(The following article is from the May 1-15, 2009, issue of People's Voice, Canada's leading communist newspaper. Articles can be reprinted free if the source is credited. Subscription rates in Canada: $25/year, or $12 low income rate; for U.S. readers - $25 US per year; other overseas readers - $25 US or $35 CDN per year. Send to: People's Voice, c/o PV Business Manager, 133 Herkimer St., Unit 502, Hamilton, ON, L8P 2H3.)

By Liz Rowley

"This Budget also highlights the government's recent announcement of Open for Business, an ongoing plan to make government faster and friendlier for families and businesses, while still protecting public safety."

     This is the description given in the McGuinty government's  backgrounder to the 2009 Ontario Budget, delivered March 26 by Provincial Treasurer Dwight Duncan.

     The Harris Tories would have been proud to deliver this budget; in fact, Jim Flaherty, former Ontario Treasurer and current federal Finance Minister, was both doula and banker at the budget's conception and birth.

     This Budget has three key features: first, deep corporate tax cuts and sales tax harmonization that will raise consumption taxes 8% across the board; second, real‑time funding cuts and the gutting of social programs, health, public and post‑secondary education, cities, and social assistance that inevitably follows; and third, rosy prognostications, with projections that see economic recovery arriving this summer, leading to growth rates of 3.8% per annum by 2011.

     In a secret agreement signed earlier this spring between Flaherty and Duncan, the federal government put up $4.3 billion in subsidies to grease the skids for sales tax harmonization. Meanwhile, uneasy Liberal backbenchers were being reassured by Premier Dalton McGuinty that no decisions had been made on harmonization. The move will raise prices 8% across the board on most goods and services, and could (and should) cost the Liberals the next election.

     Calling the measures "tax reform", the Liberal government has also capitulated to the far‑right Tory agenda by cutting the corporate income tax (CIT) rate from the current low of 14% to 12% on July 1, 2010, and to 10% on July 1, 2013. It will also reduce the CIT on manufacturing and processing from 12% to 10% in 2010, eliminate the small business CIT surtax, and lower the CIT rate on small business from 5.5% to 4.5% in 2010. The corporate minimum tax (CMT) on small and medium business will be eliminated, and the CMT on large corporations will fall from 4% to 2.7% in 2010.

     These unprecedented CIT cuts, combined with the harmonized sales tax, will cut Ontario's marginal effective tax rate on new capital investment in half. Ontario's combined federal‑provincial CIT rate of 25% will be lower than the average OECD CIT rate. The rate will be 15% lower than the US Great Lakes states, and 11% below the average combined US manufacturing rate.

     The Harris Tories developed a corporate tax strategy that they crowed would make Ontario the jurisdiction with the lowest corporate tax rate in North America. Now the Liberals' "tax reform" will give Ontario one of the lowest corporate tax rates in the industrialized world.

     That's why the federal Tories helped to birth this budget, which will hurt working people in Ontario just as much as if the Harris government was still in power here.

     The immediate consequences will be to cut purchasing power and to deepen the recession in Ontario, with a ripple effect across Canada. An 8% increase in regressive consumption taxes will cut spending on big items like housing and vehicles, at a time when car sales have already dropped 40% due to mass unemployment and income insecurity. The housing market has already dropped precipitously, and in the Greater Toronto Area, where an average detached home is already above $350,000, an 8% sales tax increase will guarantee a further drop in sales.

     The 8% tax grab applies to all things great and small, ensuring that the working poor and the unemployed will plunge deeper into poverty. This is cemented by the budget's 2% increase in social assistance - less than inflation, so that those on welfare are destined to be even poorer next year.

     The day after the budget, the Premier mused about reconsidering previously announced increases in the minimum wage. This was greeted by such a storm of anger that he was forced to confirm that the minimum wage will indeed rise next year to $10.25. How is the government selling the budget? With the promise of tax credits to offset the new sales tax (for an unspecified period), and the promise of three cheques in the mail to every individual and family in Ontario through 2009‑10. This is the prescription Mike Harris used in the late '90s as he slashed health, education and social programs to fund corporate tax cuts. It worked then as the vicious Common Sense Revolution rolled out across the province. The Ontario Liberals and federal Tories hope it will work today.

     And then, as now, there is the budget promise to reduce the size of the public sector in Ontario by 5% "through attrition". The government hopes this will appeal ideologically to the right, and conform to their "P3" agenda on the delivery of health, education and social programs - public-private partnerships, or privatization in other words.

     In almost every area, the budget holds the line, or cuts funding. Schools, hospitals, post‑secondary institutions, and cities are all at the breaking point. The federal government's refusal to pony up promised funds for child care will result in the closure of spaces and centres, since the province has pulled its funding as well.

     For unemployed workers in the hard‑hit manufacturing and forestry sectors, there is nothing. Not even requirements that companies about to receive big bail‑outs must guarantee jobs and wages, or even continue their operations in Ontario for a specified time. The government has not dealt with the issue of companies using bankruptcy to restructure and rid themselves of wage, benefit and pension obligations to former employees. The unemployed are on their own.

     In a peculiar twist, the provincial Tories are opposing this budget, complaining that the province, like the federal government, is projecting big deficits through 2016.

     In the pre‑budget consultations, the Communist Party, the labour and democratic movements all put forward proposals to help Ontario weather the economic storm, and to protect workers, the unemployed and the poor, students and seniors, women, Aboriginals, immigrants, and all working people.

     Now is the time for the OFL to move into centre stage, pulling together these forces to mount a fightback against this Liberal/Tory budget. This should be the campaign that leads labour into the fall OFL convention. This should be the fight that keeps the right-wing provincial Tories in the political desert, and helps build the labour, left and progressive forces in Ontario for a counter‑offensive.

     For its part, the Communist Party will campaign to expose the great dangers the "tax reform" poses for working people in Ontario. This is a budget which lurches dangerously to the right. There's no time to lose.

     (Rowley is the Ontario leader of the Communist Party.)