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Moncton Times & Transcript ~ Tax Help Plus ~ Provincial Observations ~ March 27, 2007 - 06 May 2007 by TaxHelp
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Provincial Observations.
Roger Haineault – “Tax Help Plus” – March 27, 2007.
It must be tough being a professional planner in the provincial Department of Finance lately. After all, it’s their job to make sure that the different services the government offers through its myriad of other departments and agencies end up making fiscal sense. While I don’t know for sure, as an example I can imagine that when a government says that Health has to rationalize the delivery of care, and a decision is made to close smaller hospitals in favour of a larger regional hospital being built, it must be tough – politically, emotionally and financially. And as the regional hospital is built and the next government decides not to close the smaller hospitals, planners must pull their hair out trying to understand how to make it work. After all, maybe the regional hospital shouldn’t have been built after all and the money could have been spent on hiring more doctors instead. I just know I’m glad I don’t have to take responsibility for these matters.
The new Liberal government has had quite a honeymoon. It seems that no matter what happened after being elected, the negative response has been muted. The $2,000 freshman grant that applied only to university students of publicly funded schools, the withdrawal of the previously promised HST rebate on energy bills, the non-revoking of the gas price regulation program – all point to a certain laissez-faire approach to commitments.
But earlier this month we saw a budget that arguably impacts the middle class more than any other over the past number of years. From a tax perspective it would be tough to describe other than regressive. If one thinks of the population as fitting into a pyramid with the apex being the highest income earners, then the base represents the lowest and the largest segment of the population. The budget continued to do good work at taking the very poorest New Brunswicker off the tax rolls. However, the middle class, which for our purposes we’re going to classify as $67,000 or less of taxable income are going to experience an almost 5 per cent increase in their provincial tax bill. And to add insult to injury, since the tax changes are retroactive to the beginning of the year but are only going to start being collected in July, it’s going to feel like a double-whammy with some of these people losing an additional fifty bucks a month in taxes to Fredericton.
The other major tax hit applies to small business. Study after study says that small business drives the economy. For every large scale facility that is built, hundreds and hundreds of small businesses come alive employing five or six people developing innovation and investing in our province. The former Conservatives recognized that not only personal taxes had to be reasonable to keep the underground economy from flourishing, but that we needed a province that welcomed investment both externally and from within. They were committed to being as competitive as possible and small business taxes were about to fall to one per cent. Remember, this savings allow companies to re-invest, expand and create additional employment. Instead, the Liberals have announced that this rate is going to 5 per cent in July. That’s right! A five-fold increase. Hard to envision? Picture your property tax bill in your hand and magically multiply it by five before you pay it in the next month or so.
Another incentive the previous government instituted dealt with the out-migration of skills. In late 2005 the government announced the launch of the Tuition Cash Back program. Designed to rebate a portion of provincial taxes (based on paid tuition) for students who stay in the province when they join the workforce, people have been talking about this with excitement. Every year we have those in the office who want to apply. This spring was going to be the first opportunity. However, now the Liberals have changed the terms and are making it available only for graduates. So someone who goes to school for a couple of years, and then takes a year off to a) work in order to make money to continue to go to school or b) work in order to re-evaluate their course of study will not have the opportunity to participate.
Some people feel that these kinds of decisions are so wrong headed that they make the electorate wonder if there really is a plan. Why wouldn’t people want to go to Alberta if their personal taxes are going up here, or their business is now less competitive, or the promoted tax break for a resident student has now suddenly vanished? When a party says one thing during an election and then back tracks incessantly when they reach power, the voter may just wonder how many mulligans he or she should have to take. While promises may not be broken strictly speaking, there is certainly no doubt that for some they’ve been badly bent!
Roger Haineault is with Tax Help Inc. His column "Tax Help Plus ..." appears each Tuesday. For questions, comments or column suggestions he can be reached by calling 855-HELP (4357) or by emailing roger@help4taxes.ca
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