Should Ontario hike its sales tax? Here's what happened to Manitoba

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Greg Selinger may be one of the boldest politicians in this country.

Last year, the Manitoba premier took a massive political risk by hiking the provincial sales tax to pay for infrastructure. Over the next five years, the 1-percentage-point increase is expected to raise $1.5-billion in extra revenue, which will be funnelled into public transit, improved highways and flood protection for the perennially inundated province.

This is the very thing transit experts, civic leaders and some business people talk about constantly. We need an "adult conversation" about how to pay for all the infrastructure the country so desperately needs, they say. With provincial and municipal budgets already strained, the contention goes, we must all be willing to chip in a little extra (or create a new "revenue stream") to build the things we want.

But politicians have consistently shied away from actually doing this. Not Mr. Selinger.

"We knew we had to make major infrastructure investments to ensure we could grow the economy, to create more jobs and to address natural disaster mitigation throughout the province," he said at an infrastructure-building conference in Toronto this week. "It was a decision that we had to make."

For Ontario Premier Kathleen Wynne, who hosted the conference, Manitoba's model is the path not followed.

When she succeeded Dalton McGuinty in February 2013, Ms. Wynne declared in no uncertain terms that the province would have to hike taxes to fund its ambitious plans to expand transit and smash gridlock in the Greater Toronto and Hamilton Areas. At the time, there seemed to be growing support in political and business circles for such a move. Even the Progressive Conservative opposition quietly conceded a new tax, toll or levy of some kind was needed.

But over the course of the next year, Ms. Wynne's resolve wore down. When provincial transit agency Metrolinx recommended a one-point sales tax increase, the Premier's office rejected it out of hand. Then, an expert panel advised hiking the gas tax. Ms. Wynne balked at that idea, too.

In the end, she took a politically safer route for raising infrastructure cash. Some will come from redirecting existing tax dollars (and, by extension, cutting spending elsewhere in the budget); some will come from selling off government-owned real estate and other assets. The Liberals are still hiking taxes, but they are much more marginal and targeted – hitting airplane fuel, tobacco and high-income earners – than what they had previously contemplated.

Ms. Wynne's calculation was that an across-the-board tax increase would be too risky in an election year. The PCs also backed away from one and made clear that, if the Liberals ran on such a proposal, they would make them pay for it at the ballot box.

At this week's conference, Ms. Wynne sounded like she had little appetite to follow Manitoba's example.

"Each of us has made different decision and we are operating in different contexts," she said when asked about it.

Mr. Selinger's experience seems to validate her wariness.

Almost as soon as he raised the provincial sales tax from 7 to 8 per cent, protesters descended on the lawn of the legislature. His New Democrats lost their lead in the polls, and have not been able to regain it. The opposition Tories have even taken the government to court over the matter.

Granted, the backlash in Manitoba has been fuelled not only by the policy itself, but by the underhanded way the NDP implemented it. Mr. Selinger never mentioned the infrastructure tax in the previous election. He also used his large majority in the legislature to override a previous law that required tax increases be put to a referendum.

Today, Mr. Selinger is contrite about how he handled the rollout, but stands firmly behind the policy.

"Quite frankly, we should've done a better job of preparing people for why we had to do it," he said. "But now we're going out there, talking to people, showing them the investments and getting results in the ground, and that has significantly improved the reception of it."

Among the projects planned in the province are $320-million for improvements to the TransCanada highway, a $225-million expansion of Winnipeg's bus rapid transit system and $320-million on new dikes and dams to better protect cities and towns from spring floods. Some of the money is also going to municipalities for local building and repairs.

In five years' time, the province plans to build $5.5-billion worth of infrastructure. Of that, $1.5-billion of the money will come from the increased PST, $3.6-billion from other provincial funds and the remainder from federal and municipal governments.

Mr. Selinger pointed to a Conference Board of Canada Report that estimates every dollar the province spends on infrastructure will return $1.16 in economic activity. Overall, the spending will create a 2-per-cent increase to real GDP, the report projects. The key, he said, is to make sure people can see their tax money is getting them a clear benefit.

Agree or not with Mr. Selinger's policy, there is no denying he has taken a major risk to implement the kind of policy everyone talks about but no one actually does. He will find out in 2016, when he's up for re-election, whether it has paid off.

If he loses, he may very well look at Ms. Wynne's caution, and wish he had been as careful as her.

But if he wins, it will certainly leave the Ontario Liberals wondering if they could have been bolder.

And it would finally prove voters are ready for that adult conversation after all.

Adrian Morrow is The Globe's Queen's Park reporter.