Treasury Board president Stockwell Day known for tax reform, not cost-cutting

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EDMONTON - More than a decade ago, former Alberta treasurer Stockwell Day took the legislature by surprise by introducing a surplus budget wearing in-line skates instead of a conservative pair of wingtips, a signal that he was about to put his own stamp on the province's finances.
Now Day, the new Treasury Board president in Ottawa, has been tasked by the prime minister to help the federal government reduce its deficit.
But Day's legacy in Alberta is his introduction of Canada's first and only single, income-tax rate - not as a cost-cutter.
Government spending during the years Day was in charge of Alberta's finances went up every year, not down. The deficit was slain by his predecessor, Jim Dinning.
"If you compare Stockwell Day to Jim Dinning, Stockwell Day looks like Santa Claus in the late 1990s," said Mark Milke, former Alberta director of the Canadian Taxpayers Federation. Milke is now director of the Calgary-based Frontier Centre for Public Policy.
"The view of Stockwell Day as the one who actually roped in expenditures in Alberta is not really the case. If you look at per capita spending, you will see that program spending increased under his watch."
Alberta Finance figures show government spending began increasing in 1997, the year Day became provincial treasurer. The spending was financed by a surge in revenues as the province's slumping economy began to grow again, in part of because of higher energy prices and a higher take on income taxes.
Flush with cash, Day handed down subsequent surplus budgets that included hefty spending increases.
After tabling one of them in 2000, Day appeared to be uncomfortable about turning on the spending taps as he explained the government's decision to hire additional teachers, doctors and nurses.
"It's a good news story for Albertans," Day said at the time, but added, "if you're a fiscal hawk, then the (spending) numbers are gross."
Day said late Wednesday his record speaks for itself.
"I have a record that shows every department I was in reduced spending and when I was treasurer, we increased spending significantly in health and education because those were the areas federal Liberals had drastically cut to all provinces...
"The fact is the Intelligence Economist Unit says that Canada is the best positioned country among the industrialized nations coming out of this economic global recession.
"That's because of the policies we have in place now and that's because of what we're projecting for the future and that's what counts and that's our focus, not whatever I did 15 years ago."
Mitchel Gray, who used to lobby the Alberta government for tax reform in the late 1990s, said Day deserves credit for ensuring that much of the extra money went toward paying down Alberta's accumulated debt and toward tax cuts.
The tax changes included decoupling Alberta from the federal income tax rate. Instead of paying 44 per cent of federal tax, most Albertans began paying a flat rate of 11 per cent of their taxable income, regardless of how much money they made. That rate has since been reduced to 10 per cent.
"That was a bold move that has worked quite well for the province," Gray said. "He championed it and it might not have happened under anyone else."
Both Gray and Milke said it was disappointing that Day could never get the Alberta government to tie spending increases to population growth plus inflation growth.
"I think he personally did his best to control spending, nevertheless he was part of the problem that we have today," Gray said.
"They could have controlled spending at that time. The legacy that exists today was primarily under Stockwell's watch."
After his appointment as Treasury Board president on Tuesday, Day was careful not to specify where the federal government will cut spending.
He would only say that once Finance Minister Jim Flaherty introduces his budget in March, the government will sharpen its pencils and look at the best way to keep spending under control.
Day said he doesn't expect too much internal opposition to cutting costs.

Organizations: Treasury Board, Frontier Centre for Public Policy, Alberta Finance Stockwell's

Geographic location: Alberta, Canada, EDMONTON Ottawa

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