Tuesday, December 5, 2017 - 10:24
Discussion A - OPTIONS FOR SHORT TERM FINANCIAL HEALTH
The Government of Yukon anticipates a significant shortfall of money (deficits) in the coming years, where the spending levels are higher than the anticipate revenue. The Panel has developed the following options to improve the currently forecasted budget deficits: Option 1: Restrain Spending Growth In order to achieve a balanced budget by 2020, the Yukon government could restrain spending growth by limiting spending increases to 1% per year. Alternatively, a more relaxed approach with spending growth capped at 2% per year would balance the territorial budget by 2022/23. Option 2: Increase Government Revenue The Government of Yukon could establish a territorial sales tax. A sales tax would address near-term fiscal challenges and would grow with the territory’s GDP. Each 1% increase in the sales tax would raise an additional $7 million per year in government revenues. The revenue collected from a territorial sales tax could be redistributed through lowering personal and business tax. Additionally, visitors to the Yukon would contribute a substantial share of the sales tax revenue, perhaps in excess of 25 cents of each dollar collected, and therefore Yukoners overall would pay less tax. Option 3: Combine New Revenues with Spending Restraint There is an opportunity to combine both Option 1 and 2 where the outcome of a balanced budget would be achieved sooner as well as the costs of the change are distributed more equitably. The Government of Yukon could combine new revenues and spending growth by:
What do you think?
- Capping spending growth at 2% and introducing a 4% territorial sales tax in order to balance the territorial budget by 2020/21.
- Capping spending growth at 1.5% and introducing a 4% territorial sales tax in order to balance the territorial budget by 2019/20.
- Capping spending growth at 0.5% and introducing a 2% territorial sales tax in order to balance the territorial budget by 2019/20.
What do you think?
- What pros, opportunities and benefits are associated with these options?
- What cons, challenges and limitations are associated with these options?