TORONTO - Strong hints from Premier Dalton McGuinty that Thursday's Ontario budget will signal the province's intention to merge its eight per cent sales tax with the five per cent goods and services tax had Ontario's opposition parties crying foul Wednesday.

Business groups and the federal government have been pressing Ontario for years to harmonize the PST with the GST. It's a move which the Chamber of Commerce estimates would save Ontario companies $100 million a year by cutting the red tape involved in paying the two taxes and allowing deductions for tax levied on the purchase of new business equipment.

Quebec, New Brunswick, Nova Scotia and Newfoundland and Labrador have already harmonized their sales taxes with the GST.

Opposition critics and consumer groups warn harmonization would mean an eight per cent increase on items now exempt from Ontario's PST, including new homes, childrens' clothing, heating fuel, books, fast food meals under $4 and feminine hygiene products.

"Premier, you already have the folks in this province by the throat," interim Opposition Leader Bob Runciman charged in the legislature.

"How much tighter are you going to squeeze them?"

The Speaker forced Runciman to withdraw the remark, but NDP Leader Andrea Horwath quickly voiced the same concerns about the impact of tax harmonization on consumers in the middle of a recession.

"That's eight per cent more to heat their homes, eight per cent more to dress their kids, eight per cent more for a hot dog on the corner," Horwath complained.

"Why is the premier slapping an eight per cent sales tax on families at a time when they can least afford it?"

Analysts say it will take at least a year, perhaps as long as 18 months, to actually harmonize the two taxes, so the increase in tax on consumer items would not be immediate.

Proponents of having a single tax say the increased cost to consumers will eventually even out as businesses are able to afford to reduce the cost of their goods and services.

McGuinty said the budget would have two main objectives: to help families weather the recession and to help businesses prepare for the eventual return to a period of economic growth.

"We will find ways to provide better supports to Ontario families," he said.

"We're going to take measures at the same time to strengthen the economy because we know that unless we enhance our capacity to do so we are going to place our public services at risk."

Both opposition parties said McGuinty would be breaking another promise not to raise taxes if the tax harmonization plan is in the budget.

"It's pretty clear from the premier's public comments that they're going ahead with this, and I'm not sure that he understands the scope of this tax grab," said Runciman.

Government sources also suggested the budget would accelerate planned corporate tax cuts in another move to help businesses cope with the recession and to hopefully attract new investment to Ontario.

The Liberals have already unveiled key components of the budget, including a $27.5-billion infrastructure program and an $18-billion deficit over two years to help pay for the economic stimulus package.

Details will come in the budget document, but it's already known that transportation projects will get the bulk of the infrastructure spending at $9 billion, another $7 billion will be spent to repair and upgrade hospitals, while education will get $4 billion for school improvements.

McGuinty said the budget will also include a plan to get Ontario out of deficit.

"There is a concerted global effort on the part of national and sub-national jurisdictions to find ways to stimulate the economy," he said.

"That necessarily means higher deficits than usual, and that's compounded by the fact that governments like ours don't want to make cuts to our schools and our hospitals, so we're going to run a significant deficit."