Province	Législature	Session	Type de discours	Date du discours	Locuteur	Fonction du locuteur	Parti politique
Manitoba	30e	3e	Discours sur le Budget	13 avril 1976	Edward Schreyer	Ministre des Finances	New Democratic Party of Manitoba

Mr. Speaker and honourable gentlemen, 1976 thus far has been the year of rather draconian budgets in most provinces in Canada, with the exception of the oil provinces, and it is in that context that I invite honourable members' attention here this evening.

In recent years governments throughout- the western world have faced a broad range of increasingly difficult challenges which have raised serious questions about the viability of basic institutions and the effectiveness of at least some of our traditional fiscal and economic policy instruments.

Here in Canada we have experienced a year of severe economic pressure, and only now does it appear that the country may be in the initial stages of gradual, and I emphasize, gradual recovery.

The Manitoba Government's primary budget objectives for the 1976/1977 fiscal year are to do what we can through policy to sustain this recovery in our province, to support and strengthen anti-inflation measures, and to create new jobs to ensure that our human and natural resources are utilized to near full availability.

Unlike those who might advocate simplistic and unrealistic solutions to our country's economic problems, our government believes that the real answer will not be found in negativism or in the abrogation of governmental responsibility in society. We have long advocated a new kind of co-operation and systematic planning involving working people, farm groups, business, governments and others directly in the decision making areas affecting Canada's future development priorities. We will continue to seek the implementation of this kind of open co-operative planning system at the national level as a replacement for the current anti-inflation program when it is phased out.

In the meantime, our administration intends to do all that it can, within the limited range of options available to us at the provincial level, to make certain that the people of Manitoba are served by a government that places their interests first, and is committed to seeing that their requirements are met, at least as well as in the past and hopefully even better.

Our 1976 Budget will prove that despite national pressures and uncertainties, and there certainly have been those, responsible, prudent Budget planning based on social democratic principles can do much to assure significant gains for the citizens in our province in the coming year - and gains in particular in per capita disposable income terms for those in average and below-average income circumstances.

Of course, with the current economic situation, annual improvements will not be as dramatic as we would wish. It would be unrealistic and unfair to suggest otherwise. Of necessity, many important expenditures will have to be, and indeed are, being limited, and even the most desirable expansion deferred in some cases. And some new fiscal measures will have to be introduced, on a limited and selective basis, to provide funds to support the highest priority initiatives, to counteract the impact of major reductions in federal financial arrangements, and to reinforce our efforts in Canada's campaign against inflation.

On April 24th last year, when I presented our Budget for 1975, I noted that, and I quote: "In the year ahead, it appears that Canadians are likely to face a continuation of double-digit inflation, coupled with widespread and growing unemployment . . . if present forecasts turn out to be correct, then Canada's overall economic performance in 1975 may well be the worst in recent memory. In these circumstances, it is inevitable that our provincial economy must be subjected to increasing pressures."

We now know that this was not by any means an exaggeration or overstating of the case. On the contrary, last year inflation in Canada remained above 10 percent, unemployment rose to the highest levels in many a year, and real growth in Canada's economy as a whole was .2 percent.

As was predicted as well, Manitoba's economic performance in large degree but not completely, Sir, but in large degree, reflected the severity of the national situation. However, the diversification inherent in our province's economy, the strength of its economic base, and if I may be allowed, Sir, the effectiveness of the government's fiscal and economic planning enabled our province's economy to keep pace with, and in some cases, important cases, to out-perform the national economic performance as a whole.

For example, the rate of increase in gross provincial product - the sum total of our province's output of goods and services - once again exceeded that of the gross national product of the nation as a whole, reaching a level of approximately $6.7 billion. This is a full percentage point higher than the growth in Canada's GNP after netting out, and that is really the only way of comparing, Sir, after netting out the impact of inflation, real growth was about one percent, but in any case higher than the national figure of .2 percent.

Last year, overall or actual price levels in Manitoba remained among the lowest in the country according to regular published surveys. In addition, data for the past few months have shown a marked slowdown in price increases in the province. Between December, 1975 and February, 1976, for example, the consumer price index for Winnipeg increased by 5 percent compared to an average increase for the same period for Canada as a whole of 9 percent.

But most important, Sir, the index that means most to me, and I would recommend it for the serious pondering of all honourable gentlemen, is that incomes in Manitoba, including the inflation-squeezed-out measurement known as "constant dollars" measurement and that is the one, I repeat, that is the only non-misleading guide - showed faster-than average growth, faster, that is greater than the national average in 1975. Per capita income in our province before taxes grew by 16 percent in current dollar terms, and in un-inflated constant dollar terms 4.7 percent last year, compared to 12.9 percent and 1.9 percent for Canada as a whole. That is the measurement that I put the stake on, Sir,
an increase in un-inflated or deflated constant dollars of 4. 7 percent improvement compared to 1.9 for the nation as a whole. This is a rather major point which requires further reference. Per capita, after tax income or disposable income per capita, showed an even larger increase, 16.8 for Manitoba in current dollars and 5.4 percent in constant inflation-squeezed adjusted dollars, alongside national figures of 13.6 percent and 2.5 percent for the nation as a whole. So, Sir, once again, this refutes the false impression that some may have tried to convey that inflation rates and tax levels in Manitoba have placed our citizens at a disadvantage relative to other Canadians. This simply isn't true. The statistics are there to prove it and I will take the liberty, Sir, if not this evening, then tomorrow or Thursday, to circulate copies for all taking a 25 year run in constant dollars and in current dollars of disposable personal income per capita.

Over the last five years, the per capita incomes of Manitobans after taxes have nearly doubled in current dollar terms, and have increased by some 36 percent in real terms after inflation has been netted out. Again in both cases, a performance that compares very favourably with the Canadian average - and even more significant, a performance not even approached by any government in this province in at least 25 years.

