TORONTO—Canada’s largest province is on a “unsustainable” fiscal course, according to a new analysis by the C.D. Howe Institute.
The report, authored by think tank Associate Director of research Benjamin Dachis, takes aim at government spending that it calls out of line with Ontario’s ability to raise revenues. The report argues the government should adopt a long-term fiscal policy that requires surpluses, not just balanced budgets.
Among its various ideas, the study advocates for keeping health-care costs under control by limiting payments to family doctors, making free drug programs for those under 24 and seniors income-tested rather than universal, and slowing increases in the minimum wage.
The general minimum wage in Ontario jumped to $14 an hour this year from $11.60, and is set to rise to $15 per hour on Jan. 1, 2019. Some have argued the increase will hurt small businesses and lead to job losses.
The study also calls for scrapping rent controls and transfer taxes as a way to curb dramatic increases in housing costs.
“The government’s policies have focused mostly on curtailing the demand of housing,” the report states. “In contrast, the actions so far for boosting housing supply have been largely limited to minor rebates on some types of development charges and taxes for multi-residential units.”
Ontario voters are expected to go to the polls June 7.
Meanwhile the report also says the province’s Liberal government has missed an opportunity to create a competitive recreational marijuana market with its plans to restrict sales to provincially-run stores.
The assessment faults the province for its refusal to allow the private sector involvement in pot retailing.
“More competition between businesses would constrain operating costs and keep prices low,” the institute says in its report. “Lower prices in the legal market would make it more likely to be competitive with the existing black market.”
The report faults the province for its plans—once the federal government actually legalizes recreational cannabis likely this summer—to severely restrict the number of outlets that will be selling pot. The province has said 40 stores will be in place initially, with a total of 150 by 2020.
The result, the institute says, will be inconvenient access for many people leading them to stay with the black market.
“Recreational consumers are highly unlikely to switch their dollars to the regulated market if there isn’t easy access,” the report states. “This means that there will be significant opportunity for the black market to continue operating in all the areas without enough legal stores to meet market demand or that are convenient to access.”
The report notes that Alberta, for example, is making privately run stores responsible for marijuana retailing although even a mixed model of licensed establishments operating alongside government retail stores could deliver better market coverage faster than the province could on its own.
Additionally, the study proposes changing the way alcohol is taxed to applying taxes to the level of alcohol content rather than on volume.