PERHAPS IT WAS A STEP in the right direction when Ontario's finance minister admitted that he hasn't produced any plan to achieve a balanced budget in the near future, let alone in the two years remaining in the government's current mandate.

On the contrary, Dwight Duncan's shocking disclosure last Thursday that the 2009-10 provincial deficit will be $24.7 billion was accompanied by predictions of further huge deficits, totalling more than $40 billion, in the 2010-11 and 2011-12 fiscal years, when Canada's economy is expected to be relatively healthy.

The $24.7 billion is roughly double the previous high deficit of $12.4 billion racked up by the NDP government of the day in 1992, and more than $10 billion above what Mr. Duncan predicted only last June.

However, it should be seen in the context of similarly huge deficits being racked up in Ottawa ($56 billion) and by the Obama administration in Washington (which is said to be approaching $1 trillion). And while Opposition Leader Tim Hudak slammed the McGuinty Liberals' financial record as "shameful" and predicted their only cure will be higher taxes and fees, neither he nor NDP Leader Andrea Horwath had much more to offer than criticism.

As matters stand, we now have a federal government that claims, incredibly, that it can balance its budget without increasing taxes or reducing services or transfers, and a provincial government which simply admits it doesn't know how to stem the flow of red ink.

In these circumstances, we think an appropriate course for both the federal Conservatives and provincial Liberals would be to at least try to de-politicize the issue by putting it to an all-party committee that could invite public input on how best to achieve balanced federal and provincial budgets within five years.

As matters stand, the "solutions" likely to be proposed by the provincial Conservatives and NDP will be equally disparate and unsatisfactory. Those on the right side of the political spectrum will keep calling for tax cuts and smaller government while those to the left will demand higher taxation of corporations and wealthy individuals along with lower taxes and more services for the poor.

Clearly, the challenges facing both the Conservatives at Ottawa and the Liberals at Queen's Park are unprecedented, and far worse than those that faced the Chrétien Liberals and Harris Conservatives in 1995.

Although much of the credit for gradually balancing the federal budgets went to Paul Martin as Jean Chrétien's wily finance minister, the fact is that the feat was accomplished in large part because of cutbacks on federal transfers to the provinces and by the added revenue flowing into the federal treasury from the Goods and Services Tax the Liberals inherited from the Mulroney Conservatives.

Similarly, the Harris government arrived on the scene at Queen's Park just as Ontario was emerging from the recession of the early 1990s, did not have to cope with a floundering U.S. economy, and reduced the provincial deficits mainly by cutting services and/or downloading them to the municipalities.

It's debatable whether the provincial Conservatives under either Mike Harris or Ernie Eves ever really balanced their budgets, one of the "balances" having been achieved only by selling off a huge asset in the Highway 407 toll road. However, it's indisputable that Conservative tax cuts (by the Harper government federally and the Harris and Eves governments in Ontario) have made it far more difficult to achieve anything resembling a balanced budget at either level of government.

In the circumstances, the obvious need is for a means of obtaining sufficient revenue to pay for either the current level of services, or for a level of services closely tailored to residents' expectations, as soon as the economy is reasonably healthy, and budgetary surpluses during any future economic booms.

As we see it, such revenue levels are utterly unattainable in the absence of greater taxation in one form or another.

That's why we see the real need as for some form of tax reform.

In our view, the all-party committees we propose should have mandates requiring them to recommend changes in the existing system of taxes and user fees that would, in addition to balancing future budgets:

• base all tax rates on the individual's or corporation's ability to pay;

• eliminate tax "loopholes" wherever possible;

• tax all forms of real income, including any individual's lottery winnings above $1,000;

• base all user fees on the actual cost of providing a licence or service;

• simplify the Income Tax Act and all other tax legislation and base income-tax liability on a household's overall income, and

• strike an appropriate balance between taxes on income and consumption.

Without a doubt, the challenge is a daunting one, yet one that surely must be met.