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Atlantic Canada at tax disadvantage compared to neighbouring New England states

Author: Paige MacPherson 27/07/2020
  • New report shows sales taxes are higher in Atlantic Canada than New England states
  • Personal income taxes are mostly higher in Atlantic Canada
  • The general business tax rates in Atlantic Canada are nearly double the rates in New England

HALIFAX, N.S.: Today the Canadian Taxpayers Federation released a report finding Atlantic Canada is at a tax disadvantage with its neighbouring New England states. Compared to Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont, Atlantic Canadians face higher government-imposed costs and taxes by almost every measure, affecting individual taxpayers and job creators alike.

“Securing a high quality of life for Atlantic Canadians depends on both local affordability and our ability to attract jobs, investment and people to the region,” said CTF Atlantic Director Paige MacPherson. “High tax rates compared to our neighbouring states not only make life more expensive – it makes bringing jobs home significantly more challenging.”

The report finds that state personal income tax rates in New England are mostly lower than provincial tax rates in Atlantic Canada. For example, in 2019, the lowest provincial income tax bracket in the Atlantic provinces was 8.7 per cent (Newfoundland and Labrador), while the lowest in New England was 0 per cent (New Hampshire). The highest provincial income tax bracket was 21 per cent (Nova Scotia) and the highest is 8.5 per cent (Vermont).

Canada’s federal 33 per cent personal income tax bracket, added in 2016, worsened Atlantic Canadians’ competitive disadvantage with their New England neighbours.

“As we reopen provincial economies across the country, governments need to focus on making life less expensive for individuals and making it easier for businesses to create jobs,” said CTF Federal Director Aaron Wudrick. “Corporate welfare isn’t the answer. Reducing taxes would allow the Atlantic Canadians to attract investment and compete for well-paying jobs.”

Sales taxes are also higher in Atlantic Canada, the report found. The provincial portion of HST in every Atlantic province is 10 per cent, while New England’s state sales taxes range from 0 per cent (New Hampshire) to 7 per cent (Rhode Island).

Atlantic Canada’s provincial small business tax rates range from 2.5 per cent to 3.5 per cent, lower than the small business tax rate in the New England states, except for Maine. However, the main business income tax rate in New England (6 per cent to 8.93 per cent) is about half the standard rate in Atlantic Canada, which ranges from 14 per cent in New Brunswick and Nova Scotia to 15 per cent in Newfoundland and Labrador and 16 per cent in Prince Edward Island.

“Taxpayers in every Atlantic province deserve better than to lose jobs and opportunity to the United States,” said MacPherson. “Provincial governments should act now to remove this competitiveness gap and welcome more opportunity to our great region.”

The report recommends Atlantic provincial governments lower business taxes to attract investment and increase government tax revenue, allow for further resource exploration and development to create jobs, and reduce government spending where possible to provide room for tax reduction.

Click here to read the full report.