Every once in a while, politicians acknowledge high taxes and big government spending drag down economic growth. In a welcomed moment of tax-epiphany, the New Brunswick government recently announced a lower, simpler and flatter tax system, and a reduction in the size of their bureaucracy. Undoubtedly, British Columbia could learn a thing or two from New Brunswick. 

New Brunswick, in its recent budget, established a lower, simpler and flatter tax system to take effect by 2012. Personal incomes will be taxed at two rates, 9 percent and 12 percent, instead of four rates. 

With New Brunswick's highest tax rate sitting now at 17.95 percent, it's no wonder its population shrank over the past five years. Punishing success is no way to promote continued economic growth. After all, why would anyone who values hard work want to live in a place that just strips away the fruits of their labour? New Brunswick is following in the footsteps of Alberta towards a lower, simpler and flatter income tax system that can only help stimulate economic growth. 

But New Brunswick isn't just encouraging its citizens to work harder. It is also ensuring there will be more wealth-creating jobs. New Brunswick's general business tax rate will fall to 8 percent by 2012, the lowest in Canada. After its reforms take effect, New Brunswick will rank third in Canada as a competitive location for business investment after Alberta and British Columbia. 

The key to success for New Brunswick's business tax reform is it applies equally to all – it doesn't pick winners and losers but sends a message that all business is welcome. 

New Brunswick is also taking proactive steps to lower the burden of government bureaucracy on taxpayers. It identified $182-million in administration and wage savings for 2009-10. It froze MLA wages in December 2008, and will extend that for two more years. It is also freezing all public service salaries for two years and cutting 700 redundant positions. A smaller government without a mandate to pick winners and losers will bring a faster turnaround to the New Brunswick economy. 

What are the lessons for B.C.? 

First, we already know here that lower tax rates don’t necessarily mean lower tax revenues, thanks to increased compliance and the benefits of economic growth. Total revenue from personal income tax was $6.9-billion in 2007-08, up from $5.8-billion in 2005-06. Most of this increase came from higher than expected personal income, in particular among high-income earners. It is a growing economy, not high marginal tax rates, that increase tax revenue. 

However, B.C. has a complicated, five-rate marginal tax structure. A simpler, lower, and flatter tax system in B.C. will work to further encourage the most productive citizens to stimulate the economy at no cost to taxpayers. 

B.C. has also made the province more attractive to entrepreneurs by lowering business tax rates, but eliminating targeted tax credits and handouts would help promote businesses that don't benefit from political or bureaucratic favours. This would allow for an even bigger tax cut to businesses of all types, no matter how much political pull they have. 

The B.C. government announced a wage freeze as well, but has yet to look at streamlining the government itself. 

As New Brunswick is about to prove, fewer bureaucrats gazing into crystal balls trying to pick winners and losers in business, and lower taxes for all, lays the welcome mat out to all individuals and businesses. These are the lessons for B.C.