Ontario’s new finance minister, Jim Flaherty, brought down his first-ever budget today. The Conservatives plan to cut personal and corporate taxes, and continue efforts to reduce the provincial debt.

Flaherty boasted that this is the third balanced budget in a row for the Tories. In it the government pledges personal income tax cuts in line with reductions promised in 1999.

Flaherty said “We propose to complete our 20% personal income tax cut promised in 1999. Ninety-five per cent of taxpayers — virtually everyone earning less than $100,000 a year – would see a cut of at least 20 per cent.”

The tax cuts proposed in the budget would bring to 735,000 the number of low-income earners who would no longer be required to pay taxes to the Ontario government. The budget also proposes to take the first step toward eliminating the personal income surtax, removing it for more than 340,000 people.

The Ontario government is also cutting corporate taxes. Flaherty pledged that the Conservatives will legislate the full schedule of corporate income tax cuts for each year between now and 2005.

The general corporate income tax rate and the manufacturing and processing tax rate will fall to 12.5% and 11% respectively on January 1, 2002. These rates would decline annually until they reach 8% for both when fully implemented in 2005. “By 2005, Ontario would have a lower combined corporate income tax rate than any of the 50 U.S. states. No Canadian province would have a lower general corporate income tax rate,” Flaherty said.

The Ontario government also proposes to take the first step toward eliminating the capital tax by exempting the first $5 million of taxable capital, effective January 1, 2002. This initiative would benefit all businesses paying capital tax and eliminate capital tax for more than 11,000 businesses across all sectors. The government also pledges to undertake a review of Ontario’s tax incentives to ensure that they are effective, useful and relevant.

The government notes that last year it sliced $3 billion off the provincial debt, the largest debt reduction of any government in Ontario’s history. It has now cut $4 billion of the total $5 billion it promised to cut in 2000. The government remains committed to applying the $1 billion reserve, if not needed, plus any surpluses, to pay down net provincial debt, which is projected at $110.7 billion as at March 31, 2001.

As for new spending, the government plans to invest $500 million of the $1 billion SuperBuild Millennium Partnerships initiative on transportation and environmental initiatives. Spending will increase about 3.1% in the coming year.

Flaherty is also proposing sweeping reforms to hold the entire public sector more accountable to taxpayers.