New Brunswick Government Policies Regressive and Unsustainable

In September 2010, New Brunswick voters elected a majority Conservative government, led by David Alward.  Since being elected, this government has pursued the twin illusions of low taxes and public service cuts.  These strategies have served only to undermine the province’s ability to invest in essential programs while promoting the low-wage sphere of employment.

After taking office, the government quickly announced $220 million in cuts.

The Canadian Union of Public Employees estimates that the Alward government has already eliminated 600 public service jobs, and that more will be lost in the future. These cuts mean an erosion of the province’s ability to provide essential services.  They mean taking funds out of a local economy that is desperate for stimulus.  Putting more government employees out of work is bad for the public and the private spheres, hurting all New Brunswickers.

What’s worse is that these service cuts are taking place at a time when the province has recently instituted massive income tax cuts.

A CCPA-NS analysis of these cuts shows that they have served upper-income earners much more than their lower-income counterparts.  Someone with annual taxable earnings of $30,000 would receive a benefit of only $495, while their neighbour whose annual taxable earnings are $150,000 would receive a benefit of $5,922—fifteen times as much!

Another  recent CCPA-NS publication offers a brief summary of steps New Brunswick could take to move toward a more sustainable fiscal situation.  After making a case for progressive taxation, the paper estimates that by simply reversing the 2009 Graham tax cuts and adding an extra bracket for people with taxable incomes of more than $150,000 per year, New Brunswick could increase annual revenue by about $260 million.

For those who argue that it is a bad idea to raise taxes in hard times, we point out that it is an even worse time to cut jobs and services as a way of tackling New Brunswick’s deficit. By raising taxes in a progressive way, the government can maintain and expand spending beyond what it otherwise would be able to do while also reducing the deficit. Compared with the alternative, the result should be a net increase in spending and economic activity in New Brunswick, as well as an improved quality of life for all its citizens.

As well, times are not hard for everyone. This proposal raises taxes for those most able to contribute. The Graham government’s tax cuts reduced taxes in an unaffordable, unsustainable way, disproportionately benefitting those most able to pay. It was irresponsible and reduced the fairness of the fiscal system.

The province has also taken the wrong track on corporate income tax rates, which have shrunk significantly, from 13 to 10 percent in recent years, further compromising the province’s fiscal sustainability.

In an attempt to make up for this lost revenue, the government has chosen to raise user fees on public services.  These changes will cost New Brunswick families a collective $6 million annually, with low-income New Brunswickers shouldering a high share of the costs.  Raising the costs for necessary services, such as vehicle registration, is a regressive way to increase revenue. It forces those citizens who are least able, to pay disproportionately more of their income.

The Alward government has also moved to lower wages in the private sphere, delaying scheduled minimum wage gains and proposing an even lower tier of pay.  Suppressing the minimum wage creates greater barriers to breaking the cycle of poverty, growing the low-wage sphere of employment.  It makes saving for higher education difficult, and feeding a family impossible.  It decreases demand for local goods and increases the costs of training to small business.

Since the Alward government took office in 2010, it has takenNew Brunswickdown a path of job and service cuts.  It has lowered taxes, but in a way that favours upper-income individuals and corporations.  It has suppressed wage increases and fostered growth only in poverty-level employment.  This is not a sustainable policy model.

Instead, New Brunswickshould be raising the necessary revenue to provide its citizens with the services they need to flourish.  The province needs progressive taxation, adequate funding for health care, support for quality education, and liveable wages.

 

An abridged version of this article was published in the Telegraph Journal, Freuary 21, 2012.

 

Jason Edwards

Research Officer, CCPA-NS

One comment

  1. While I agree that the income tax cuts should be reversed, and a new level added for high income earners, I think that your calculations as to revenue gain are a bit simplistic. First, reversion to the previous rates would have to be phased in over a few years – I don’t think that it would be politically viable to do otherwise as you are asking for a tax hike for most income-earners, not just those in the higher categories. Second, as you are aware, NB is facing more fiscal pressure due to transfer payment reductions (in real dollars) in the near future. I think that the net result of increasing PIT and reductions in transfers could be close to a wash – leaving the defict unchanged.

    Likewise, CIT rates could be reversed over a few years. But again, NB will need to increase own-source revenue just to keep the deficit from growing too rapidly.

    Seems to me that HST increases are required to really make much of an impact on NB’s fiscal situation.

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