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Presentation to:

Standing Committee on Social and Economic Development

Bill 20 – The Manitoba Building and Renewal Funding and Fiscal Management Act


Presenter:
Doug Chorney, President
Keystone Agricultural Producers
203-1700 Ellice Avenue, Winnipeg, MB  R3H 0B1
Phone: 204-697-1140
www.kap.mb.ca


Good morning honourable members of the Legislative Assembly, ladies and gentlemen. My name is Doug Chorney, and I’m president of Keystone Agricultural Producers, the grassroots organization that works in the interest of farmers in Manitoba.

I’d like to thank you for the opportunity to comment on Bill 20 and Budget 2013.

Before I begin, I’d like to paint a quick picture of the agriculture industry in Manitoba, so that you’ll understand our concerns over the effects of this budget.

Our industry is critical to the province as an economic driver and a creator of jobs. According to provincial information, we contribute $10 billion to the province’s economy and create 62,000 jobs. These jobs, I note, are in every sector – including shipping, processing, retailing, research, and the businesses that supply goods and services directly to farmers.

Agriculture, as you know, starts at the farm level. The unique thing about our industry is that we consist of a large number of independent farm operators – each one a stand-alone business.

Compare this to Manitoba’s other large industries – for example, the aerospace industry, which is dominated by just three major firms.

Manitoba’s approximately 15,000 individual farm operators face a series of risks that are not found in any other industry. Weather, as we well know, can wipe out crops – as it did in 2011, when $900 million in production was lost to heavy spring rains.

The world marketplace, too, creates very significant challenges. Markets can be lost in the blink of an eye, and a farmer can suffer huge losses as a result. Currently, country-of-origin labelling  in the U.S. is costing the Canadian livestock sector an estimated $1.14 billion annually.

In addition to these risks, agricultural producers must also contend with crop prices that rise and fall with global market cycles.

Despite these risks, farmers must invest in the industry if they are to stay competitive. While net farm income has improved, continuous investment in land and equipment is necessary.

In fact, total farm debt in Manitoba has risen to $7.5 billion dollars – double what it was a decade ago. In 2013, Canada wide farm debt exceeded $70 billion for the first time in history.

The Government of Manitoba has long supported agriculture, as do other provincial and federal  jurisdictions, in recognition of the challenges the industry faces. However, we are concerned over the recent cuts in support for farm business risk management programs – by both federal and provincial governments.

We are further alarmed by the additional cuts as a result of the Budget 2013 and Bill 20. We believe these cuts are based on the mistaken belief that farmers have overcome the natural and market risks that I have described. These risks, however are inherent to the industry, and have been present since the late 1800’s.

PST

The PST increase will impact farmers. While many farm input and equipment purchases are PST-exempt, farmers must pay the tax on construction material for all farm buildings – as well as on a variety of other purchases.

A one per-cent increase will make a huge difference on big-ticket investments such as building materials or agricultural trailers – investments I might add, that are completely exempt in Ontario.

We are asking that this competitive disadvantage be corrected. There must be a review of taxable farm items, and more exemptions allowed on farm purchases.

The increased PST will also impact rural communities. Farmers near our western border inform me that many residents are travelling to Saskatchewan for large purchases.

At a time when rural de-population is a growing concern, Manitoba should find ways of creating competitive advantages for rural commerce – instead of legislating disadvantages.

PST and Infrastructure

Another issue with the PST increase is the way in which the added revenue will be spent. We are told that it will leverage federal funding so that some large infrastructure projects in rural Manitoba can take place.

As residents of local municipalities, we understand the impact of the provincial infrastructure deficit on our farms and communities, and the need to maintain and re-build. However, the problem with this funding formula is that municipal governments will not see this money.

The provincial government will choose which projects it will create and fund – even though municipal governments are best equipped to assess and determine where strategic infrastructure investments need to be made to improve their communities.

In Manitoba, we have the land, water, weather, knowledge, people and ability to grow world-class agricultural products. What we don’t have, however, is a comprehensive food-processing industry to take those products, add value, and then sell them to consumers at home and throughout the world.

We are in a contest with our neighboring states and provinces for food-processing investment, and we must be competitive to attract the kinds of investment that will drive the agriculture industry, our communities and our economy forward.

Good transportation infrastructure is a critical factor for food processors when they perform a location assessment.  Because Budget 2013 will be providing almost no new revenue to rural municipalities for local infrastructure projects, we don’t believe communities will be able to develop the competitive edge they need to attract investors.

This is very disheartening for those who live, work and farm in rural Manitoba.

Farmland School Tax Rebate

Another grave concern for Keystone Agricultural Producers is the changes to the Farmland School Tax Rebate program contained in Budget 2013.

We have long argued that education tax levied against land and property is a dysfunctional way of funding a service as critical as primary and secondary education.

It creates a situation where farmers, regardless of net income or relative wealth, pay a disproportionate amount of the total tax required to fund education in Manitoba.

The provincial government has recognized this and created the Farmland School Tax Rebate program, which it has enhanced over the years.

On September 18, 2011, farmers in Manitoba were very pleased to hear Premier Selinger announce, and I quote;
“farmers will pay no school taxes. We all know the feeling that we could use a little more money in our wallets… Our hard-working farmers face many challenges, from the weather to the volatility of crop prices. And many farmers have had a rough year… Today’s NDP will: Save farmers $14 million every year by eliminating the school tax on farm land.”

This was the government’s pledge to increase the rebate from 80% to 100%. Instead, however, in Budget 2013, a $5,000 cap on the program was introduced.

Another change will limit the time frame for farmers to apply, and yet another has disallowed the rebate for out-of-province landowners.

The $6.2 million the government expects to save through these program changes is roughly equal to reducing the rebate from 80%, down to 68%.

Premier Selinger was clear on his commitment to reduce the tax burden on Manitoba farmers. However, to the contrary, money will be drawn out of rural Manitoba at a critical time. Farmers would otherwise be investing in their operations, paying down debt, and saving for future years when we will see cyclical declines in production and commodity prices.

This new tax burden will also be difficult for many young farmers – those who have borrowed substantial amounts of money to increase the size of their operations as an investment in the future of agriculture in this province.

Curtis McRae, a young farmer with both a growing family and farm, is a very good example of why these program changes are wrong. If they are not reversed, he will pay an additional $3,000 in taxes – money that otherwise could be used towards university tuition for his children, investment in land, buildings or equipment, or to help pay down long-term debt.

Farmers who rent land are also concerned – because they know that their rental rates are going to increase as a result of the removal of the rebate for out-of-province landowners.

None of this is contributing to the competitiveness of the industry or the business climate in Manitoba – and I ask why this is so.

To point out the disparity in our education tax system, I’d like to bring your attention to the last page of our submission. It’s an ad for a condo not far from here – 8,000 square feet, library with stained glass ceiling, den, gym, and a separate bedroom for live-in help. All this for only $3.3 million.

The final line of the ad is the interesting part. “Due to new legislation, if the owner is age 65 or over, the net tax, less the education tax, will be approximately $15,460.69.”

The pre-rebate tax bill is $32,635, so the homeowner will get a break of $17,172.

I’d like to leave you with this question: who is more deserving of a tax break, the future owner of this $3.3 million residence, or a farmer who uses his land for business and takes on great personal risk to drive our economy and our province forward?

Let’s fix this broken education tax system that we have once and for all. Let’s base school taxes on one’s income and ability to pay. Let’s create a competitive business climate in Manitoba, where  taxation is fair, entrepreneurship is encouraged, and investment is sought out instead of discouraged.