Liberals feeling heat over unpopular deficit reduction levy

Liberal MHAs are growing increasingly nervous about the political fallout of the unpopular deficit reduction levy, and some are even hoping that Premier Dwight Ball will scrap the tax and find the lost revenue elsewhere.

Caucus sources say the levy is the No. 1topic in their private meetings when they discuss the political fallout of the budget.

The reaction has been so explosive in their districts that some MHAs fear the levy could be their Bill 29 an unpopular move early in a mandate that does permanent political damage.

"The premier's office has got to step in on this,"said one Liberal who wants to see the levy eliminated in favour of income tax hikes.

The levy will deliver $126million to the government when fully implemented.

New levy perceived as unfair

The backlash focuses on the perceived lack of fairness in the levy rates.

Someone who makes $25,000 pays $300 a year while someone who makes $250,000 pays just $900.

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There's also the fact that the levy doesn't appear to provide anything tangible in return.

Ontario residents pay the Ontario Health Premium at roughly the same rates as the deficit reduction levy.

In fact, the deficit levy was modelled after the Ontario Health Premium. But the premium is tied directly to the provision of health services which makes it an easier pill to swallow.

The deficit levy is widely viewed as an unprogressive cash grab that disproportionately hits people who earn less than $50,000 a year.

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The levy faced some resistance from the very beginning of the budget process.

Multiple Liberal sources say that cabinet ministers Gerry Byrne and Eddie Joyce argued against it but ultimately lost the battle at the cabinet table.

It could have been a TORI tax

But as bad as the levy has been received, it could have been worse. The initial proposed name for the levy was theTemporary Offset Revenue Initiative, which spelled out the acronym TORI.

So a Liberal government which just defeated a Tory government in the election was poised to implement a TORI tax.

It's no wonder the Liberal caucus is getting the post-budget jitters.

The public anger has been fierce. The communication strategy for the budget has been the subject of intense internal criticism.

And now the premier has gone on a media blitz of extended interviews and townhalls to try to sell the fiscal choices to the public.

Many in caucus argue this is the best approach. To stand firm on the tough choices, make their case to the public as to the necessity of the choices and ride out the public storm that's currently battering the government.

Listening and leading

But others make the case that this is the time for the government to show some flexibility.

They point to Ball's prior statements -- being used to great effect in NAPE attack ads -- that "if you can't listen, you can't lead" and argue Ball needs to listen to the anger over the levy and take action.

The most obvious solution is to eliminate it and recover the lost revenue by increases to base income tax rates.

The downside is that if the government flinches now, how can it stand tough in the future?

It all puts Ball in difficult position. He has to choose between dealing with an anxious caucus and an angry public or overruling Finance Minister Cathy Bennett in her first budget on a tough road back to fiscal stability.