Tax relief in a dangerous time

The Moody’s briefing on New Brunswick (read the brief here and the TJ article here) gave three reasons for the province’s weak near term revenue outlook: the recession, the tax cuts and what they term as risks associated with the Lepreau refurbishment.

I thought the tax cuts probably were mis-timed but just about every expert interviewed in the media (that I saw or heard) said it was a good thing to cut taxes.   At least Moody’s calls a spade a spade.  As for Point Lepreau, I find that curious.  Haven’t the cost overruns been discussed in the press? What is the uncertainty?

Update:

I agree with Charles Cirtwell on this:

Charles Cirtwill, executive vice-president of the Atlantic Institute for Market Studies, said the tax cuts could have been handled better by the Liberal government. “It’s interesting that Moody’s went out of its way to mention that the tax cuts will be good for the long-term economy of New Brunswick but the ability to meet debt in the short term is weakened by it,” he said. “We made the point earlier that if the province is cutting income tax, it should take back the two points on the HST because that would have allowed the province to maintain some of its revenue and probably would have avoided this.”

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11 Responses to Tax relief in a dangerous time

  1. John Doe says:

    I’m a strong advocate of taxing consumption, and was under the impression that the tax breaks were to be recouped by an increase in HST. I was quite surprised to hear that this wasn’t the case when the budget was actually released, and am now concerned that the will be fortunate if we don’t bankrupt the Province.

    It’s been all quiet on the Northern front in terms of job creation, and it seems as though the Liberals are making the acquisition of the former Wayerhauser mill as difficult as possible for TAG Industries. Northerners will never see the benefits of the tax reduction unless more jobs are brought to the area, and the government will be unable to collect a smaller piece of tax revenue from a bigger tax base pie. I’m hoping that the province had the wood allocation earmarked for another undisclosed industry which will be setting up shop in the North, but it doesn’t seem likely.

    Hopefully the upcoming NBBC presentation on the North will be paired with some good news on the issue.

  2. Rob says:

    “…but just about every expert interviewed in the media (that I saw or heard) said it was a good thing to cut taxes.”

    Could it be that the media only interviewed experts who agreed with the tax reforms? When you ask AIMS, the Fraser Institute, or Jack Mintz what they think, you’re sure to get the answer you’re looking for.

    When the tax reforms were first discussesd, they were supposed to be a taxation shift instead of an outright cut. The federal HST cuts were to be reclaimed, and a carbon tax was to be instituted. When those two items were deemed a bridge too far, we stuck with the easy tax cut. Now the government is bleeding revenue even faster, but no one at the Legislature (Government or Opposition) said peep.

    We were supposed to get intelligent tax reform. Instead, we received a tax cut of dubious affordability. The other shoe will eventually drop, and we’ll see either deeper cuts in services, or the tax cuts will be rescinded.

  3. mikel says:

    If you look at the liberal record, none of those things seemed particularly important. The FIRST thing they did was cut the tax on gas, another crazy move. When they increased taxes in their first budget, the highest bracket had the second lowest increase (next to the ‘poverty class’).

    With this budget there really wasn’t much talk in the media on anything but the tax cuts. As mentioned, there is a strong conservative crowd in NB who doesn’t care about anything but that the government is doing as little as possible. And again this time, the lowering tax was of most benefit to the wealthy, the liberals even said so-that was how they were going to try to get more doctors.

    At the moment I think the lowering taxes were to do two things-cut off tory support during an upcoming election, since they can tout it all year long and the tories seldom talk about anything but taxes. And second, the main aim was to cut Corporate Income Tax drastically, and you can’t do that without cutting everybody’s taxes. Corporations also don’t like increases in consumption taxes, because the biggest industries in NB consume quite a bit. So the liberals went the only other direction they could-and have drastically raised fees and licenses. Whether that will have much effect isn’t known, its pissed off more people I know than even the RAISED taxes of two years ago did. My old man is livid because the licenses and taxes paid for things necessary at our hunting camp have raised exponentially-and he was a former President of a liberal association.

    So like most governments these budgets just seem a patchwork to pacify an electorate enough to get re-elected while catering to those MOST politically active-the wealthy and corporations (don’t forget the corresponding cuts in capital gains, and since there aren’t even any public companies in NB that does NIL for NBers-that was almost never mentioned in the press).

    So again we see evidence that policy simply reflects the desires of those most politically active. Its not supposed to ‘make economic sense’, but I think its quite hypocritical of AIMS to be making those comments, I remember them being quite thrilled at the time-meanwhile WE were all stating those facts at the time. To be fair, if there WAS an NB ‘think tank’ or branch of Policy Alternatives, I bet you money that they would print it. Journalists seem just lazy and aren’t willing to call around to profs to ask them for a counterpoint.

  4. Anonymous says:

    I would gladly pay the same amount of tax if the government was more prudent with our money. NB cannot afford major screw ups like $60 million for the Shippegan branch of the Caisse and $80 million for Atlantic Yarns (not a risk that failed, a pure bad business decision).

    Those two incidents alone cost taxpayers about $500 each.

    How many taxpayers would agree to pay the same or even more if our children had an opportunity for employment in our home province? If our education system at least met the national average?

    Get education, health care and economic development right then worry about tax relief.

  5. Rob says:

    “Corporations also don’t like increases in consumption taxes, because the biggest industries in NB consume quite a bit. ”

    I also wonder how the larger corporations in NB felt about the proposed Carbon Tax.

  6. Paul says:

    I don’t think we have the whole story on the Lepreau refurbishment. One of the major partners AECL is a suspect partner who have a history of problems. I bet dollars to donuts Moody’s is worried about the federal governments long term plans for AECL, along with how well this refurbishment is actually going. This is pure speculation, mind you, but somethings making them nervous enough to mention it.

    As for the tax cuts, they couldn’t have been more poorly timed. Just like the tax increase when they took power, and the increased spending, which was over and above what the budgeted. These tax cuts have nothing to do with economic development.

    Shawn Graham is a weak leader who has no real sense of direction unless someone gives it to him. We can all find good and bad decisions with the government, but since they took power I always had the sense they really didn’t have control of the ship. Numerous studies and ideas from high profile Liberals like Francis and Claudette, and a whole lot of backtracking and scrambling.

    As for increasing the HST, while its a good idea, can New Brunswick increase it unilaterally? I thought they had to work in unison with the other participants, so even if they wanted to they couldn’t.

  7. Samonymous says:

    To put it in general terms, tax cuts are costly, especially when you consider the lost revenue which government depends on to operate. That said, they can also spurn on significant economic growth when coupled with a stable and healthy market and a government that is committed to the true principles of fiscal conservatism (limited spending/limited government).

    At the moment, in New Brunswick, we have a government that is as committed to reducing spending as George Bush was during his time in office. Not a good combo when you look at the results south of the border.

  8. The tax cuts were poorly times, and arguably they were poorly directed.

  9. richard says:

    “That said, they can also spurn on significant economic growth”

    That’s a belief held by some, but where are the data to support it? There seem to be as many examples of growth spurts after tax increases as there are after tax cuts.

  10. Anonymous says:

    Point Lepreau likely being skimmed. MDI going down the tubes, RED LIGHT!

  11. John Doe says:

    The reopening of the former Wayerhauser mill looks to be in dire straits as well. Seems like some shifty business in regards to the wood allocation

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