TORONTO (Reuters) - Ontario’s minority Liberal government passed its 2012-13 budget on Tuesday, hanging on to power a day after striking a deal with the left-leaning New Democrats to introduce a surtax on the rich that allowed the Liberals to avert a snap election.
The budget passed by 52 votes to 37 in the provincial legislature. New Democratic Party (NDP) lawmakers did not vote, allowing the budget to pass. The Conservative Party voted against.
The NDP said on Monday it would not defeat the minority government’s spending plan after the Liberals agreed to impose higher taxes on Ontario residents earning more than C$500,000 ($500,000) a year, among other concessions and tweaks to the budget.
The Liberals had promised in their election platform last year that they would not raise taxes, but they needed support from either the Conservatives or the NDP to pass the budget into law and avoid a second election in six months.
The new tax bracket will hit the wealthiest earners with a two-percentage point increase to 13.16 percent.
Premier Dalton McGuinty said the extra revenue from the tax hike, which he pegged at around C$470 million, will go to reducing Ontario’s deficit, estimated at C$15.3 billion for 2012-13. But the revenue estimate met with skepticism from some analysts.
“The actual net revenue take will almost certainly be less (possibly quite a bit less) than the static, nobody-changes-their-behavior estimates of C$450-C$550 million per year,” BMO Capital Markets said in a note to clients.
“Possibly the most serious potential damage from such a move is its impact on perceptions - the province is at risk of being seen as a high-tax/high-cost jurisdiction, potentially blunting investment.”
Editing by Peter Galloway