering a few special-interest credits, (winter tires, child care, and arts and fitness). But he's partly offsetting the cost of these breaks by scrapping Ontario's $1.9-billion-a-year cap-and-trade program and embracing the more expensive federal carbon-tax plan. New carbon taxes would instead raise $2.4-billion a year.

Overall, provincial tax revenues will rise to $167.8-billion by 2021-22, from $151.9-billion in 2018-19, under Mr. Brown's plan. Collectively, we'll all be paying more.

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On the spending side, Mr. Brown is heavily relying on what he calls "a value-for-money audit" to reduce government waste. The audit would lower government spending by 2 per cent, saving the government nearly $3-billion a year, according to the party's costing estimates. But there are no details.

The bottom line is that without higher carbon taxes and the nebulous audit savings, Mr. Brown's plan would actually swell Ontario's deficit and add to its already hefty $300-billion debt.

There is also a bit of economic incoherence to Mr. Brown's platform, particularly on the climate side. He's embracing a carbon tax, which is designed to get people to use less energy. But he's doubling down on the Liberals' politically motivated hydro rebates. The result will make driving a car more expensive and heating a home cheaper, sending contradictory signals to consumers about their energy use.

Meanwhile, the platform talks about the problem of industrial and corporate electricity rates that are among the most expensive in North America. But it's vague about what to do about the problem. The cost of electricity is one of a raft of competitive challenges facing Canadian companies, which are already grappling with uncertainty over the possible demise of the North American free-trade agreement.

Consumers can't easily just up and leave Ontario because they don't like what they're paying for electricity. Businesses can, taking tens of thousands of good jobs with them.

Mr. Brown's platform also lowers the small-business tax rate by another percentage point, beyond what the Liberals have already promised. This perpetuates the misguided notion that preferential rates encourage small business to create jobs, grow and all sorts of virtuous things.

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They don't. The lower rates create a perverse incentive for small companies to remain small as they strive to avoid the higher tax rate that larger businesses face, according to research by the International Monetary Fund. Many small businesses are self-employed individuals or professionals, such as doctors, who use their corporation as an investment vehicle to defer tax until retirement or to split income with a spouse.

Canada's current tax regime is already hugely generous to small businesses, and Mr. Brown would tilt the balance even more so to curry favour with a key constituency.

Mr. Brown is promising Ontario voters "more for less." If he wins, they could just as easily wind up with more – for more.

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