Less is more with taxes in New Brunswick
This column was published in the Telegraph-Journal on February 7, 2019.
The talk we’re hearing from Premier Blaine Higgs and his cabinet ministers has been positive.
This talk is music to taxpayers’ ears. But the real test will be whether the government walks the walk in the upcoming budget.
So far, so good.
The government cut $200 million from the capital budget in December. Higgs declined to spend more on the Francophonie Games than the original $10 million, even though it means the games now won’t be happening.
Cutting spending to reduce the debt – and fast – is necessary. But it’s growing job numbers and reversing the trend of outmigration that will turn the economy around. The province needs bold tax reductions that force outsiders to take notice of New Brunswick.
Here’s the good news from our Canadian Taxpayers Federation 2019-20 New Brunswick Pre-Budget Submission: Not only will tax reductions attract investment; research shows lowering taxes in New Brunswick can actually increase revenue for government.
At 53.3 per cent, New Brunswick has one of the highest top marginal income tax rates in Canada, closely behind only Nova Scotia and Ontario.
Research from the Fraser Institute in 2018 showed that higher top marginal income tax rates have significant negative impacts on entrepreneurship in the short- and long-term.
High income taxes turn away important professionals such as family doctors, surgeons and engineers. When the federal government was considering tax changes to take more money from doctors, farmers and small business owners, the New Brunswick Medical Society commissioned a member survey, showing 46 per cent of doctors would consider moving their practice out of New Brunswick if these tax changes were imposed.
Those proposed changes weren’t provincial, but this shows how responsive doctors in the province are to tax rates.
Reducing income taxes in New Brunswick by 10 per cent would save taxpayers $170 million per year, while sending a strong signal to those living away that New Brunswick is open to prosperity. Those tax cuts can deliver relief to all income levels.
Increasing the basic personal amount – the income on which you pay no tax – would save all working New Brunswickers money, but would help the working poor in particular.
New Brunswick’s basic personal amount for 2019 is $10,264. Contrast that with a working person in Alberta, whose basic personal amount is $18,690, or Saskatchewan, whose basic personal amount is $16,065. Alberta and Saskatchewan are the top destinations for New Brunswick out-migrants according to a 2017 report by the University of New Brunswick.
With taxes, less can be more.
Academic research by Bev Dahlby and Ergete Ferede in 2017 showed that a reduction in New Brunswick’s general business income tax rate would actually increase the value of the government’s tax revenue.
Abandoning all corporate subsidies dished out through Opportunities New Brunswick – which represent tired, failed attempts at job creation – would also boost funds.
Research from the Montreal Economic Institute showed that federal cuts to business taxes between 2001 to 2012, first instigated by Prime Minister Jean Chretien, had no negative impacts on revenue generation.
It’s time to change course in New Brunswick. Taxing people less can mean more jobs, more government revenue, and more hard-earned money back in taxpayers’ pockets.