Ontario budget shuns Ottawa's tax cut demands

Tue Mar 25, 2008 5:06pm EDT
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By Lynne Olver

TORONTO (Reuters) - Ontario trod its own fiscal path in its 2008-09 budget, refusing to follow federal advice to cut business taxes and insisting that tax cuts were not a silver bullet for a rapidly slowing provincial economy.

"The government has invested, and continues to invest, in tax cuts for business," said the budget, which the provincial Liberal government released on Tuesday. "However, simply lowering taxes is not enough to ensure that an economy can compete in global markets."

In highly unusual comments on Monday, federal Finance Minister Jim Flaherty, a Conservative and a former Ontario finance minister, said he expected Ontario to lower corporate taxes to stimulate the economy.

Otherwise, Ontario is on the way to becoming a "have-not" province, or one that receives payments from other provinces, he said.

Ontario Finance Minister Dwight Duncan declined to speculate on the reason behind Flaherty's criticism, and said Ontario would focus on its own plan.

But John Tory, leader of the opposition Progressive Conservative Party in Ontario, said the federal government has every right to comment on what goes on in Ontario, which has traditionally been Canada's economic powerhouse.

"So goes the Ontario economy, so goes a large part of the Canadian economy," Tory said. "Mr. Flaherty has made no secret of his desire to see Ontario get on board with every other government in this country, to lower taxes, to provide some relief from the regulatory burden, and to make sure that we stimulate the private sector to create jobs."

However some newspapers said Flaherty's comments smacked of interference, and argued that federal government should butt out of provincial affairs.   Continued...