September 26, 2024
Canadian Centre for Policy Alternatives – Manitoba
For Immediate Release (Winnipeg, Treaty One): On September 25th, Premier Kinew announced the gas tax would get extended for three more months until December 31, 2024. This is resulting in $326 million less revenue for Manitoba than in 2023/24. CCPA Manitoba has written about the problems with this approach (see Winnipeg Free Press op ed Gas Tax Cut is Back Fiscal Policy). First dubbed as a “holiday” for six months, this is being extended for a second time to a full year – a very long “holiday”. The following outlines drawbacks of extending the elimination of the gas tax:
- Affordability
The Manitoba government introduced the gas tax cut in January 2024 as an affordability mechanism. Since January, Manitoba’s inflation rate has remained within the Bank of Canada’s target rate (1-3%) or lower. The gas tax cut has provided lower prices for drivers, but for the one in five Manitobans who do not drive or cannot afford to have a vehicle did not receive any affordability benefit from this change (Manitoba’s proportion of vehicle commuters was 83% in 2023, which means 17% or roughly 1 in 5 do not use a car to commute and do not benefit from the gas tax cut) .
Those who do not own a vehicle are more likely to be on fixed and/or low incomes and do not benefit from gas tax cuts. The cost of transit in Winnipeg went up 10 cents in 2024, and cities like Winnipeg show no signs of passing on any fuel savings to passengers due to the dire state of transit funding in Manitoba. Other costs, particularly the cost of rent, need to be addressed as part of an affordability plan.
- While the gas tax did bring down inflation rates in Manitoba, inflation has come down across Canada.
Inflation is down across the country, it has not reduced food costs or transit costs. Food prices have not come down either. According to Statistics Canada, food costs have plateaued across the country, indicating that there has been no downward pressure on food prices here in Manitoba due to the gas tax cut, despite the Premier indicating the gas tax cut should have this effect.
Oil prices rise and fall based on the dynamics of supply and demand in a global oil market, which has become increasingly volatile over the last twenty years. Renewable energy prices, by contrast, have been slowly dropping over the last two decades.
We also note that when the gas tax holiday was announced as an election commitment in August 2023, the Premier committed to holding gas companies accountable by bringing in new regulations on the price of gasoline to stop anti-competitive behaviour. This has not happened, but the gas tax cut continues to be extended.
- Climate
The gas tax cut was promised as a short-term measure to minimize long-term influence on consumer behaviour. By extending it again, consumers get the signal to invest in gas vehicles at a time of climate crisis. It is illogical to cut taxes on fossil gas and inadequately invest in the required rapid transition to renewable energy at a time of climate crisis.
The revenue from the gas tax and additional public investment are needed to help Manitobans get off of fossil fuels and onto truly affordable renewable energy in the form of good public transit and transportation and EVs.
- Canada and Manitoba’s gas tax is low and does not pay for wear and tear on crumbling roads and infrastructure
The transportation and infrastructure department’s overall capital budget is $540 million in 2024-25, down from $704 million two years earlier – about the same as the $250 million cut from the gas tax so far in 2024. Initiating a gas tax cut every time oil prices spike is a costly policy with significant and unpredictable budgetary consequences.
The gas tax in Canada and Manitoba is quite low. Compared to other countries, Canada’s average combined federal/provincial gas tax in 2022 (41c/litre) was less than half the OECD average (88c/litre). Only two countries, Turkey and the United States, levy gas taxes lower than Canada. Most OECD countries have taxes on vehicles tied more closely to maintenance required for public roads.
- Accelerating the transition to renewables will make Manitoba truly affordable
Renewables are not subject to oil and gas price volatility. The costs of doing nothing to mitigate climate change are far higher than the costs of taking action over the long term. Destructive weather events turbocharged by climate change, such as fires, flood, and drought, are already impacting Manitoba. Across the US, losses for home insurance companies created by extreme weather are causing those companies to raise premiums by as much as 50%, reduce coverage, or leave entire states – even midwest states once thought to be insulated from climate risk.
Manitoba should put at least the same amount cut from the gas tax into climate action – renewables, building retrofits, transit and intra-community transportation. The Climate Action Team’s Road to Resilience in Manitoba report series has evidence-based policy actions for Manitoba to act upon.
- Scientific evidence must inform public policy decision-making
The gas tax and carbon tax have been politicized by populist and right-wing politicians. The evidence shows that a price on carbon brings down GHG rates. What has been missing is a public education on the clear link between the taxes people pay and what people get from them to remind people that public investment is needed to help people get off of fossil fuels, protect against climate change, and make life more affordable.
The Manitoba government adopted the previous PC budgets, which cut $1.6 billion in income, property and business taxes, substantially reducing Manitoba’s own source income. With the gas tax cut on top of this, Manitoba’s own source revenue as a proportion of GDP is at historical lows, which will seriously impact the government’s ability to meet key election commitments in the areas of health, education, homelessness and climate action.
Although the government walked back from this position somewhat in its first budget by transforming the property tax rebate and capping the basic personal amount tax exemption, reducing the the blow to provincial revenues somewhat, it is becoming increasingly clear that more revenue is needed to repair and rebuild public services. This government has made some important steps during its first year in office – introducing a school nutrition program, commiting to search the prairie green landfill, and hiring new healthcare workers – but there is still more to do to follow through on commitments to fix healthcare and rebuild public services.
