As Andrew Jackson has written recently on this blog, the New Brunswick government is proposing a set of truly dreadful tax reforms. The proposals include:
- a 10% flat tax for personal income, or a two-tier rate at 9% and 12%
- reducing the corporate income tax from 13% down to as low as 5%
- a carbon tax
- increasing the provincial sales tax by two percentage points
- reducing the provincial tax rate on non-residential properties by 33%
- restraints/cuts to government spending from the shortfall in revenues
Each one of these measures is regressive in itself; combined I believe that they constitute the most regressive tax package put forward by any government anywhere in Canada. The carbon tax is not connected to any other environmental measures and appears to be just a cash grab to finance the income and corporate tax cuts. There are a few compensating measures that would be less regressive, including an increase in the basic personal amount, a child tax credit and a climate change tax credit, but these are relatively minor.
The New Brunswick Department of Finance released a discussion paper last month that is unfortunately highly biased, misleading and withholds information about the impacts. The main references cited in the paper include the C.D. Howe Institute (Jack Mintz was their main consultant), the Fraser Institute, Canadian Taxpayers Federation and even the U.S. Heritage Foundation and Arthur Laffer. A number of these organizations have expressed strong support for these proposals.
A select committee of the N.B. legislature has been holding a fairly hasty set of consultations that are expected to wrap up next week. They are planning to move forward with a package in the Fall and implement the reforms over the next five years. One gets the sense that they are planning to steamroll ahead with these set of tax reforms, chosing the just slightly less offensive ones proposed. New Brunswick already is already one of the least taxed provinces for households and business, according to both the Fraser Institute and the C.D. Howe Institute for what their measures are worth. The danger is that even deeper tax cuts would then force other provinces, and particularly other Atlantic provinces, to follow suit.
There have been some excellent presentations to the committee opposing these proposals, including a number from New Brunswick economists and many others. Andrew Jackson’s paper focusing on the impact on high income earners was presented by the New Brunswick Federation of Labour.
Having worked in different departments of Finance, I have to say that I was most disappointed not just by the proposals, but by how biased and miseading their discussion paper is. Since they only included figures on the impact of the proposed income tax cuts, I prepared a fairly comprehensive analysis of the impact of the major tax proposals on different household income quintiles in the province.
This analysis is included in the brief that CUPE’s President, Paul Moist presented yesterday, entitled Pig in the Poke. It shows that these proposals would cost the bottom 60% of households an average of at least $500 more per year in higher taxes and the value of reduced services. Meanwhile the top income quintile would benefit by an average of over $5,300 a year, including a $6,800 income tax cut. There are some fairly dramatic tables and charts that illustrate the impacts in our document, as well as a critique of their main arguments.
The New Brunswick government is concerned about “self-sufficiency”, an ageing population and declines in their forestry and manufacturing industries. It is important to propose progressive alternatives to address these concerns, but first of all these highly regressive and counter-productive tax proposals need to be stopped.
- Update: A Petition of Academics Against the CCPA Audit (September 11th, 2014)
- Severance Pay and Public Servants (March 14th, 2012)
- Tax Increase. What Tax Increase? (December 30th, 2010)
- Taxpayers and the Census (August 6th, 2010)
- Taxers of the World Unite (April 26th, 2010)