. . . . . Tables of this historic reference will be tabled for perusal by honourable members.

The unemployment situation as well has remained, in a relative sense, favourable in our province. The average unemployment rate in 1975 was 3.7 percent under the old statistics of the Canada Labour Force Survey, and under their new mode of calculation or survey it is 4.6 percent, the third lowest of any province in Canada, and below the 7 percent average Canadian rate as indicated under the most recent survey.

In primary resource production, the value of output in Manitoba increased by
about 8 percent last year. Mineral resources led the way with an increase of around 10 percent, the total value of production exceeding $500 million. As an aside observation, Mr. Speaker, I must indicate, also candidly, that the last 12 months have been a period of relatively depressed prices in world metal markets insofar as nickel and copper is concerned, but the prognosis is that some months into 1976, certainly by the end of the second quarter, beginning of the third quarter, that this circumstance should improve for those in that industry.
In manufacturing, Manitoba industries compare favourably well with the Canadian average of performance, the value of shipments increasing by 10 percent, compared to 6.1 percent for the nation as a whole. Output in the machinery industry was particularly encouraging, with a growth rate of 60 percent last year. Machinery shipments were valued at $236 million dollars in 1975, significantly greater than a few years ago. There is much of this kind of national-provincial economic statistical data for the year just over, Mr. Speaker, and they will be tabled at the conclusion of the address here this evening.

Insofar as the economic outlook for 1976 is concerned, most forecasters are now predicting a gradual recovery for the Canadian economy, but there is growing concern about the pace of this recovery and the possibility that badly -timed or otherwise inappropriate policies could jeopardize the upturn in its critical initial stages, and the Government of Manitoba shares that concern. If any major improvement in the national economic situation is to take place during the balance of 1976, the Federal Government must make a number of important policy decisions, and soon.

First, oil and gas price increase decisions should not be made without reference
to the fact that these prices have already increased by at least 125 percent in the last three years. The Government of Canada's own figures show that a $1. 50 per barrel increase in oil and the index increase in the price of natural gas effective July 1 would reduce GNP growth by just about exactly one percentage point, increase the consumer price index by 11 percentage points and raise the unemployment rate by one third of a percentage point by itself. A $2.00 per barrel increase, the minimum apparently being sought by the producing provinces, would have an even more damaging effect on the economy, cutting 1.2 percentage points off the GNP growth rate, adding 1.9 percentage points to the CPI, Consumer Price Index, and. 4 percentage points or 40,000 persons to unemployment.

Second, the current Anti-Inflation Program should be strengthened and tightened
up. Despite assertions by various federal authorities that the program is working, there continues to be widespread concern that it has not been and will not be as effective in curtailing undue escalation in prices, profits, and professional incomes, as it will be in holding down wage and salary increases. This impression has been supported by continuing high bank profit statistics, the apparent total elimination of the export levy as part of that program, the reluctance of the Anti -Inflation Board to publicize its activities on the price, profit, and dividend side, and the loopholes in the guidelines applicable to high income executives and professionals. This is much of the cause of the suspicion, unfortunately I say, unfortunately held by some Canadians that the guidelines are heavily biased to restrain wage earners only. This we can only continue to hope and pray, because I don't know what other alternatives exist, will not be the case. We feel it is important to call on both federal and provincial fiscal and tax measures to offset at least some of this inherent weakness in the guidelines. The Federal Minister of Finance has said that much of his planning for his next budget, which presumably comes next month, will be based on the impact of the program up to now. It is my view that this planning must recognize the apparent inequities of the program, the widely held suspicion of inequity, and deal with them quickly if it is to have any chance of substantial success.

As for Manitoba, the outlook for the remainder of 1976 is reasonably promising. The statistical data I have already outlined for last year indicates that our province did not experience some of the more serious difficulties faced by some other provinces and regions in Canada last year. Consequently, it should follow that we should be in a relatively favourable position to advance now as the expected national recovery now starts to take hold. However, as we must emphasize every year, our own efforts to support balanced expansion are subject to considerable influence by the kind of policies adopted in Ottawa. That is why we look forward to the upcoming Federal Budget with so much concern.
Ottawa's Budget plans, along with a number of other major issues in the field of federal-provincial relations, will be discussed at what seems to be likely a very large number of important Federal-Provincial Ministerial Conferences expected between May and October, perhaps May and November of this year. At the end of April, the western Premiers will be meeting in Alberta this year to consider specific problems affecting the four western provinces. Then, between early May and mid-June, at least one, and possibly two national conferences of First Ministers will be convened to discuss energy pricing crisis and the renegotiation of the current system of federal-provincial fiscal arrangements which expire at the end of this year will be convened to discuss energy pricing and the renegotiation of the current system of federal-provincial fiscal arrangements which expire at the end of this year, as well as most of our major cost-shared program agreements. These meetings are to be followed by a special series of conferences of Finance Ministers and other departmental Ministers, leading up to another general conference of First Ministers in the Autumn.
The significance of these meetings for all provinces, certainly for most, certainly for Manitoba, becomes obvious when it is realized that the financial arrangements and cost-shared programs which will be under discussion during the balance of this year account for approximately half our government's total current budgetary revenues and expenditures, about half of all that is involved here.

At a Finance Ministers' Conference which was held just two weeks ago, the Government of Canada made it clear that it plans certain far-reaching changes in these programs which will result in substantially-reduced levels of federal financial support at the end of this fiscal year.
These cutbacks, if they occur, will only serve to compound the budgetary pressures which the provinces are already experiencing as a result of a series of unilateral program changes which the Government of Canada commenced implementing since 1974. At the last Finance Ministers' Conference, I identified three such changes:

1. Was the decision by the Federal Department of Finance, or shall I say the Government of Canada, to exclude artificially from the equalization formula, from the existing equalization formula, two-thirds of the revenues to the producing provinces from higher oil and natural gas prices. And, Sir, that had an absolutely dramatic impact on the nature of and the workings of that Equalization Formula that was supposed to be intact, operating in place.

