Ontario slipping on wealth index: ‘Peer jurisdictions’
National Post
By Tom Blackwell
Ontario is getting less and less wealthy than similar U.S. states and must cut taxes, boost spending on universities and invest more in its businesses to halt the prolonged slide, a provincial agency warned yesterday.
Ontario was once in the middle of the pack among the 14 largest American states and Quebec—what the agency calls its North American “peer jurisdictions.”
But in the last year it has fallen another spot to number 15 of 16, putting it ahead only of Quebec, said the Task Force on Competitiveness, Productivity and Economic Progress in its annual report.
What is needed is a shift away from consumption—such as increased spending on health care—and toward investment that will bolster the province’s economic future, the group said.
Fiscal federalism also must be revamped. Ontario is sending four times as much tax money to other regions as counterpart states transfer to other parts of the United States, said the report.
“Through the ‘90s, we slipped further and further behind,” said James Milway, the task force’s executive director.
“It’s like in a race. If the lead runner gets so far ahead of you that you can’t see him, you’ll never catch him.... We’re not going to enjoy the quality of life we have now and we’ll slip further and further behind our counterparts and there’s no good reason to do that.”
Ontario’s gross domestic product per capita in 2004 was $41,800, about $6,000 below the median rate in the 16 jurisdictions, and way behind Massachusetts’ leading $60,900, the report said.
Ontario had been even with Massachusetts in the mid-1970s.
The picture is less bleak when the comparisons go beyond North America. Ontario is second only to the United States among nine OECD (Organization for Economic Co-operation and Development) countries in per capita GDP, the report indicates.
Still, the task force chaired by Roger Martin, dean of the Rotman School of Management at the University of Toronto, concludes that Ontario is not investing enough in several areas:
- Businesses are spending too little compared with their American counterparts on machinery, equipment and software, which lead to better productivity and higher wages;
- Governments are not devoting enough resources to post-secondary education, with the U.S., for instance, producing twice as many business graduates as Ontario;
- Ontario’s tax structure impedes business investment. The province must end its “stupid” tax on equipment and other capital, cut sales tax on business investments and give tax relief to the working poor, the task force says.
The province also must change its strategy for encouraging innovative new businesses, Mr. Milway said. The province’s universities and government agencies do enough research and development; what’s needed are more entrepreneurs with the know-how to take commercial advantage of discoveries, he said.
Joe Cordiano, the Economic Development and Trade Minister, said his Liberal government is already following much of the advice in the report.
It has added billions to post-secondary education in its last budget and is committed to eliminating the capital tax within five to six years, he said.
Illustration:
* Black & White Photo: HO, AFP, Getty Images / The integrated Stelco Inc. steel plant in Hamilton. Ontario’s gross domestic product per capita in 2004 was $41,800, about $6,000 below the median rate in the 16 jurisdictions, and well behind Massachusetts’ leading $60,900, a report says.
* Graphic/Diagram: Statistics Canada, US Department of Commerce, OECD, Institute for Competitiveness & Prosperity / GDP PER CAPITA: (See print copy for complete graphic/diagram.)
