TORONTO -- Premier Dalton McGuinty agreed Tuesday to a key NDP budget demand to hike taxes for the wealthy in order to stave off another election.
The minority Liberals will put a surtax on those earning more than $500,000, McGuinty said, after a 40-minute meeting with NDP Leader Andrea Horwath.
NDP Leader Andrea Horwath says the tax on what she calls the ultra-wealthy helps make the Liberals' budget a little more fair.
She says the NDP will not vote against the budget in a crucial vote Tuesday, which means the minority government will not be defeated.
All the money raised by the surtax -- about $470 million next year -- will go towards paying down Ontario's $15.2-billion deficit and will end once the budget is balanced in 2017, he added.
The NDP wanted to use the revenue to increase welfare rates, save daycare spaces and put more money into community and home care.
McGuinty agreed last week to allocate more money to child care from the existing education budget and increase the Ontario Disability Support Program by lowering the costs of the top ten generic drugs paid by the government.
The premier called his offer on the surtax a "sensible compromise,'' but it still flies in the face of his promise not to balance the budget by raising taxes.
"They wanted a tax on the rich, I wanted a way to pay down our deficit faster,'' he said.
"So we're asking those that can do most to do a little bit more to help us accelerate our plan to eliminate that deficit, so that ultimately we have a stronger economy and we can protect our schools and health care.''
McGuinty also agreed to increase welfare by one per cent instead of freezing rates and creating a $20-million transition fund to help rural and northern hospitals.
"I accept the status that I have as leader of a minority government,'' he said. "And I think the most important orders I received from the people of Ontario is make this government work for them.''
The concessions came after Horwath dropped one of her key demands -- removing the provincial portion of the HST from home heating bills -- last week.
The party was also demanding the Liberals create a $250-million job creation tax credit, scrap plans to sell off Ontario Northland and help industries affected by the budget, including horse racing and tourism.
The Progressive Conservatives have vowed to vote against the budget on Tuesday, so the Liberals needed NDP support to avoid an election.
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]