2. Was the decision to impose the progressive system, because in most ways it is regressive, the regressive system of income tax indexation; and

3. The decision - which was just announced a few weeks ago, shall I say the tentative decision now - to alter unilaterally, and worse, to alter retroactively - the income tax revenue guarantee formula. This last change has been put in abeyance until the full implications, and ethics, I might add, of such a change can be discussed and appreciated. And I stated that all these three measures were expected to cause a revenue reduction from what otherwise would have been received of approximately $85 million in the 1975/1976 fiscal year to Manitoba alone, and approaching $100 million to our province in 1976/1977 - had these changes not taken place.

Of these amounts, roughly $20 million to $25 million each year is accounted for by the new plan to change the revenue guarantee formula. In response to our request at the meeting, the Federal Finance Minister agreed to defer any change in regulations to effect payment cutbacks until after the subject is discussed at the First Ministers' Conference next month. Although this will not help our 1975/1976 position - interim payments have already been made on the basis of artificially low estimates - I assume that a compromise can and will be reached in order that future losses can be minimized. Indeed, a compromise of 50 percent of retrospective payments as well as of the 1976 proceeds is regarded as necessary for the maintenance of basic ethics in dominion-provincial relations. Later I will deal with this matter in more detail. However, the bulk of our revenue shortfall problem will remain, and it will be aggravated still further by the implementation of unrealistic ceilings on federal contributions towards post-secondary education and medicare, and by withdrawals affecting manpower and regional development programs and federal support for services to treaty Indians.

I would like to make it clear that our government believes certain changes are necessary, all right, to make these programs more effective and efficient. But, we oppose the false restraint represented by the kinds of cutbacks Ottawa has made in this area up to now. These measures have not really cut costs - they have merely shifted them, from the federal budget to provincial budgets - and, in so doing, they have hampered the provinces' efforts to rationalize programming and to improve assistance to local government.

As the negotiations proceed in the months ahead, our government intends to stress this point strongly and to argue that real, lasting economies in national programming can only be achieved through close co-operation between the federal and provincial governments - not through confrontation or abrogation or responsibilities. If there is some way to return to the spirit of co-operative federalism, an expression coined by the late Lester B. Pearson, then now it would seem a time for those of good will in governments across Canada to attempt to do just that, to return to the spirit of co-operative federalism.

Despite the problems caused by the federal cutbacks, however, our government is determined to proceed with our program of provincial-municipal financial reform as quickly as budgetary circumstances permit.

Last year, we announced the details of a new tax sharing plan for municipalities offering them direct access to revenue sources now available to the province. This plan has generated considerable interest across Canada, indeed it has been discussed in some length at the Canadian Association of Mayors and Municipalities and been favourably commented upon there, and it has been commended as a positive, precedent-setting response to municipal requests for a more equitable division of taxing authority.

This year, we plan to introduce enabling legislation to affirm our offer. This
new provincial-municipal tax sharing legislation will authorize the assignment of revenues from 2 percentage points of personal income tax, one percentage point of corporation income tax to municipalities on an unconditional basis for their own budgetary purposes. This plan, which replaces the old system of unconditional grants, will mean total payments of approximately $17.6 million to municipalities in 1976 - an increase of 31 percent over last year.

The 1976 tax sharing payments will be based on a formula which assigns a basic per capita amount of $15.30 to all municipalities, along with an incremental payment of $1.00 or $2.00 additional per capita depending on population level to assist in meeting police protection and other urban service requirements for those towns and cities not presently already in receipt of provincial assistance for policing costs. In cases where the new formula could provide greater assistance to those individual municipalities already receiving the existing village police protection grants, special adjustments will be made to ensure that they receive the benefit of the larger or more generous of the two formulas, in their case. This could be relevant, for example, to towns under 1,500 population such as Morris and Melita. In addition, the 1976 tax sharing payments will include an interim population growth adjustment factor to take into account the increased costs associated with expansion of population in the faster-growing towns and cities in the province.

The new Provincial-Municipal Tax Sharing Act will also contain provisions to
permit municipalities to levy and collect certain other so-called - and I use the term deliberately - so-called "growth taxes", because I find, Sir, if I may say as a parenthetical aside, that any form of tax, including the realty tax, can be made a growth tax by adjusting either one of the two factors. But in any case, Sir, the intent is to make provision in this Provincial Municipal Tax Sharing Act to permit municipalities to levy and collect certain growth taxes and, under specified conditions, to permit the province to enter into tax collection arrangements with the municipalities similar to those now in effect between the federal and provincial governments.

In recent weeks, we have been advised that there is growing interest in this concept at the local level and that at least one municipality is giving active consideration to taking advantage of it in the near future in order to lessen its reliance on property taxation and to increase the overall equity and revenue potential of its tax structure. This is an encouraging development which could have extremely beneficial implications for local property taxpayers. It is estimated, for example, that if the City of Winnipeg were to apply a 5 percent municipal sales tax on liquor purchases, hotel accommodation and restaurant meals, as well as a land transfer tax at the rate of one-half of one percent, such as is the case in at least one other province, the revenue generated by these measures - around $9 million in a full year - would probably be sufficient to eliminate the need for a general municipal mill rate increase on residential property in the city this year. That is put forward merely as an illustration of the comparative yield of some of these potential revenue sources that could be available to municipalities in the future.

