Alward and tax cuts

I am a bit surprised the Tories are claiming to reverse the tax cuts but by only doing on on the very rich they don’t lose a lot of votes.  The most recent data I have shows 1,170 people in then entire province earning declaring more than $250,000 in income.  The CBC article says:

Alward said he could save $120 million over the next four years by withholding the tax cuts for people who make an average of $450,000 a year.

First, there is no tax bracket specifically for those earning $450,000 and up so unless Alward is going to establish one, the reversal of the tax cut would have to apply to the highest tax bracket which would be $118,000/year which would mean over 12,000 persons.

But let’s say he does just raise the tax rate on those earning $450,000 or more.  I still don’t see how he gets $30 million in more taxes per year. This study for the Canadian Labour Congress estimated the tax cut was worth $27 million per year to those earning $250,000 or more.

But, I could be wrong – it would be nice for them to release how they are calculating their expected taxes but that would be too much to expect from any political party.

As for the corporate tax cuts – Alward is going to “cut small business tax rates to stimulate job growth and economic development”.

Sigh.  After former Premier Lord cut the small business tax rate to the bone, New Brunswick had third worst rate of small business growth (decline) in North America among the 60 provinces/states -according to a Fraser Institute study.  Further, total employment growth among small businesses with less than 20 employees actually dropped after the small business tax cut.   Note that over 17,000 of the net 19,000 job growth came from employers with 500 or more employees (that includes government).

There are an estimated 45,000 businesses in New Brunswick and an estimated 87% of them have less than 20 employees.  The only reason to cut small business taxes is political.  These small business owners vote and many of them contribute to political parties.

Employment Growth/Decline by Size of Employer (2000-2006)

  Employment Change: % Change:
All sizes 19209 6.8%
0 to 4 employees -678 -3.0%
5 to 19 employees -480 -1.1%
20 to 49 employees 3077 11.2%
50 to 99 employees 1814 9.1%
100 to 299 employees 784 2.7%
300 to 499 employees -2547 -23.6%
500 and more employees 17239 13.3%
0 to 49 employees 1918 2.0%
50 to 299 employees 2598 5.4%
300 and more employees 14693 10.5%

Source:
Statistics Canada. Table 281-0042 – Employment by enterprise size of employment (SEPH) for all employees, unadjusted for seasonal variation, for selected industries classified using the North American Industry Classification System (NAICS), annual (persons) (table), CANSIM.

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3 Responses to Alward and tax cuts

  1. mikel says:

    Good comments, however, I should remind you of some basic logic. In the world of economics nothing works in a test tube for analysis. So Bernard Lord lowers the small business tax to almost nil, and as you say, the number of small businesses drop. However, there is no evidence-in fact there almost literally CAN”T be any evidence that lowering taxes to almost nothing leads to a reduction in the number of small businesses. It’s an absurd statement if you think about it, however, I do agree that Alward making the claim that just lowering taxes will somehow result in more small business. That’s also illogical.
    The problem of course is for a political party to come up with a way to ‘support small business’ in any other way. Do you, say, come out with a plan to support ‘certain’ companies? That’s a bad idea, and will get you politically killed.

  2. That’s absolutely correct. I am not saying the tax cuts were the cause of the small business employment decline. I haven’t seen any analysis of this trend but I suspect it has something to due with Walmarts in Sussex.

  3. mikel says:

    Just thought I’d mention in case David or anybody else doesn’t know, a good place to get some kind of handle on business stats is to download the “Royal Gazette” from the Queens Publisher-available at the government of NB website. It lists the new companies that have recently been registered, business name changes, as well as bankruptcies. It’s a pretty interesting read for inquiring minds (but boring as hell for everybody else).

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