Still, the Ford government’s recent mini-budget provided a small reason for optimism. As part of its plan to “build the most competitive economy in the G7,” it promised to deliver a multi-year “tax action plan” aimed at improving competitiveness in its next full budget. And to update “Ontario’s personal and corporate income taxes” to attract investment, lower costs, and provide relief to individuals and families.

Given the Ford government’s history of broken promises in many areas of fiscal policy, Ontarians should be skeptical. But if the government is serious this time—and wants to finally live up to its early rhetoric—it should swing big. Ontario’s economic growth record in recent years has been dismal. The Ford government is right that tax reform can provide a big help but not if it takes baby steps. 

So, what should the Ford government do? First, it should substantially cut to the provincial business income tax rate. If the government wants to take its own words about competitiveness seriously, it should match Alberta’s 8 per cent rate, which is the lowest in Canada. This would be a reduction of 3.5 points from today.

Ontario faces intense competitive pressure from the United States, where business tax burdens have fallen sharply in recent years. Businesses making location and investment decisions compare jurisdictions, and reducing Ontario’s business income tax can bolster its position. There’s strong evidence that business tax reductions spur growth and investment, with research showing the economic costs of Ontario’s high rate are substantial. Highly regarded studies even suggest Ontario may lose little net revenue from a well-designed business tax cut because the economic gains help offset the effect of the rate reduction.

Critics will argue this type of reform benefits only “the rich,” but the evidence does not support that view. Economists continue to debate the exact split of the business income tax burden, but there’s no doubt it’s shared by both shareholders of the companies that pay it and those who work for them. A lower business income tax rate would boost wages, improve competitiveness and encourage broad-based growth.

Second, the tax action plan should include personal income tax reform focused on supporting economic growth. That means not focusing exclusively on reducing tax brackets at the low end of the income distribution, which governments often prefer to do, but also reducing marginal rates faced by high earners. Ontario’s top marginal rate (53.53 per cent) is the fourth-highest in Canada and the U.S. Such a high rate discourages productive economic activity, and makes it harder for the province to attract and retain high-skilled professionals such as tech workers, engineers and physicians.

One obvious step would to eliminate the two “temporary” high-income tax rates introduced more than a decade ago, which were supposed to have expired long ago. The government could go further and eliminate Ontario’s personal income tax surtaxes, which significantly increase what economists call “marginal effective tax rates” for higher earners.

Taken together, lower business taxes and more competitive personal income taxes would help improve Ontario’s miserable economic growth performance. 

The Ford government has been promising ambitious tax reform to make Ontario “open for business” for the better part of a decade. It hasn’t delivered yet. But the new tax action plan is an opportunity to finally make good on those commitments, and help Ontario become a more dynamic, competitive and prosperous place to live and do business. Perhaps 2026 will be the year. 

Ben Eisen is a senior fellow with the Fraser Institute’s Ontario Prosperity Initiative.