But it should be emphasized, Sir, that this is being put forward strictly on a local government-decision basis. It will be up to the municipal governments themselves to decide whether or not they would wish to alter their revenue structure greatly, or slightly, or not at all, and to shift a portion of their costs onto a more - what could be argued to be perhaps a more equitable tax base. We will extend our co-operation, as well as technical assistance if it is requested, to help municipalities study the merits of such a possible course of action.

Of course, the new provincial-municipal tax sharing system is only one element in our overall program of local government finance reform. This year, we are increasing direct operating grants to school divisions by about $17.1 million, bringing the province's total contribution toward public schools under the Foundation Program to some $161 million. We have also increased other forms of assistance, such as an addition of $3.5 million in grants to the City of Winnipeg. This amount includes additional contributions under a revised formula for sharing the costs of urban transit - a formula which, hopefully, will make it possible for the Cities of Winnipeg and Brandon to either restrain or set aside entirely any plans for an increase in fares for public transit.
Finally, we have expanded our property tax credit plan each year since its inception in 1972. At the present time, many thousands of individuals and families across Manitoba are receiving income tax refunds reflecting the increased credit benefits announced last budget. We now estimate that the total property tax relief provided by the Manitoba Property Tax Credit Plan for 1975 will be approximately $751 million.

Although the 1976/1977 fiscal year has commenced, and we are two weeks into it, the province's accounts for the last fiscal year ending March 31, will not be closed for another week - it's usually, Sir, as you perhaps know, about the 20th of April. Consequently, it is not yet possible to provide a precise accounting of our year-end position. However, the information which is presently available indicates a 1975-1976 current account deficit of approximately $111 million.
A number of factors account for this deficit, including the lower-than-expected income tax revenue guarantee payments from the Federal Government, which I have already referred to. At the same time, however, revenues from certain other sources exceeded original forecasts, thereby helping offset the shortfalls in federal support and enabling the province to meet additional expenditure requirements during the year notably the $18 million, approximately, $18 million Department of Agriculture program to assist cow-calf producers.
Some weeks ago, the government's main estimates of current expenditure for the
1976/1977 fiscal year were tabled for consideration by the Assembly. At that time, in a brief statement, I indicated that these Estimates reflected the results of an extremely rigorous program review which saw original departmental requests reduced by some approximately $170 million from initial submission or consideration.

Our general restraint policy is evident in the Estimates for every department, by and large. Only the highest priority programs in fields such as agriculture, health, education and assistance to local government have been permitted to expand beyond a minimal amount to allow for the impact of inflation on operating costs. This has kept the rate of increase in our expenditures, I may say, Sir, very deliberately and slowly, well in line with those of other provinces in Canada. I would only ask that, if making comparisons, that the comparisons should be uniform, either budget to budget, or revised to revised, or budget to revised, but the same for every province - and thus avoid the kind of misleading article that appeared in the Financial Times just the other day, comparing budget to revised for nine provinces, and budget to budget for one. Be that as it may, I'm reasonably confident, as indeed my colleagues are, that since we have started from a position as the second lowest spending province in Canada on a per capita basis last year, it seems likely that this position can be maintained in 1976/1977.

At the conclusion of this address tonight, I will table our government's Main Estimates of Revenue for the 1976/1977 fiscal year. I have already described some of the problems we have had to consider in preparing these Estimates. The revenue guarantee situation is one example. The limit on the equalization of oil and gas revenues is another. And a third is the substantial shortfall in potential income tax yield caused by the simplistic, regressive indexation system, as it applies under the present Income Tax Act of Canada. In addition, unlike the situation in the last two years, we do not have the advantage of a substantial revenue surplus to carry forward to help meet the projected increase in public service costs for 1976/1977, although we have been able to transfer $2~ million from special reserves built up in recent years.

Of course, these problems are not unique to Manitoba. With few exceptions, the other provincial governments across Canada have experienced similar difficulties in preparing their budgets, and, as a result, they have found it necessary to raise additional revenues through increased taxation. The Government of Manitoba has had to make at least some of those same similar decisions.

In reviewing the taxation options available to us, we took careful note of the increases which the other provinces have introduced this year, as well as a number of additional alternatives. We based our final decisions on three general principles as it would apply to taxation policy:

First - That any tax changes should be related to ability to pay;

Second - For maximum equity, any changes should be applied selectively wherever possible, rather than across-the-board; and

Third - Any changes should be consistent with the general anti-inflation policy of our government, and with the national Anti-Inflation Program as well - and particularly so as to offset to a degree, at least to some small degree, to offset the criticism that the guidelines militate against wages but do not restrain capital returns, dividends, executive income, bank profits, etc. etc. etc.

So in a year of major tax change budgets across Canada, we are still able to avoid general sweeping increases in major taxes, such as the general sales tax, the 1967 general sales tax, or on the major income or corporate tax.
I am pleased to announce that our government has ruled out - and will continue as long as it can, it may not be forever - has ruled out for now any increase in the general sales tax rate or the basic personal income tax rate for 1976. As to whether we can continue to do so - and let me pause, so that this is understood, Mr. Speaker as to whether we can continue to do so in the future, will depend strictly, I would say will depend entirely, but entirely, on the outcome of federal-provincial negotiations during the rest of 1976; and will depend entirely on the new agreements to be adopted with Ottawa for the period 1977-1982, the next five-year round of agreements on the major cost-shared programs and on the fiscal arrangements.

Of course it goes without saying, as long as there are alternatives, we have no intention of re-introducing Medicare premiums this year - or ever - despite the fact that there seems to have been some resurgence of interest in at least some of the provinces in Canada in this rather strange and regressive form of taxation. Instead, we are proposing a series of selective measures which conform to the three principles I have just outlined.

Earlier in my address, I stated that our government believes the Federal AntiInflation Program should be strengthened and tightened, particularly as it applies to corporate and bank profits, high income executives and professionals. To a degree, the Federal Government seems to recognize this concern when it decided to apply a special surtax. In proposing this surtax, I want to quote the Federal Minister of Finance, because the words certainly deserve the unqualified endorsation of all thinking Canadians.

