TORONTO - Premier Dalton McGuinty poured cold water Wednesday on the New Democrats' demand to increase income tax on the very wealthy, but he didn't rule out the idea completely.
The Liberals need at least two NDP votes to pass the budget, which the Conservatives have vowed to reject, or the minority government will be defeated, automatically triggering another election.
The New Democrats' first demand in exchange for supporting the Liberals is to make people earning more than $500,000 pay a two percentage point income tax premium, something McGuinty is reluctant to do given his pledge not to raise taxes to fight the deficit.
McGuinty told the legislature he doesn't want to respond to a series of "one-off" ideas from NDP Leader Andrea Horwath, and urged her to present all the party's demands at once.
"I say to my honourable colleague that we welcome any proposal that she might put forward, but our preference — and I believe this is in the public interest — is that we receive that in its entirety, and that we not receive a series of demands," said McGuinty.
"We’re very concerned about any new costs."
McGuinty cautioned Horwath not to present her ideas through the media if she wants a better working relationship with the Liberals.
However, Horwath said it was important to keep the public aware of the ideas her party presents to the Liberals as they negotiate possible amendments to the budget, and pressed McGuinty to proceed with the new tax bracket.
"The premier has made some comments about wanting to avoid any new taxes," Horwath told the legislature.
"But more and more people are saying that those who make a lot more can actually pay a little more, especially in tough times."
Workers earning more than $78,000 a year pay an Ontario tax rate of 11.16 per cent. However, higher income earners also face surtaxes — or taxes on taxes — of 20 per cent on the first $5,400 of provincial income tax paid, and 56 per cent on any tax above that amount.
The new, higher tax bracket would generate $570 million a year for the cash-strapped government, which the NDP says would be enough to pay for lifting a budget freeze on disability support payments and remove the HST from home heating bills.
Horwath noted U.S. President Barack Obama wants a new tax on the highest income earners, and said uber-wealthy figures like Bill Gates and Warren Buffett agree they should be paying more in taxes, an argument McGuinty immediately shot down.
"We have a different taxation system here in Ontario and Canada and I would argue it is much more fair, more progressive," he said.
"The income gap between our lowest earners and highest earners is not nearly as extreme as it is in the United States."
Outside the legislature, Finance Minister Dwight Duncan took pains to say the Liberals did not flatly reject the NDP's call to tax the rich, but warned the province doesn't want to do anything that could prompt credit agencies to downgrade its rating.
"We’re worried about costs when we have a proposal to raise taxes and expenditures," Duncan told reporters.
"That’s one thing that in my view, given what the demands of the credit agencies are, we have to be very cautious about. That’s not what credit agencies are looking for."
Moody's Investor Services put the province on credit watch last fall.
The government must stay on track to eliminate its $15.2-billion deficit by 2017-18 or it could be hit with an expensive downgrade, warned Duncan.
The Progressive Conservatives urged the Liberals to reject the NDP plan to raise taxes on people making more than half-a-million-dollars a year to lift the freeze on disability support payments and remove the provincial portion of the HST from home heating bills.
Ontario can't afford new spending programs, said PC finance critic Peter Shurman.
"We’ve got the NDP saying 'get some more revenue and you can spend it on these things,'" said Shurman.
"We don’t have a revenue problem here. We have a spending problem."
The 2012 Ontario budget freezes pay for doctors, and extends a pay freeze for health care executives. The province will begin means-testing seniors' prescription drugs, paid for under the Ontario Drug Benefit Plan, effectively meaning that the 5 per cent wealthiest seniors covered by the plan will have to pay more into the plan. Seniors with incomes over $100,000 and senior couples with combined incomes above $160,000 will be affected. Increases in health care spending will be capped at 2.1 per cent per year.
The budget freezes pay for teachers. A pay freeze for educational executives, already in place, will be extended. School boards in low-population areas will be amalgamated, and "under-utilized" schools will be shut. Student transportation will be cut by $34 million.
The province will begin means-testing seniors' prescription drugs, paid for under the Ontario Drug Benefit Plan, effectively meaning that the 5 per cent wealthiest seniors covered by the plan will have to pay more into the plan. Seniors with incomes over $100,000 and senior couples with combined incomes above $160,000 will be affected.
Welfare rates will be frozen and planned increases to the Ontario Child Benefit will be delayed.
There are no tax hikes in the 2012 Ontario budget, but it does freeze the corporate tax rate at 11.5 per cent, foregoing planned reductions in the tax rate to 10 per cent. The freeze is expected to save $1.5 billion over three years.
Ontario will cap the 10 per cent hydro bill rebate at 3,000 kilowatt-hours, a limit high enough that most homes won't be affected, but businesses could be. Reducing the tax credit will save $470 million over three years.
On top of the four jails the province already plans to close, the budget adds two more to the closure list -- one in Brantford and one in Chatham. Overtime for jail guards and the Ontario Provincial Police will be reduced.
Ontario plans to reduce spending on business support programs by $250 million by merging a number of different programs.
The province aims to increase revenue by increasing the number of gambling facilities. [Details to come]