I have been reading a very interesting article in the Canadian Historical Review on the McNair government’s economic development focus for New Brunswick right after World War II. It is a fascinating read on many levels (thanks to Kurt Peacock for the tip) and will likely provide fodder for several columns and blogs in the coming days. It does reaffirm the old adage “the more things change, the more they stay the same”.
But one thing that has changed is where the provincial government gets its tax revenue. The article includes a breakdown of tax revenue by source in 1952 (see the table below). The amount of the provincial government revenue from property tax has only decreased a bit since 1952. However, the amount of revenue generated from booze is down 83 percent. Likewise, the 1952 government got a pile of revenue from car taxes and gas taxes. In 2011, those taxes were marginal to the provincial revenue. The sales tax – introduced in 1952 – immediately generated nearly 19 percent of provincial revenues – now it is only 15 percent. This seems strange to me given the expansion of consumer spending in the intervening years but I didn’t go deeper into the data.
The feds contribution to provincial revenue has remained remarkable similar. In fact, over the years I have looked at the data – fed transfer payments have been in a fairly close range of between around 34 and 40 percent of the total.
What can we learn from this? I suspect if you increased liquor taxes 5.5 times – to get to the 1952 level – you would have a revolt on your hands. Even though advocates of public transportation and environmentalists would like to massively jack up gas taxes, it is unlikely any government could ever get 16.4 percent of its total revenue from gas tax again. We have talked about this in the past – you could dramatically increase gas taxes – or add a carbon tax or whatever – if you dropped other taxes to compensate – but no government wants to go there (although BC has a carbon tax).
Provincial Government Revenue (% of Total)
|Motor vehicle tax||7.3%||1.5%|
Sources: 1952 – Canadian Historical Review LXIX, 2, 1998; 2011 – New Brunswick Government Main Estimates.