He said, and I quote:
"In terms of fairness and equity, it is, we believe, only fair that those at the upper end of the income scale, who are able to absorb the impact of rising living costs without undue hardship, should be asked to shoulder some share of the burden. . . it is fair to ask those who already enjoy ample means to make a proportionately greater sacrifice in the national interest." But what is strange, Mr. Speaker, is that in the unfolding of the Anti-Inflation Program, the necessity of which I personally feel is a matter of great necessity and importance to our country, that the sentiments of the Minister of Finance have been turned around in the actual unfolding and working of the anti-inflation system. Our government most emphatically shares the Federal Minister of Finance's sentiments as thus expressed, and consequently, we feel it would be desirable to complement the Federal Government's plan to improve its equity by implementing a provincial personal income tax surtax.

Under our surtax proposal, a gross income level of approximately $25,000 would be the point at which the surtax would begin to apply for a family of four. The provincial surtax would be $1.00 at that level; it would increase to $150 at $30,000; $460 at $40,000; $792 at $50,000, etc. A detailed set of examples illustrating the surtax proposal will be included with the text of this address as soon as it is tabled later this evening. I might add, that in no case will the surtax exceed 4 percent of personal income. I rather suspect, Sir, that this proposal - well, it's more than a proposal - that this measure will be attacked by the very same people who have been shouting out with glee at the inception of the anti -inflation guidelines, guidelines which affect them relatively less. Estimates indicate that the surtax will apply to approximately 15,000 Manitoba tax filers, or roughly 3 percent of the total; or in other words, 97 out of every 100 tax filers in the province will not be affected by this particular measure.

This surtax will be administered by the income tax collection machinery as it exists. We believe it is appropriate that the surtax should be in effect, in place, for the duration of the Anti-Inflation Program, and for this reason, we will seek legislative authority to apply it for up to three years, to the end of 1978, but it would be subject to termination under the legislation after mid-1977, depending on the future of the Anti-Inflation Program and Manitoba's involvement with it.

In addition to the foregoing, the government believes that large corporations should also be expected to contribute a fairer share towards the costs of meeting essential public services. For this reason, we are proposing an income tax on large corporations, a surtax equivalent to 2 percentage points of taxable profits. Small business as defined under the Federal Income Tax Act will be exempt from this measure. The small business definition covers approximately 80 percent of Manitoba business - those with under $100,000 of taxable profits a year, up to a cumulative total of $800,000.

In total, the Manitoba corporation surtax will be approximately half the magnitude of the corporation surtax introduced by the Federal Government in May of 1974, but which they have since removed. For a corporation with $1 million of taxable income in Manitoba, not income, but taxable income, the surtax will involve $20,000 in additional tax. The effective Manitoba income tax rate on large corporations above the $100,000 level subject to the surtax, will be the combination of the 13 percent income tax rate already in place, plus the 2 percent surtax for a total of 15 percent. I might add that the combined federal-provincial corporation income tax rate on these businesses in excess of that size will be 51 percent. It is interesting that this is lower than the 53 percent which applied in 1972, or the 52 percent which applied in 1973, or the 54.8 percent which applied in 1974. And I emphasize that point, that as a result of changes in the national tax treatment of corporations, that even with this surtax, the end result is still lower than the level of taxation in 1972, 73, 74, 75. This measure also will apply for the period of Manitoba's involvement in the Federal Anti-Inflation Program. We believe that most corporations in Canada are supporting this program, and they should be expected to support it in a way that is visibly equitable as well.

It is estimated that the personal and corporation income surtaxes together will yield $14.4 million in additional revenues in a full year. The corporation income surtax revenues will be received in the current fiscal year. The balance, however, will not be revenue this year, but the next. But, Mr. Speaker, we must all think of next year, we must all think of the year after that, and many more years down the road we must begin to think of much more than we have been accustomed to. It is fast becoming a patriotic duty that, as Canadians, we think a lot more about the future than we have been accustomed to, realizing at the same time that current life styles built up in the last quarter century make it very difficult.

There is one further change affecting income taxation. I am pleased to announce on behalf of my colleagues, that our government, in order to avoid taxing unrealized income, intends to rebate to individual Manitoba mineral holders any additional Manitoba share of personal income tax paid as a result of the Federal Government's decision to disallow provincial charges as an income tax deduction for 1975. When details of the rebate plan are finalized, letters will be sent to eligible claimants. As to whether or not the Federal Government will do likewise to remedy its part of the same problem, is a decision still resting with Ottawa.
For a number of years, Manitoba has expressed concern about the effectiveness of the current system of corporation income tax in taxing profits earned in Manitoba by national and international concerns. In total, as shown in Statistics Canada's corporation taxation data, the corporate sector across the country pay income tax on under two-thirds of profit. In fact, the latest available information, for 1973, indicates that for the largest corporations, corporate income for tax purposes is barely 50 percent of the profits shown in the companies' own books. In our view, this is substantial indication that the current corporation income tax base requires some overhaul. Our concern was increased when we discovered that a significant number of corporations have been able to adjust their accounts in such a way as to pay absolutely no income tax in the very same year when they reported substantial earnings to their shareholders, and on occasion even increased dividends, while disclaiming tax liability on the returns. But this too is essentially a national issue, so I shall desist, at least for now.

As a means for ensuring that a minimum tax contribution will be made to the people in Manitoba by such businesses operating here, we propose to follow the lead of some other provinces, namely Ontario, Quebec and British Columbia in implementing a capital tax on large commercial operations.

