Economists question whether re-elected PCs can make up $1B in lost taxes with economic growth

Whenever Heather Stefanson is asked whether a re-elected Progressive Conservative government can truly afford an additional $1 billion in tax cuts a year, the party leader says growing the economy will make up for any shortfall.

It's a belief that is central to the Tories' economic vision, but some economists say it isn't as simple as Stefanson describes.

"I do think it's wishful thinking that we can sacrifice a billion dollars in tax revenue and satisfy all the demands of citizens of Manitoba about things that they want," said Stefan Dodds, an associate professor of economics at the University of Winnipeg.

The Tories are promising an assortment of tax cuts, valued at more than $1 billion by the fourth year, in their campaign to be elected to a third consecutive mandate on Oct. 3.

They have promised that over eight years, they'll axe the payroll tax for businesses, which brings in around $440 million a year. By the end of four years, the cuts will be half of that, for a loss of $220 million in tax revenue.

There are also pledges to cut the lowest income tax rate in half (costing the government $600 million in annual tax revenue by the fourth year), waive the land-transfer tax for first-time home buyers (costing $35 million to $40 million annually), remove the provincial sales tax from restaurant meals ($25 million annually) and increase the charitable tax credit ($12 million annually).

The Tories say they can offset this revenue loss through prospective manufacturing projects — the vast majority of which still need to be approved.

On the campaign trail, Stefanson has said 13 development projects are about to come to fruition, which would attract $24 billion of capital investment in Manitoba.

A Progressive Conservative spokesperson said the party can only elaborate publicly on four of those projects, while the rest are subject to non-disclosure agreements as negotiations between the proponents and Manitoba's economic development board are underway.

Of the four listed projects, construction on the expansion of a pork processing plant in Winkler is expected to start shortly.

The other projects still have hurdles to cross before construction can begin: A $1.9-billion sustainable aviation fuel factory in Portage la Prairie, a $900-million solar glass manufacturing plant in Selkirk and a $200-million Arctic Char production facility in the rural municipality of Rockwood.

Other projects, such as new mining, are in motion, but without economic development board involvement, the spokesperson said.

Tax cuts can be helpful in stimulating the economy, Dodds said, but there's a financial cost to growing the economy and the population that must also be weighed.

"We have to build more hospitals and we have to build more schools and we have to build more roads," Dodds said.