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In Yukon’s budget battle, politics trumps reason

It’s a shame our politicians have decided to take months of consultation and throw it in the trash
Yukon Premier and Finance Minister Sandy Silver said he wouldn’t comment on suggestions from the financial advisory panel before its final report came out, but he and Highways and Public Works Minister Richard Mostyn did just that. (Joel Krahn/Yukon News)

The Liberal government’s response to its own financial advisory panel last week was like a bit from The Simpsons.

Premier Sandy Silver: “So, panel, what should we do about the Yukon’s fiscal situation?”

Panel: “Well, we think….”

Silver: “Okay great! Thanks for coming out.”

Both Silver and Highways and Public Works Minister Richard Mostyn quickly announced that major options presented by the panel of five experts would simply not be considered.

The Yukon government needs to close a budget gap of between $40 million and $60 million over the coming years. Economic growth, courtesy of all those mines that are currently working their way through the regulatory system will help, but it won’t be enough.

The government will have to raise revenues, cut expenses, or some combination of the two. There is no magic wand. There are three options and the government has to pick one.

One of the panel’s suggestions is a sales tax. Now, nobody wants to hear this, but consumption taxes accomplish a couple of things we want: they shift the tax burden off employment, incentivizing work, and they draw revenue from the spending of non-residents and participants in the black market, whose incomes are off the books.

But we are giant babies about taxes, even though at 4.5 per cent of GDP (according to the panel’s report), we have one of the lowest tax burdens in the nation, and the moment anyone proposes any kind of tax change we start frothing at the mouth. The panel says that if the Yukon adopted the tax system of Alberta our deficit problem would basically be solved.

(Here’s another tax change that would be easy to make. The top territorial income tax rate is 15 per cent, which is pretty average by Canadian standards. But that rate only kicks in after $500,000. That is insane. In Alberta the top 15-per cent rate comes into effect at incomes of $303,900.)

Silver, meanwhile, declared a sales tax off the table. You can read this as basically an act of political self-preservation, given the hullaballoo the Yukon Party was raising. But it also means that Silver isn’t interested in the difficult — but arguably necessary — task of restructuring the tax system.

The premier also ruled out an increase in royalty rates, even though some of them are comically low. You can argue boosting royalty rates would actually diminish returns by killing off marginal resource projects, but that’s far from certain. It seems more likely Silver was trying to avoid the headache of having to even make the case for higher royalties, which would prompt a backlash from the resource sector.

The government’s consideration of cuts to the Yukon’s inflated public service has also been inconsistent.

Here’s Silver in May: “Nobody is contemplating any cuts to the public service.”

Here’s Silver in September: “All these recommendations are on the table.”

Then, just before the report came out, Highways and Public Works Minister Richard Mostyn told reporters cuts were in fact “off the table.”

Finding the absurdity in the government’s reluctance to cut does not even require you to be a fire-breathing libertarian fantasizing about an ideological spree of state-shrinking. Nearly everyone is in favour of good hospitals, schools and roads.

But the panel’s own data show that 14.5 per cent of the Yukon’s population works for the territorial government at an average hourly cost of $61 per employee. This doesn’t just eat up vital cash in the here and now: these jobs also mean long-term pension costs for workers whose utility is sometimes debatable. Any scan of the government directory reveals all kinds of positions that are, shall we say, non-vital.

The government employs, as of a Nov. 20 directory search, 65 policy analysts. Is anyone going to credibly argue that we need all of them? The average salary of a policy analyst, per, is more than $81,000 per year, around 24 per cent higher than the national average.

Or take the advice of Doug Bell, former Yukon Commissioner (and publisher of the Yukon News), who wrote his own speeches and news releases for six years. In 2014, he told the CBC the Yukon government spent too much money on government spin. When that story ran, the government employed 48 people in “communications.”

As of this week there are now 69 people doing this kind of work. A handful of these jobs are useful. The vast majority are not. I very much doubt the number of media requests to the government has increased by nearly 50 per cent in three years.

This, by the way, is why it’s rich for the Yukon Party to crow about the need to cut spending. They’re not wrong, but who hired most of this dead weight? The Yukon Party did. As Kyle Carruthers wrote this week, the Liberals are responsible for what happens next, but the Yukon Party bears responsibility for the state of the territory’s finances.

The Yukon Party also complained about the notion of raising fees and fines to cover the budget shortfall. Across Canada, the share of provincial/territorial revenue from user fees is 13 per cent. In the Yukon it’s five. Simply raising fees to the Northwest Territories’ level of 10 per cent would raise $60 million and eliminate the deficit.

But that’s beyond the pale for Yukon Party finance critic Brad Cathers, who called user fees “a tax increase by another name.” He’s not entirely wrong, but user fees are in many cases preferable to taxes because it means people who use certain services pay a greater share of the cost.

In other words, it’s only fair for someone who goes camping a lot to pay for campsites, in order to reduce the burden on someone who never goes camping at all.

It’s fine to have preferences. It’s fine to base those preferences on ideology. But it’s a shame our politicians appear to have decided to take the product of months of consultation and study, and throw most of it in the trash.

Contact Chris Windeyer at