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Will Ontario take from one of your pockets what Ottawa puts in the other?

These are stories Report on Business is following Tuesday, Nov. 18, 2014.

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Give and take
At least one economist is wondering today whether the Ontario government could take from one of your pockets what the federal government is putting into the other.

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This question is based on this statement yesterday from Ontario Finance Minister Charles Sousa: "Should economic conditions persist that result in the province's revenue outlook falling further below the 2014 budget projection, the government will consider other tools, as necessary, to balance the budget by 2017-18. This would be done while continuing to make critical investments in those programs and services that people depend on."

While Mr. Sousa didn't outline what exactly that could mean, economist Robert Kavcic, for one, read it that "more tax increases could be on the table."

This would, of course, fly in the face of how the Harper government boasts repeatedly of the money it's saving Canadian taxpayers.

As The Globe and Mail's Adrian Morrow and Justin Giovannetti report, Mr. Sousa outlined in his fall economic update that government revenues are down by more than $500-million, at the same time as the economy lags projections.

He stuck to his target of balancing the books by 2017-18, warning he'll look at other ways to do that.

"This opens an interesting possibility for Ontarians, whereby tax dollars could be returned to one pocket by the federal government, but taken out of the other by the province," said Mr. Kavcic, senior economist at BMO Nesbitt Burns.

"Time will tell on this one."

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Today, speaking in Toronto, Mr. Sousa said he doesn't want to hike taxes, but he wouldn't rule it out, either.

"I want to maintain our tax rates the way they are now, to maintain our competitiveness and to attract investment and to put everybody at their best," he said.

No matter what, the Ontario government faces issues despite the fact that exceptionally low interest rates are helping it along.

"The difficult work of expenditure restraint continues to loom on the horizon," said economist Leslie Preston of Toronto-Dominion Bank.

"The government intends to hold spending growth well below inflation over 2015-18, with the toughest years for restraint in 2016-17 and 2017-18. The government stated that it is meeting its program review goals, but the  years ahead will continue to be challenging for the Ontario public sector."

Economists largely praised the fiscal plan, though we've yet to hear from ratings agencies that are reviewing the province's finances.

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"There continues to be some disappointments on the revenue side but these are fairly modest and well within the wiggle room afforded by the budget reserve," said Royal Bank of Canada economists Robert Hogue and Laura Cooper.

"We are encouraged to see that revisions to the debt profile, however slim, are the right direction – i.e., down," they added.

"Still, it remains to be seen whether rating agencies will be satisfied with the evolution of Ontario's fiscal position to date, as well as the plan going forward. Ontario's credit rating is under review by Moody's and Standard and Poor's for a possible downgrade."

The 1 per cent
And while we're on the topic of who's got money and who doesn't, The Globe and Mail's Tavia Grant reports today that total income among Canada's 1-percenters has dropped to a six-year low.

The number of women in the top group, meanwhile, is at a record, according to Statistics Canada data.

The country's richest 1 per cent held 10.3 per cent of total income in 2012, down from 10.6 per cent a year earlier. Their share peaked in 2006 at 12.1 per cent, though it remains higher than three decades ago, when it was 7.1 per cent.

The bar to qualify as a 1-percenter is rising, Ms. Grant writes, now at $215,700 compared to $212,700 in 2011.

Keystone vote could move dollar
To the oil patch, Keystone XL is a must. To environmentalists, it's a filthy project. To currency traders, it's something that could give the loonie a boost.

The U.S. House of Representatives has already passed legislation that would allow the long-stalled TransCanada Corp. project to proceed. It's now scheduled to go to the Senate this evening, though, as The Globe and Mail's Paul Koring reports, at least one more Democrat is needed for the 60 necessary votes to approve.

If it passes, observers say, you could see a small, if short-lived, jump in the Canadian dollar.

Here's how chief currency strategist Camilla Sutton of Bank of Nova Scotia explained it: Actual construction of the pipeline would be a "powerful" piece of the oil transportation puzzle, helping to buoy the Canadian economy down the road, and thus a positive for the loonie.

Already, she said, the loonie may have gained a bit over the past couple of days with the focus on the pipeline.

"The impact of Keystone XL's approval on CAD would be much bigger, but is likely to be short-lived," said Charles St-Arnaud of Nomura, referring to the Canadian currency by its symbol.

"Keystone won't be operational until 2017," he added.

"So the positive economic spillover effects won't be visible until then. Moreover, the impact may be gradual as new transportation capacity is likely to mainly displace oil already being shipped by rail rather than being new production and exports."

Mr. St-Arnaud, by the way, expects the loonie to sink to about 84 cents U.S. next year as the U.S. dollar strengthens.

TransCanada on offensive
TransCanada went on the offensive today ahead of the vote, highlighting again why Keystone XL "is truly in the national interest of America" and lamenting how the regulatory process has been "hijacked" by opponents.

"After 2,200 days and five environmental reviews totaling 17,000 pages it is time to move this project forward as it has passed the environmental GHG test," chief executive officer Russ Girling said in a statement.

"All reviews concluded Keystone XL would have minimal impact on the environment," he added.

"The scientific conclusions are clear - more delays will not change that. The regulatory process itself has been hijacked by those who believe if they can delay or prevent the Keystone XL pipeline, oil production and refining will be controlled and global GHG emissions will be reduced. This is a naive, inaccurate and unrealistic conclusion."

Mr. Girling cited the jobs and higher property taxes for counties, among other things, as reasons to approve.

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