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This article was published 12/3/2018 (923 days ago), so information in it may no longer be current.

Manitoba will cut income taxes and substantially reduce the deficit in the upcoming year — thanks largely to an infusion of cash from Ottawa and the introduction of the federally mandated carbon tax.

After numerous skirmishes with the Trudeau government over funding in recent months, there was a certain irony Monday when Finance Minister Cameron Friesen unveiled his financial blueprint for 2018-19.

The government led by Premier Brian Pallister will use a carbon tax windfall of close to $1 billion over the next four years to reduce income taxes and small-business taxes, and help slash the provincial deficit to a projected $142 million by 2021-22. For the coming year, the deficit is projected to be $521 million, more than $200-million less than for the current fiscal year that ends March 31.

Friesen said the province's carbon tax will take effect Sept. 1. The measure is expected to add $300 a year to the cost of gasoline and home heating for a family of four. Gasoline prices will rise by more than a nickel per litre.

The Tory government promised Monday every penny – and more – of carbon tax revenues will be returned to Manitoba taxpayers, but that won't happen right away. In the coming fiscal year, Manitoba is expected to take in $117.7-million more in carbon tax revenues than it refunds in the form of income and small-business tax cuts and credits.

That's because, while the carbon tax takes effect in less than six months, the income and business tax cuts won't kick in until 2019.

That didn't stop Friesen from calling the changes "the largest tax cut in Manitoba history."

Beginning Jan. 1, 2019, the basic personal exemption in Manitoba will rise by $1,010. That will mean $109 more in each taxpayer’s pocket. The exemption will increase by a further $1,010 for the 2020 tax year, adding an additional $109 in savings.

Manitoba is expected to bring in $143 million in carbon tax revenues in the coming fiscal year, due to the Sept. 1 start -- and $248 million on an annual basis. Total transfer payments from Ottawa are expected to be $301 million higher in the coming year than in 2017-18.

“It’s a little bit like getting a Christmas present from your toddler. You paid for it yourself” — Todd MacKay, Prairie director of the Canadian Taxpayers Federation on increased fuel taxes used to pay for a break in income taxes

Due in large part to its belt-tightening efforts, the province will close out 2017-18 with a better fiscal performance than it had first anticipated. Friesen initially budgeted an $840-million deficit last spring, but the shortfall is now expected to come in at $726 million.

The Progressive Conservative government has held the line on costs for the past year, freezing grants to municipalities, ordering health authorities to find savings, and passing a bill to freeze public-sector wages.

In his third budget, Friesen continued his municipal funding freeze, while reducing spending in four government departments: agriculture; growth, enterprise and trade; municipal relations; and sustainable development.

The latter, responsible for environmental programs, will take a one per cent cut.

At a news conference Monday, Pallister rejected the notion Ottawa's mandated carbon tax and enhanced transfer payments were responsible for the income tax cuts and lowered deficit.

He credited his government's efforts for the improved fiscal performance, and its ability to identify with taxpayers.

"We’re inspired by Manitobans and the decisions they make by necessity, all the time with their own budgets," he told reporters. "Manitobans have had to learn to do more with less the last number of years."

The government announced plans to establish a "conservation trust" to protect wetlands. An initial endowment of $102 million is being made this year to the trust, which will be managed by the Winnipeg Foundation and with the proceeds being administered by the Manitoba Habitat Heritage Corporation.

But apart from that, there were no specific announcements Monday to address climate change. Pallister said programs to address greenhouse gas build-up would emerge, but only after consultation with various stakeholder groups.

Despite the good news of a lower deficit, and plans to reduce income taxes, reaction was mixed.

Loren Remillard, president of the Winnipeg Chamber of Commerce, coined the term "carbon confusion" to describe the province's planned use of carbon tax revenues over the next several years. Some of the anticipated windfall will be used to offset some of the revenue that will be lost when the Progressive Conservatives keep a promise to lower the provincial sales tax by a percentage point in 2020, reporters were told.

PHIL HOSSACK / WINNIPEG FREE PRESS Manitoba Minister of Finance Cameron Friesen delivers his budget at the Manitoba Legislature Monday.

Remillard lamented there were no measures to assist certain "trade-exposed sectors" with the costs of the carbon tax. He was also critical of the absence of programs to address climate change.

"There is no investment in the green economy, supporting the environmental industries, to be able to help us mitigate and adapt to the challenge of greenhouse gas emissions," Remillard said.

Todd MacKay, Prairie director of the Canadian Taxpayers Federation, blasted the government for raising taxes in the coming year. The income tax break Manitobans will receive starting in 2019 will be offset by higher fuel taxes, he said.

"It’s a little bit like getting a Christmas present from your toddler. You paid for it yourself," he said.

Meanwhile, Friesen would not say how much revenue the province expects to bring in from taxes on legalized marijuana. While the federal government had hoped recreational cannabis sales would begin in July, the start date may be pushed into the fall.

"We do not expect a revenue windfall -- and we anticipate there will be many costs associated with this initiative," the finance minister said in his budget speech.

Overall government spending is slated to reach $14.17 billion, an increase of 2.5 per cent over this past year. The Families Department will receive one of the biggest increases, with a budget hike of three per cent, to $2.06 billion.

As first reported by the Free Press, small businesses will see their income threshold rise to $500,000 from $450,000 before they pay tax beginning next year. Individual businesses stand to gain as much as $6,000 a year.

Health

Total health-care spending will edge up by 0.9 per cent to $6.16 billion, an increase the Opposition NDP described as a defacto cut.

New health initiatives include a reduction in ambulance fees to $340 from $425, and the creation of 60 full-time paramedic positions across Manitoba.

Funding for renal dialysis will be boosted by $7.7 million to expand access to care for those with end-stage kidney disease. And there is an additional $14 million budgeted for cancer drugs taken at home.

Education

Spending on education and training is projected to rise by a half a percentage point, to $2.45 billion.

The province has approved the construction of five new schools, one more than previously announced: a kindergarten to Grade 8 facility and a Grades 9-12 school in Winnipeg's Waverley West, a K-5 school in Seven Oaks, a K-8 school at Waterford Green in northwest Winnipeg, and a K-8 school in southeast Brandon.

Operating grants to universities and colleges are down 0.9 per cent. Research funding to post-secondary schools has been cut by $3 million, University of Manitoba president David Barnard said.

There are improvements to student financial aid, including an increase in bursaries totalling $1 million for low-income Indigenous students, and an additional $1.7 million to expand eligibility to students studying at private religious institutions in Manitoba.

Infrastructure

The government will spend $350 million on road projects, in addition to the more than $100 million on maintenance.

It has earmarked $70 million in the coming year for outlet channels to improve the regulation of water levels on Lake Manitoba and Lake St. Martin.

It is also spending $33.6 million to rehabilitate and reconstruct provincial dams, flood-protection infrastructure and agriculture drains, including projects at the Fairford Dam on Highway 6, the Shellmouth Dam and reservoir and improvements to the river-control structure and outlet structure at the Portage Diversion.

larry.kusch@freepress.mb.ca