Making sense of public dollars: Ontario government revenue, spending and debt

Released May 2013

The task of how to improve the Ontario government’s efficiency has become a widespread topic of debate. While most observers have looked at cost-cutting measures and administrative inefficiencies within the government, a central concern is missing from the debate: how to get Ontario back on a path of strong growth. In its latest Working Paper, Making sense of public dollars: Ontario government revenue, spending and debt, the Institute looks at how Ontario’s fiscal policy can be used as a tool for rebuilding and enhancing the province’s economic strengths.

The province has been able to maintain a satisfactory level of public services while spending less per capita (or as a percentage of its GDP) than every other Canadian province. However, the longstanding deficit and growing debt are a pressing concern as the cost of servicing debt has escalated to become the third-largest government expense after health care and education.

To strengthen competitiveness, Ontario must raise revenues efficiently, and spend them in the most productive areas. The Institute recommends that the Ontario government:

  • Prioritize Ontario’s future prosperity by increasing investment in education to match per capita spending levels in other provinces.
  • Control the deficit and debt-to-GDP ratio to stop the rise in interest payments.
  • Phase out the small business marginal tax rate by gradually increasing it for corporate incomes up to $500,000 so that it merges with the general corporate tax rate..
  • Adopt the Nordic Dual Income Tax system to reduce taxes on capital gains.
  • Reward innovation by adopting a patent box on corporate tax returns so that companies can be taxed at a lower rate on patented products.
  • Find new revenue tools for transportation construction in the Toronto region and expand infrastructure investment across the province to boost trade and economic growth.
Topics: Government investment and innovation