All unincorporated businesses - corner stores, family farms, and so on, will be exempt. In fact, exemptions will be provided for all small business, in the sense that the definition of small business is those businesses with taxable capital of under $100,000. In addition, co-operatives, credit unions, and family farm corporations, as well as charitable corporations exempt under the Federal Income Tax Act will continue to be exempt. In general, it is those corporations with taxable capital of over $100,000 engaged in commercial activity, will be subject to this tax.

Now, the rate will be 1/5th of one percent of taxable capital, the same rate now in effect in Ontario, Quebec and British Columbia. The new measure will be in effect for all corporations with fiscal periods ending on or after July 1, 1976. The full tax will apply to these corporations after the enabling legislation is passed and forms are designed and printed. We anticipate that the first payments of tax by these corporations will take place around the end of August.

Corporations with fiscal years ending after August 31, 1976, will be required to make an initial payment of tax 15 days before the end of their fiscal year, with a final "clean-up" payment when returns are submitted six months later. The initial payment will be based on estimated taxable capital in place at the end of each corporation's fiscal year.

Perhaps an example of the impact of this tax would be helpful, as follows: At 1/5th of one percent rate, a corporation with $250,000 in taxable capital would be subject to a payment of approximately $500; at $1 million of taxable capital, the payment would be $2,000. But, an important point, Mr. Speaker, is that, if such a corporation were currently paying income tax, its effective capital tax liability could be cut by more than half by virtue of the fact that the capital tax is deductible for income tax purposes, in terms of tax payable to Ottawa and to the Province of Manitoba. So at the combined federal-provincial large business corporation income tax rate of 51 percent, which is in effect after tonight's Budget, the net additional tax liability for such a company would be reduced to $980. So it is not an onerous tax by any stretch. It is estimated that the corporation capital tax will yield approximately $6.5 million in the current fiscal year and approximately 8 in a full twelve-month period.

In addition to these measures designed to ensure that large businesses operating in our province support a fairer share of the cost of public services, our government also proposes to implement a number of revenue changes designed to encourage conservation of our scarce non-renewable depleting type energy resources.

Perhaps the more obvious example of wrong use of non-renewable depleting fuels, certainly one that is incompatible with the growing conservation ethic - I think it's fair to say it is growing - are the large luxury and so-called high performance cars - many of which provide only a few miles per gallon, after dual carburetion or quadruple carburetion etc., etc. If any use of our limited non-renewable resources is absolutely defenceless, becoming more and more so in our time, this would appear to be one example. With this in mind, we have decided to restructure our system of automobile registration fees to provide an added incentive for the use of smaller cars over larger, heavier cars. Under a new system, therefore, of registration fees this will take effect with the next
registration year, next March, the charges will be based on weight instead of wheelbase. The heavier the car, the larger the registration fee. The basic minimum fee, Mr. Speaker, will be $15.00, an increase from $12.00, which is sort of the general current base of registration fee, and it will be $15.00. I might add that this $15.00 base, it is more or less a present base, has been in effect without change for the last 10 years, so this $3.00 adjustment in 10 years, I don't believe is undue. For some cars, the registration fees will be actually reduced somewhat. For example, for a 1968 Plymouth Satellite - I don't know if anyone has a Satellite - the revised fee will be - you smile, Sir, I take it you drive such a vehicle; if you do, Sir, you will save yourself $3.00. But of course, larger heavier cars will be subject to major increases, and I do not try to hide that fact, on the new weight basis. For example, the fee on a 1974 Lincoln Continental Mark IV or Mark V, whatever it's called, will increase to $99.00 from $27.00 under the current system.

Mr. Speaker, in case it is felt that there is some discrimination inherent in this proposal, I wish to make it clear that there is no discrimination whatsoever. All cars of equal weight will pay the same fee.

In addition to this change, we are also increasing the registration fees on trucks by 10 percent. Now the rates for trucks I should explain, Mr. Speaker, were last adjusted ten years ago. Absolutely no adjustment in the last ten years despite the fact that the cost of everything has gone up, certainly the cost of goods and services for individuals, families, businesses, governments, no exceptions. And because there has been no adjustment in ten years, an adjustment is being made of 10 percent which, if one likes to look at it in terms of annual average of change, it's one percent per year. And that is commencing with the next registration year.

I should also add that commencing with the next registration year for the sake of consistency and tax record keeping; licensing will be required for slide-in type camper trailers, camper units. This is intended to provide the Department of Highways with better information and control over such units in the same manner as mobile home trailers.

I might add that this item is not a large revenue item. It is being proposed for the sake of records and consistency. The three changes taken in their totality will add about $4.4 million to provincial revenues in the current fiscal year.
As well as the adjustment to motor vehicle registration fees, a limited number of changes are also proposed for motive fuel taxation. But I would indicate this will not affect the generality of Manitobans. In large measure the changes simply represent a diminution in a provincial refund or rebate, reflecting our view that subsidies or rebates which encourage the use of scarce fossil fuels - perhaps I shouldn't say scarce fossil fuels but by definition, depleting fuels, must be reviewed carefully for consistency with conservation principles.

First, the tax rate on aviation fuel will be increased to 5 cents per gallon from the present 3 cents. Second, the refunds made available for diesel fuel used off-highway are to be reduced from the current 16 cents per gallon to 11 cents per gallon. Which means if the refund is decreased by 5 cents, it really means, Sir, an increase of 5 cents in the gallonage. The applicable tax rate on diesel fuel used in railway locomotives will also be raised by the same amount, from 5 to 10 cents per gallon. Third, to restore the tax rate on bunker fuel and fuel oil used for commercial, non-residential heating, to full equivalency with other energy forms that are taxed under The Revenue Tax Act of 1964. Mr. Speaker, I should explain that they have become disproportionate because certain forms of energy that were taxed starting in 1964 on a percentage basis, so the percentage adjustment has been automatic, while bunker fuel and fuel oil used for commercial heating have been on a flat penny basis. And so, for that reason we have decided to increase the tax rate on bunker fuel to two pennies per gallon and on non residential fuel oil, two and a half pennies per gallon. These changes will take effect at midnight on May 16th and are estimated to increase provincial revenues by approximately $5 million this fiscal year.

