This op-ed was published in the Halifax Chronicle Herald on February 22, 2020.
Nova Scotia taxpayers need relief in the upcoming provincial budget. They also need to see a serious plan, because there’s already cause for concern over runaway debt.
Nova Scotia Finance Minister Karen Casey’s announcement that of the largest infrastructure spending tab in the province’s history has spurred a back-and-forth about debt. Spending “short term” on infrastructure is “good debt,” Casey says.
“Only history will tell if it’s good debt or bad debt,” PC MLA Murray Ryan said in response.
Here’s the reality: debt is debt. Whether you’re using your credit card to buy groceries or to wallpaper your bathroom, it’s still debt and it still needs to be paid off. And either way, big interest payments keep getting bigger.
And let’s be clear: government borrowing is nothing like a family’s mortgage. Families make monthly payments while governments routinely kick the can down to road by borrowing more to pay old debts, leaving the burden to future generations. Families are buying assets they can sell, but there’s no resale value for an old highway.
Calling more than $1 billion “short term” spending is laughable, unless the government has a secret pile of cash to pay this off. Instead, it’s a virtual certainty this debt will carry over for decades given that there’s no apparent plan to pay the provinces existing debt of more than $15 billion (and counting – not including this new spending). Each Nova Scotian’s individual share of the province’s debt is nearly $16,000.
Future generations of Nova Scotia taxpayers won’t be laughing when their taxes spike even higher and their services are reduced because the government left them with a massive bill.
Infrastructure is important, but whether a politician calls borrowing “good” or “bad,” debt is debt. And if the government wants to spend a boat load of money on infrastructure, it needs to have a serious plan to pay down that debt, like the New Brunswick government is commendably doing next door.
To do this, the government needs to think long term, with an eye toward jobs, prosperity and affordability for Nova Scotians.
Premier Stephen McNeil is on the right track by reducing taxes for businesses, taking the general business income tax rate from 16 per cent (the highest in the country, tied with P.E.I.) down to 14 per cent, and cutting the small business tax by 0.5 per cent.
Not only will this send the right message to job creators – it will also bolster the government’s coffers.
A University of Calgary study showed a reduction in Nova Scotia’s general business income tax rate would actually increase total tax revenues by attracting investment.
But going from “the highest business tax rate in Canada” to “among the highest business tax rates in Canada” is still nothing to write on a welcome mat. Taxes need to come down further.
It’s not only job creators that are feeling the pinch. All Nova Scotians pay some of the highest taxes in the country: the highest top marginal income tax rate and the highest sales tax.
By lowering taxes, the government can lighten the burden on Nova Scotians and make room for economic growth.
Of course, to reduce taxes and debt, the government needs to reduce its spending. This is doable. If the government had constrained its spending to inflation and population growth since 2010, it would have saved over $300 million tax dollars this year.
Controlling costs means saying no to obvious wastes of money, such as cheques to wealthy sports executives for their for-profit CFL stadium or to the Yarmouth ferry that was docked all year. The government should also spend smarter on education and health care by finding efficiencies.
It also means remembering that debt spent on things you like is still debt. And spending massive amounts of money we don’t have is risky. So come budget day, the government better have a plan to pay for it.
Paige MacPherson is Atlantic Director of the Canadian Taxpayers Federation.