NB tax cuts cause deficit: economists

 

The New Brunswick government has sounded alarms about the provincial deficit. Yet its first actions include decreasing essential revenue, by cutting major corporations’ property taxes, unasked and against economists’ advice. 

First, this government continued the previous government’s income tax cuts, which benefit mostly upper income citizens. Then, last month, the provincial government told Costco, Irving Paper, Champlain Mall, McCain Foods, Potash Corp. of Saskatchewan and various other such entities that the government didn’t need all of the taxes they were paying, thus sacrificing millions in property tax revenues.

 

Even the New Brunswick Business Council was taken aback by this decision. Said CEO Susan Holt, "I get concerned when there are benefits to places that haven't requested such a benefit… It’s revenue we [New Brunswick] could have continued to collect. You save Costco $100,000 and they reinvest $100,000 back in New Brunswick? I don't think it plays out like that."  

 

The government did not reply by saying, “Don’t worry, we have a plan to recoup some of that money from the poor. Citizens who haven’t paid fines or who received overpayments from us in the last 20 years, for example. Not companies, don’t worry.” Mind you, it could have done so, and an observer could be forgiven for thinking it did.

  

Property tax cuts were not part of the ruling party's platform and the Finance Minister is on the record saying they would be unaffordable. Apparently,  New Brunswick can suddenly afford such largesse — at least for large corporations and wealthy citizens, though, it seems, not when it comes to government initiatives and public services that citizens care for, such as health and education, or reinstating services sacrificed to the “fiscal situation” such as family court services, an independent voice for women or an anti-poverty plan.

 

Also last month, a bakers’ dozen of economists made headlines by calling for the province to restore 2008 income tax rates — that is, reverse the income tax cuts put in place since 2009. 

 

The group, which included Pierre-Marcel Desjardins, Roderick Hill, Joan McFarland, André Leclerc, Ted McDonald, Anthony Myatt and Ronald C Leblanc, said New Brunswick would not be facing as much of a deficit this year if it reversed the cuts, which cost $230 million in revenues — nearly two-thirds of the estimated deficit. 

 

“If the rate reductions continue for one more year, the larger deficits they produce will have added almost a billion dollars to the province’s debt,” said the group’s statement. The economists were careful to point out that not all taxes are alike. They said increasing the HST while leaving income taxes untouched would be unfair, because it would shift more of the tax burden away from relatively high-income people to those with middle and low incomes.

 

Again, the business council said it never supported the income tax cuts, but had not spoken up at the time “because we didn’t want to hang Shawn (Graham) out to dry. We didn’t think that was a move the economy needed at the time. I think we were proven out that those reductions didn’t stimulate the economy … Business council members believe that similarly returning the corporate tax to where it had been will not cripple the economy given that we didn’t see the gains from the reduction.”

 

Respected expert Donald Savoie, Canada research chair in public administration and governance, also says that successive tax cuts by New Brunswick governments have not produced the promised payoff, and a tax increase is needed.

 

So why did the government slash property taxes, if the action goes against provincial interests and if citizens, enterprise, economists and other experts aren’t calling for it? Is the writing on the wall too large? No, I figure the answer lies in ideology. Governments do it because they think it’s morally superior to have fewer taxes, less government.  

 

In his reaction to the new tax cuts, Green Party Leader David Coon also alluded to the power of believe in ideology. “Somehow, the notion of cutting taxes is a ‘good’ and of raising taxes — or restoring them to previous levels — is a ‘sin’,” he said.  “It’s almost like a matter of religious faith on the part of these two parties and it’s getting in the way of serving the common good in this province and we’re going to pay forever for this. It’s incredible.”

 

The only tax-cut supporters “tax-cut” are the mis-named Canadian Taxpayers Federation. Media tend to interview the Halifax employee of this anti-citizen front of an organization, as if he somehow represented ordinary New Brunswickers.  But it’s as if the one-percenters set up an organization called “We are the 99 percent” and had a toll-free number, like the CTF.  The Federation is quotable; it just doesn’t represent any viewpoints but its own.