Also, there will be a change in the tobacco tax. The standard tax rate will be raised by one-fifth of a cent per cigarette, or a nickel on a pack of 25, bringing. . . Fair enough? I note the moral support in concurrence of the Honourable Member for Swan River and I accept it with alacrity. So therefore, Mr. Speaker, that will bring the total rate to four-fifths of a cent per cigarette. Similar or proportionate increases will apply to other types of tobacco products. The estimated incremental revenue to be realized from this measure will be about $3~ million in the current year.

I should also advise honourable gentlemen that an additional $10 million in revenue will be received from the Liquor Control Commission as a result of increased mark-ups. The mar-kup changes will be implemented in such a way as to be consistent with the current pricing structure. Specific details will be announced - this reads like a sentence out of the Ontario Budget, Sir. Specific details will be announced by the Commission in due course.

Finally, one modification is proposed in the exemptions under the Retail Sales tax. In line with a recent change in Saskatchewan, we propose to end the exemption presently allowed for railway rolling stock effective midnight tonight. It is estimated that this measure will equate the treatment of railways with other transportation modes will yield about half a million dollars in revenue in a full year.

In total the new measures I have just outlined will increase revenues for public service of Manitoba by about $39 million in the current fiscal year. Of our total estimated revenues for the current year. . . I should say our total estimated revenues for the current year are $1,163.7 million.

I should like to point out that this total includes an estimate of $51 million in respect of our province's entitlement under the Income Tax Revenue Guarantee arrangements. This figure provides an allowance of $21 million to cover half our estimated shortfall for 1975-76 and 1976-77. We believe this amount represents an equitable minimum compromise settlement of the current dispute surrounding the guarantee calculations and we are hopeful, but solemnly so, Mr. Speaker, that the Government of Canada will agree to such a basis of compromise. If Ottawa should agree to go back to the original formula, then of course we will end up in a surplus position, a modest surplus position. If Ottawa does not agree in an even part way, then of course the government will have to consider utilizing special reserve funds to offset part of this unanticipated loss.

At the conclusion of my address tonight I will also be tabling Supplementary Expenditure Estimates for 1976-77, totalling approximately $181 million. Among the principal items in these estimates are an additional $2.6 million - of which $1.6 million is recoverable from Canada - to provide authority for continuing negotiations in respect of program extensions under the Canada-Manitoba Northlands Agreement, or other agreements with the Department of Regional Economic Expansion. That is still under negotiation, Sir.

An additional $1.1 million - of which $550,000 is recoverable from the Government of Canada - to enable the Department of Mines, Resources and Environmental Management to finance certain incremental exploration activity.
An additional $800,000 for the Ministry of Corrective and Rehabilitative Services to provide for the operation of the Winnipeg Public Safety Building and to provide funding for the Alcoholism Foundation.

And an additional $6.8 million to cover a portion of the increased assistance to school divisions under our Foundation Program as announced by the Minister of Education some weeks ago.

And this is also inclusive of certain initial year funds for the Winnipeg School Division No.1 to cover admittedly only part of the special costs incurred by that division in trying to cope with problems of education services resulting from immigration and migration families.

I am happy to announce that the Supplementary Estimates also provide for a significant increase of the Manitoba Property Tax, properly called the Education and General Municipal Property Tax Credit Plan for 1976.

This will be the fourth consecutive year that the province has increased the benefits available under this program. You may recall, Sir, that in 1972 we began with an initial maximum credit of $140 and a general minimum of $50.00. For 1973 the maximum credit was raised to $200, the minimum to $100.00. Also the new Resident Homeowner advance system was introduced to give homeowners the general minimum tax credit immediately as deductions from their property tax bills. For 1974, the maximum was increased to $250, the minimum to $150.00. For 1975, the maximum was raised to $300 and the minimum to $175.00.

For 1976 we propose to increase the maximum grant or Education and General Property Tax Credit, to $350, the general minimum of $200.00.

And so, Mr. Speaker, in a way that we hope does not becloud or in any way muddle or confuse what is the true level of municipal government operating costs and
spending and yet at the same time, providing relief to homeowners, we hope that this measure will provide the necessary desired relief on property tax for homes. But in a way that does not artificially subtract from the true cost figures relating to municipal government. It is estimated that for a home assessed at $6,000 that the $350 maximum credit is equivalent to a property tax reduction of over 58 mills. The $200 minimum is equivalent to a 33 mill reduction of the same kind of home.

As in previous years, the newly-expanded $200 general minimum credit will be made available to eligible resident homeowners on their property tax statements this summer. All such homeowners with taxable incomes of under $15,000 - equivalent to a gross income of about $20,000 for a family of four - will be entitled to further benefits up to the new $350 maximum. These additional benefits may be claimed on income tax returns in the spring of 1977. Any resident homeowner not eligible for the $200 advance payment on property tax statements, and all tenants, will continue to be able to apply for full benefits when they file income tax.
These increased entitlements will bring the total annual benefits under the Education and General Property Tax Credit Plan for 1976 to $871 million, an increase of $12 million or 16 percent over last year's total amount.

We are including an extra $5 million in the supplementary estimates to cover the
added costs of the Resident Homeowner Advance portion. There will also be an automatic increase in the benefits available - this is automatic by formula, Mr. Speaker - available under the Cost of Living Tax Credit Plan for 1976 because these credits are calculated in relation to personal income tax exemptions which under the existing Income Tax Act are adjusted upward every year in line with increases in the Consumer Price Index.

