Not the way to go

I like Bruce Fitch. I run into him occasionally at church. His commentary against upping the HST has been published in at least the T&T and the Gleaner.

In the commentary he hammers the idea of raising the HST and lists all the same old tired arguments that have been published before.

He says it is not the way to go.

Then, what is the way to go?

That’s the problem. It is easy to hammer away at any change at all (remember the HST was 15% just three years ago so those people like Fitch claiming doom and gloom apparently don’t remember just three years go – if a 15% HST was so damaging to the economy why didn’t his government drop it?).

The truth is that New Brunswick never really changes. All governments come in with great rhetoric but if you read (and I have) the narrative going back 50-60-70 years or more the talk is always about New Brunswick becoming a better economy. A place that doesn’t see great out-migration, etc. And nothing changes.

Why?

Because even the simplest of proposed changes gets hammered and governments back off. It’s unbelievable. Changing the HST to 15% is about the most tepid change in tax policy that you could implement because it was that level just three years ago.

When the PM cut the GST, virtually all economists said it was a bad idea. Think tanks right and left saw it for what it was – good politics. It was visual. It was immediate and people saw the impact.

Essentially the NB government is saying that this province should have smarter tax policy that is designed to incentivize more investment here (not more consumption) – at least that is my hope.

And along comes Bruce Fitch, Al Hogan, the CFIB, the Retail association, the Chamber and just about every other influencing agent in society to hammer as cataclysmic something that was in place just three years go with no cataclysm. In fact, I don’t recall any of the things Bruce Fitch discusses actually happening three years ago.

But we all have short memories, don’t we?

I say the odds are 50/50 maybe less that we get any substantitive tax policy changes. It is far easier to do nothing and coast along rather than risk the wrath of the vested interests. Just ask Bruce Fitch.

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0 Responses to Not the way to go

  1. Anonymous says:

    Church!! lol
    Why don’t you try and behave yourself?
    You need a course in proper name dropping.

  2. mikel says:

    That’s not really fair since you are painting the picture as if the liberals want to raise taxes in order to pay for essential services.

    However, as Mr. Fitch points out, the idea for the liberals is to raise a consumptive tax, all so that they can lower personal and corporate income tax.

    The corporate income tax is a joke, while the ‘rate’ is the same as most places in Canada, most corporations in NB pay little tax, as evident from the 3% of the NB budget they provide. Mr. Fitch is quite right about that, and I think a lot of poeple WOULD agree-although not a lot of people know how little corporations contribute in NB. Most of their contribution is in ‘royalties’, meaning that if their product is not making money at the time, they pay little. Most of the pulp mills haven’t paid taxes in years (even when they’ve made money).

    One thing people should remember is that technically Irving is very horizontally aligned, which means within the organization they can charge a low rate for a product that is purchased by one Irving company all so they can save on the HST.

    More importantly, Mr. Fitch is just doing his job-which is to oppose. As for the papers, that’s a different story entirely, and just for fun it would be interesting to see Mr. Campbell write an article with that bit about the mere 3% corporations contribute, the measly 4 million Irvings refinery contributes in property tax, and of course the LNG terminal, and have an article which would have a LOT of people agreeing-that ‘the way to go’ is to get more money from those who can afford it.

    If the liberals were serious about policy, they’d be raising HST simply as a way to stay in the black, and pointing out, as they often do to the feds, that ‘more is needed’ in order to be self sufficient. They could go a step further and raise taxes on those earning over $100,000, they could retract the raises given to MLA’s, all in the name of ‘tough love’. That would have TONS of support, and even if Irving screamed til the cows came home, few people would seriously listen.

  3. Rob says:

    Raising the HST to lower income tax is good policy in my books. I don’t like the $250 million gap between the HST and income cuts though. We should be more financially prudent.

    On the other hand, if you read the T-J story today on the report, they talk about property taxes being to high in NB.

    The articles goes on to say that the report will recommend that the non-residential rate and the non-owner occupied rates should be lowered.

    Nothing about the residential rate.

    Of course, according to our Minister of Local Government, no one has ever complained to him about high property taxes =).

  4. David Campbell says:

    On this blog, I have shown on many ocassions the 3% of the NB budget paid through corporate income tax.

