The Pallister paradox: How a fiscal hawk embedded a titanic tax cut within a deficit budget

For decades, councillors, reeves and mayors of every ideological persuasion have implored whoever happened to be running Manitoba to stop using municipal property tax bills to collect provincial school taxes.

Some argued it was an issue of competitiveness for their municipalities. Why, for example, should cottage owners in Gimli or Victoria Beach pay to operate schools their Winnipeg-dwelling children will never attend?

Others argued, perhaps more persuasively, it was an issue of fairness. Why should retirees on fixed incomes have to shoulder a growing education tax burden in addition to their municipal taxes?

For all, it was an issue of optics. When property owners get their tax bill in the mail, they may not bother to notice provincial school taxes made up more than 50 per cent of the tally. They glance at their return address and curse their city, town or rural municipality.

So when Brian Pallister’s Progressive Conservatives made a 2019 re-election pledge to phase out provincial education taxes, many municipal politicians quietly applauded. Whether they would admit it or not, that includes some who erected orange-and-brown or red-and-white election signs on their lawns that September.

The PCs promised to phase out  those taxes out over the course of a decade, starting in 2023, at a cost of about $800 million. Pallister said he expected to first balance the provincial books, starting in 2022.

Manitoba briefly balanced its books last year, but the pandemic made the moment short-lived. So the premier, denied one prized component of what would have been his fiscal legacy, turned to another on Budget Day 2021.

Half the education tax burden will disappear in two years, his government announced Wednesday.

“I think we’re just moving to a fairer, more reasonable way of supporting education in our province without punishing senior citizens for trying to stay in their own home a little longer or picking on farmers in rural Manitoba,” Pallister said during a budget-day news briefing.

Fairness, of course, plays better than optics or competitiveness.

The big question on budget day was not why Pallister is pursuing such an aggressive schedule for eliminating school taxes, but why he’s doing it at a time when the province’s books are already out of whack.

Manitoba is poised to follow up a $2-billion deficit incurred during the first year of the pandemic with a $1.6-billion pool of red ink.

Why would a premier who has made it his mission to exercise fiscal restraint place a $151-million tax cut in a pandemic budget?

Pallister claimed a promise is a promise.

 “We always said when we moved to balance, we would begin to phase it out over 10 years,” he said, referring to eliminating school taxes. “So this gets us a start on that. But I won’t make a commitment today to when the rest of it will come off.”

In two short years, it will be easier — as in, $400 million easier. Two years from now also happens to be when the PCs  face re-election, assuming we’re back to four-year terms in this province.

Drastically smaller property tax tabs could go a long way in winning back voters who appear to be disenchanted with the Manitoba Tories and especially their leader.

Yet it is tax fairness, not long-term political strategy that served as a buzzword for Budget Day 2021.

Pallister also described the application of the provincial sales tax to Netflix, Airbnb and possibly Etsy — another facet of the budget — as a matter of tax fairness.

“The present structure was a free ride for some and an additional unfair disadvantage to others. So we’re changing it to fair up the system,” the premier said of Manitoba’s decision to tax online platforms that have thus far eluded the grasp of Manitoba Finance.

Airbnb bookings will be subject to PST, starting in December. (Martin Bureau/Getty Images)

Fairness, Pallister said, is also the guiding principle behind the province’s plan to offer tax credits to teachers who pay for school supplies out of pocket.

“I’ve watched teachers invest their own money out of their own pocket for decades now and I just think this is a good, fair incentive to encourage other teachers do the same,” Pallister said.

He was asked whether he was bothered by the idea of teachers purchasing the supplies they need to do their jobs.

For the record, he was not.

“There’s lots of room for initiative and teachers have initiative,” the premier said.

The same logic may apply to nurses who purchase their own protective masks or police who buy their own body armour.

This is not a dystopian joke. Medical and tactical supply stores count professionals among their retail clients.

Manitoba is simply formalizing the practice of expecting public servants to spend some of their wages on supplies their employers won’t provide.

Budget 2021 calls for credits for teachers who pay out of pocket for school supplies. (Sofia Rodriguez/CBC)

Brian Pallister may not be the Hobbesian bogeyman his left-of-centre opponents paint him out to be, but own goals like this certainly provide them with ammunition.

Even on a day when he announced something seemingly inconceivable: a holy-grail tax cut as part of a deficit budget.