Higgs can lead the country toward a new era of tax relief

Author: Jay Goldberg 2023/03/06

New Brunswick Premier Blaine Higgs has an opportunity to lay the groundwork for a wave of tax relief across the country as an antidote to governments profiting off inflation. That antidote is lower sales taxes.

Higgs is the man for the job because he has a sterling fiscal record. He has run surpluses every year since he took office in 2018, including during the pandemic. And, due to his strong spending management, New Brunswick has lowered its debt by over $1 billion and now enjoys the largest surplus in the province’s history.

Finance Minister Ernie Steeves announced last month that, as of the end of the calendar year, New Brunswick was running a surplus of $826 million. For a province with a budget of just over $10 billion, it’s hard to overstate the scale of the surplus.

With so much fiscal room, Higgs has an opportunity to be bold and lead the country in the direction of lower sales taxes.

Here’s the simple reality: governments are profiting off of inflation. Because sales taxes are charged as a percentage of the final price of a good or service, higher prices means a sales tax windfall.

Consider this example. If you went out and bought a new Honda Civic a year ago, the price might have been $25,000. New car inflation has been sitting at roughly 12 per cent. That means a new Civic would cost $28,000 today.

Between Ottawa and Fredericton, New Brunswick taxpayers are forced to pay 15 per cent sales tax on almost everything they buy. If you bought the Civic a year ago, you would have paid $3,750 in sales tax. But if you bought a Civic today, the tax bill would spike to $4,200. That’s an increase of $450.

The end result? Governments are seeing massive sales tax windfalls from higher prices.

That includes the Higgs government.

In New Brunswick last year, the government brought in $305 million more in sales tax revenue than originally projected. With high inflation still an unfortunate reality, higher sales tax revenue is fueling New Brunswick’s historically high surplus.

Similar patterns can be seen across the country. The Ford government saw sales tax revenue spike by $4 billion last year.

The antidote to governments profiting off inflation is a lower sales tax. With prices higher, governments are enjoying massive windfalls while consumers suffer.

The Higgs government is now projecting a surplus of over $800 million for the present fiscal year. For some perspective, Higgs could lower the provincial portion of the HST from 10 per cent to six per cent and the government would still be running a surplus.

Canadians desperately need tax relief. Last year, grocery bills were up $1,000 over the year before. And 20 per cent of Canadians have said that they are skipping meals to help deal with inflation.

In 2022, the Higgs government brought in approximately $1.77 billion in sales tax revenue. On average, the typical New Brunswicker sent $2,284 to the finance ministry in Fredericton through sales taxes. Reduce that burden to 6 per cent, and the average New Brunswicker stands to save $914 a year.

That’s enough to pay for groceries for a family of four for a month.

Governments across Canada are playing a game of chicken. They’re all profiting off of inflation, but, other than some minor tax cuts, no government has yet to make a meaningful effort to return the inflation windfall to taxpayers.

Higgs can change all of that. He has a record of balanced budgets, lower debt and income tax relief.

If one premier makes the leap, others will follow. Canadian taxpayers will demand that sales tax relief in one province be emulated in others.

It’s time for Higgs to make that jump. He has a chance to build a legacy as a defender of the taxpayer. 

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