    As for property tax, that is a trickier one. In theory, property taxes (at least the local portion) are levied to support municipal service delivery such as garbage, water/sewage, police/fire, etc. However, we don’t generate nearly enough property taxes to pay for city hall and therefore grants from the province and other smaller sources of revenue need to be found. If you push for a dramatic reduction in property tax rates how will that impact municipalities?

  5. richard says:

    The joke is not the corporate income tax; the joke is the way in which corporations are able to hide income thru various measures such as off-shore shell companies. That, I assume, is largely a federal issue.

    ” and even if Irving screamed til the cows came home, few people would seriously listen.”

    I wish that were true, but the Irvings have rarely lost an election.

    My problem with the proposed changes is the flat tax proposal, not the HST increase. Income tax should be more progressive not less. We’ve seen changes, mainly federally, that have reduced progressivity over the past few decades, with little to show for it, IMHO.

  6. mikel says:

    It’s true that they haven’t ‘lost an election’-not since little louis, the WAY they affect the political discourse varies. Here I agree with Mr. Fitch about the tax policy, and its obvious he’s doing his job as the protest in front of the legislature shows. So here the Irving media actually agrees with NBers moreso than the government-which is a good thing. But the fact that you won’t see the media talk about raising CIT or closing those loopholes proves they aren’t doing it in the public’s interest.

    But I never read the report, a flat tax is just horrible, and now I’m not surprised there was a protest. Contrary to Mr. Campbell, I think the biggest problem is not that ‘everything the government tries to do’ gets shouted down, the problem is the same as many other (often worse) places, which is that you have a government that is SO out of step with the public that it necessitates such drastic action-and pretty much proves my point that you’ll never see public policy in the publics interest because the public’s interest is nowhere on the political radar.

    But for Mr. Campbell, I wasn’t talking about saying that HERE about corporate income tax, I was talking about (trying) to put it in the Irving media which is seen by FAR more people. I can understand the reasons to avoid it, but like I said, it would be an interesting experiment.

    The tax system is complicated, and brings us back to my main point-that its ‘politics, stupid’, not economics. It’s because of Canada’s history of ‘top down’ government, in other words ‘imperialism’ that this occurs.

    Take a look over at Vermont, where every town can set its own sales tax rate. Of course economists and ‘some’ consumers don’t like it, but it satisfies a basic democratic principle-that LOCAL people can best decide local public policy.

    So look at a place like New Brunswick. IF a mill closes in Miramichi or Restigouche, the city can make changes to taxes in order to facilitate growth. That’s a basic tenet of capitalism too.

    Of course the province doesn’t like that, it takes away some of their power. Other cities don’t like it, because some retail may go elsewhere. But democratically, its not important for the people of Campbellton that people in Saint John, Fredericton, or Winnipeg are happy with their public policy. What matters is that they decide it themselves.

    I was recently in Switzerland and next week comes their elections-which are FAR different from ours. Placards are everywhere and there are hundreds of different issues voters will be deciding on. In the city of Lausanne I watched a show about how the people will be voting on whether to drop the sales tax on glasses.

    That’s local democracy-its also local economic development. As mentioned above, this is a big issue, for over a decade people have railed about how the feds got rid of a deficit by dumping it on the province, provinces got rid of theirs by dumping them on cities. Property taxes have strained to cover them, with some few ‘grants’ from the province (that also helps keep municipalities in line). People don’t like the word, but essentially thats what ‘imperialism’ is, and its not a far stretch to call the maritimes an Ottawa ‘colony’.

    Just to mention, in a flat tax this isn’t ‘irving bashing’ or even mccain. There are LOTS of wealthy people in New Brunswick, and they aren’t workers in those companies. It’s no coincidence that the liberals didn’t raise the tax rate on the wealthiest NBers as they did on the middle class. Over at Charles blog he rails that Graham ‘is no leader’. I disagree, I’ve never seen a government leader so willing to take the kind of bizarre chances that would almost certainly lose them the next election. They seem to be putting a lot of stock in the idea that so long as Irving keeps putting him on the front page and ignore David Alward that it will be an easy win. I don’t know if they read this blog but one thing new policy and a bad economy mean is a change of government.