Taking the easy way out

Sometimes I can’t believe I am the guy arguing against tax cuts in New Brunswick. It seems, on the face of it, to be counter to a pro-economic development mindset.

But after reading Al Hogan’s 743rd editorial asking for deep tax cuts, I feel compelled to ask him and everyone else to think a bit. Forget AIMS for a minute. Forget Rotman. Just think.

14.3% of Ireland’s total budget comes directly from corporate taxes – 3% of New Brunswick’s budget. I know that this is not an apples to apples comparison but think it through.

The average Calgarian taxpayer pays $11,431 in income taxes alone. The average Monctonian taxpayer pays $6,906 in income taxes. The Calgarian pays 65% more income taxes than the Monctonian even though his/her tax rate on average is almost 10 percentage points lower than the Monctonians.

Think this through.

Economic development has got to be about creating the environment for successful companies and successful people.

Now, again think this through. Cutting the personal income tax will not raise the income level of New Brusnwickers by one iota. It will not attract one more high paying job. In fact, if the money is diverted out of economic development infrastructure funding or R&D or health care or education, you might actually conclude it will lead to even less high paying jobs over time.

Rotman, AIMS and the boys don’t conclude this because their thinking is based on either ideology only, national economies with no relevance to little old New Brunswick or other models in strong economies (again not relevant to New Brunswick).

Ask anyone on the street. Would you rather have $10,000 more in income every year or pay $1,000 less in taxes. Unless they are crazy, they would respond with the former.

The same thinking has to apply in New Brunswick. We need to be focused on wisely investing taxpayer dollars in ways that will raise the economic potential of this province – not just cut away taxes at the margin and cross our fingers. That’s bad policy and an abdication of the trust the public puts in their government.

The time for tax cuts will come. But it is not now.

One last point on this. People are moving to New Brunswick – and particularly Moncton – because it is considerably cheaper to live here than in larger urban centres in this country. I know that some folks argue about this but it is true. Even when we were in the middle of the bitter auto insurance debate a few years ago I noted with some glee that the rates were still well below Ontario. Your house insurance is higher, property taxes are higher, etc. – sure this is tied to home values but it is still a cost out of pocket.

So to say that someone will pay an extra $900/year in personal tax in New Brunswick and ignore the $8,000 in housing cost savings is just silly.

So, I see almost no economic benefit from across the board tax cuts and potentially serious negative implications as we fall deeper and deeper into the Equalization trap. It is very hard for me to ignore the fact that for every dollar cut out of the revenue stream by Premier Lord’s tax cuts – we have added three in Equalization (using their own estimates).

I don’t see the merit. So Al Hogan would be advised to step out of his bubble for once and take a wider angle look at this stuff.

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0 Responses to Taking the easy way out

  1. Anonymous says:

    I dare ya to try to get that into your Telegraph article:)

  2. NB taxpayer says:

    Ask anyone on the street. Would you rather have $10,000 more in income every year or pay $1,000 less in taxes.

    The problem is redistribution of our hard-earned money lies in the hands of a few bureacrats.

    Which is why I find it hard to wrap my head around your arguement that regional economic programs are the way to go. It has been tried again and again without success. Not only that, when subsidies and loan programs are used over tax cuts, it creates a certain animosity amongst those who don’t receive them, not to mention, they’re also paying for those who do. And in the end, bad business deals end up effecting everyone’s bottom line or total income after taxes. In other words, bureaucrats do a poor job at trying to mimic a free market.

    New Brunswick is probably the best example of a province that has never had a balanced approach to its economy. Probably because their tory governments of the past are further to the left on fiscal policy than their Liberal counterparts.

  3. David Campbell says:

    NBT, your skepticism around government action is well founded. Maybe I am naive – that is the part of my analysis that may lack intellectual rigor. I am saying that government should make wise investments infrastructure, labour market development, R&D, etc. supplemented with smart tax and public policy to make the province attractive for certain types of industry. Maybe at a systemic level that will be impossible in New Brunswick. I don’t know. But I can’t get my head around the Mintz argument on this. Is he saying that having no film industry at all in Vancouver is better than having one that is subsidized by deep tax breaks? Or is he saying that they would have come to B.C. anyway? Or is he saying that if they cut taxes across the board and withdrew from any economic development activity, that things would just naturally occur? If it is the last one, is is saying that is the right approach even if competitor locations are offering such incentives? Aren’t private sector companies rent seeking animals that will go where it makes most sense – including factoring in incentives? I don’t know. I really don’t. But I am 40 years old this year and until I am 41 at least I will cling to the notion that wise investments by government into economic development will help us become more competitive. And as I have said before subsidizing bad business models, given friends grants, propping up communities with EI, trying to subsidize the forestry sector willy nilly, etc. are not in my opinion economic development. In fact, they may be the opposite of development whatever that might look like.

  4. NB taxpayer says:

    But a lot of that type of development comes out of the very departments you say need to be reformed. (i.e. BNB) The question I ask: would it be any different if run by a different set of politically partisan unaccountable bureaucratic chaps?

  5. mikel says:

    Since both of your guys are arguing hypotheticals its easy to dive in.

    First off, those investments and ‘subsidies’ have been VERY successful. Again, that’s what has kept EVERY single economy running. Find one that doesn’t and win a prize.

    They have been so amazingly successful that up to 1995 Canada was considered the best country in the world. They are NOW so amazingly successful that Norway is the best country in the world with a trillion dollar surplus.

    They are so amazingly successful that Venezuela, in less than a decade, has poverty levels dropping almost as fast as it is rising in Canada.

    They are so amazingly successful that ontario’s economy is propped up by it, so amazingly successful that most of the american economy is propped up by them.

    But calling New Brunswick ‘left’ because the government continuously bails out corporations is just too funny. Every province, and every state does that. Where is the ‘left’ in that? If anything, as we’ve seen, New Brunswick is the most laissez faire of any province, it is pretty much ‘irving owned’. So in that case I guess you can’t even call it ‘right’ or ‘left’ because its ‘pre-industrial’, its almost literally a feudal economy.

    There is almost no investment in just about any industry. Take a look at the film industry, there’s nothing there, a measly little tax break on labour of 15%. That’s nothing.

    The only investment right now is coming from massive giveaway of resources and tax credits on capital investments. Next up will be lowering stumpage fees. That’s not ‘investment’, but it is a form of subsidy. Subsidies don’t just mean writing a cheque.

    Again, all the evidence leads the other way. Taxes are among the lowest in canada…nothing. Taxes on small businesses are lowered to the level of non existence…there are not only fewer new companies but they continue going bankrupt. Taxes have zero to do with it. As david says, you either get into the subsidy game or, you remain new brunswick.