I’m a big believer in the importance of a strong opposition in the Legislature to provide oversight and keep the governing power on its toes. I had hoped that once the NB Tories elected their new leader, we would see some new and innovative economic development ideas percolating up from the Opposition. Or, at least, the Opposition grabbing some of the major themes in the media and adopting them as policy ideas.
Whether anyone likes it or not, there are a pile of economic development policy options swirling around out there (some good and some not so good) that the Tories could easily adopt. For example, the idea of migrating BNB to more of an NSBI or Investissement Quebec model with a CEO and a private sector board. Or how about the idea of the tax credit program for the animation/new media sector. Other policy options that have been discussed include: industrial electricity rate incentive schemes to attract large industry such as data centres, increasing the investment tax credit program to stimulate new investment in productivity improving technologies and equipment, etc.
But the Tories revert back to the same old, tired model they used under former Premier Lord. The so-called “made in New Brunswick” solution to economic development. From Bruce Fitch’s commentary in the TJ this morning:
The Canadian Federation of Independent Business’s 2009 budget recommendations point out that lowering the small business tax rate and increasing the small business threshold are the best ways to stimulate the economy.
Fitch should know that 97% of these ‘small businesses’ (of which I am one) generate their revenue exclusively in New Brunswick. In other words, their markets are local. They are hair dressers, janitorial companies, construction workers, electricians, consultants, etc. etc. etc. The Tories cut their taxes to the bone when they were in power and according to the Fraser Institute New Brunswick went on to have one of the worst SME growth rates in North America. These 97% of SMEs need a growing market, not a small cut in taxes, to growth their own businesses.
That’s why it is surprising that the Tories don’t just adopt in principle – as red meat – a lot of these ideas floating around out there. Reverting back to the same old ideas gives us no real opposition thinking in the area of economic development which, I think, has a negative impact on the province’s potential economic growth.
And, by the way, not to beat a dead horse but cutting small business taxes to the bone is far more beneficial to the province’s high income earners than cutting the personal income tax rate. When former Premier Lord cut the small business tax, several thousand unincorporated self-employed persons migrated to being incorporated self-employed persons to take advantage of this lower rate. Doctors, lawyers, many construction workers, dentists, etc. are all ‘small businesses’ because you pay less tax as a corporation than you would as an individual.
So when you read Mr. Fitch talking about the deep tax cut for the ‘richest’ New Brunswickers, tell him to look in the mirror. I don’t mind a debate about tax rates but I dislike people that try to mislead New Brunswickers about the issues. I haven’t done a full analysis but my suspicion is that cutting a small business tax (and increasing the threshold) is likely more beneficial for most high income earners than a cut in personal income taxes. Of course, cutting the personal income tax rate is beneficial to those that cannot incorporate such as senior civil servants, middle and senior managers in big companies, etc.