The maximum Cost of Living Tax Credit benefits for a family of four - a married tax filer claiming a spouse and two children under age 16 as dependants - were about $127 for 1975. For 1976 the maximum is automatically adjusted in that kind of case to $141.

In total the tax relief provided by the two Tax Credit Plans for 1976 will be $110.5 million. In last year's Budget it was noted that although these tax credits are shown as expenditures in our Estimates, they are, in reality, tax reductions and are treated as deductions from revenue in the accounts of some other provinces with similar plans. And I serve notice that the Province of Manitoba will be giving careful consideration to do exactly the same in terms of the kind of presentation in our Budget next year so as to reflect more accurately the effect of these transfers and to reflect as well the fact that the bu1k of these funds involved never really enter the Provincial Treasury.
With the addition of the $18.5 million in Supplementary Estimates which I have just announced, the government's estimated current expenditures for the Province of Manitoba for 1976-77 will total $1,176,000. This represents an increase of about 13.8 percent over the combined Main and Supplementary Estimates for last year. The percentage increase for 1976-77 Estimates over actual expenditures including Main, Supplementary, Special Warrants, will be in the range of 9 p9rcent according to the present calculations.

Having given honourable gentlemen the Revenue Estimates and the current Main and Supplementary Expenditure Estimates, it is by simple calculation clear that we are anticipating a deficit of approximately $12.8 million on current account this year. We feel that realistically viewed that this is a relatively small current account deficit equivalent to just about exactly one percent of the total budget scale, and that this is consistent with our overall fiscal policy objectives in the context of the kind of year we feel we are entering into.
In just a matter of a few days now, Mr. Speaker, I will be tabling Estimates
of the Capital Authority requirement for 1976. But I could indicate that this year's total requirements of $398 million are approximately $146 million lower than was the case last year.

Manitoba Hydro requirements have been reduced considerably this year from $336 million to $201 million, as have those of the Manitoba Housing and Renewal Corporation and the Manitoba Development Corporation. Total requirements for self-sustaining programs are $311 million for the current year, compared to $481 million for the year just ended.

Requirements for direct government programs will be approximately $87 million. Last week, I might add that the Government of Ontario noted that it did not expect to have to go to the public market to finance any of its direct capital requirements. It certainly could be argued that the same could be said here, although I am not sure I would want to express it quite that way. Off market sources such as the Canada Pension Plan should be sufficient to cover our capital needs for direct departmental capital requirements this year.
But of course it is obvious that we will be going to the public market as well,
I think every other province with the possible exception of the oil provinces, for financing for utilities and for other Schedule-A programs. In this connection the recent decision by one of the most highly respected and independent international bond rating agencies to raise our government's credit rating to "Double A" will b9 particularly valuable. I think it is worth repeating here what the rating agency - Moody's to be specific stated in its publication known as Bond Survey in September of last year, when it announced the upgrading of Manitoba's credit rating.

And I might add as an aside here, Mr. Sp.9aker, that those who try to suggest that this was the rating agency - there are only two, there's Moody's and standard and poor. And the honourable member that tried to imply that Moody's was the one that gave the high credit rating in New York City and therefore its judgement probably would not be that good, that in fact he had it turned the other way around, it was standard and poor, not Moody. But I don't want to make a point of that either because we have a double A rating from both and we wouldn't like to lose either. Anyway they said and I quote, and it is, I think significant to put on the record, and I quote the bond survey publication.

"The Province of Manitoba has a diversified economy in which agriculture, mining manufacturing and services all make important contributions. Manitoba has experienced above average growth in recent years.

"Provincial authorities have realistic expectations and good prospects of realizing them.

"The province pursues prudent," and I emphasize prudent, "fiscal policies with relatively small direct financing requirements.

''Net direct debt is moderate and the bulk of guaranteed debt is for well-managed, self-supporting Crown companies.

"The province's financial operations have been," these are not my words, Sir.

"The province's financial operations have been extremely well conducted for several years. I can forgive my honourable friend for thinking so, but I must assure him that I really did not write it.

Earlier in my address I stated that our government's budgetary strategy for 1976 is aimed at sustaining our economic recovery, supporting measures to combat inflation at least to some degree, and creating new employment opportunities, particularly to try to do so in those regions where it is particularly problematic.

I believe that this is a defensible strategy and one which will mean substantial benefits for all our Citizens.

Our budget tonight demonstrates the kind of responsible restraint which we feel is consistent with the Anti-Inflation Program and consistent as well with the economic and social priorities of the people of this province as perceived by this government.

The revenue measures we have introduced tonight have been applied selectively and equitably to support essential services on as much as possible ability-to-pay basis while reinforcing the objectives of the conservation ethic and of the national Anti-Inflation Program, and reducing some of the features of unequal restraint as between wage income and corporate and dividend and executive income, on the other hand, and reducing or attempting to reduce to some degree conspicuous consumption on non-essentials. And I do not know if that should be a matter for apologies Sir. Certainly, personally I do not apologize for attempting in a small faltering way to commence the task of trying to reduce by degree at least conspicuous consumption on non-essentials which has crept more and more into life styles.

Finally, may I add that the increases in assistance to municipal government and school divisions and the enrichment of our property tax credit plan will playa major role in supporting important local government services, and at the same time helping to offset the impact of inflation for Manitobans. This budget will hopefully help strengthen the recovery trend which is already started, and the increased momentum it provides will be reflected in a continuing improvement in our economic position throughout the balance of 1976 and into 1977.

So I conclude, Mr. Speaker, by expressing the hope that while we have come through a couple of years of relative pause the signs are there for reoccurrence of growth, let us hope that if there is growth to our national wealth that it will be applied in a way that is most directed towards those fellow Canadians who are still in need of greater equality of opportunity. Perhaps I could put it that way, and less on conspicuous consumption.