Toward Balanced Budgets
January 18, 2013 | 7 Comments
This article was originally published in the Telegraph Journal on Tuesday, January 22nd, 2013.
Members of the New Brunswick Business Council are concerned about our province’s debt. Today New Brunswick owes 10 billion dollars.
10 billion dollars. That’s a difficult number to imagine. Put another way it’s roughly $13,300 per New Brunswicker. More troubling is the fact that this debt continues to increase. Each year, our government pays almost $662 million in interest on that debt. That’s more than the combined budgets for Natural Resources; Post-secondary Education, Training and Labour; and Economic Development. And our interest rates are at risk to increase.
Can you imagine what we could do with $662 million, if our debt was paid off? We could dramatically improve social assistance for the poorest New Brunswickers, double our investments to eliminate illiteracy, and improve training for those wanting to learn. But to make that dream a reality tomorrow, we need to make sacrifices today.
Some think the cause of these financial ills is a spending problem. Indeed, New Brunswick’s expenses have grown steadily over the past 30 years, and particularly in the last decade. We’re encouraged that our expenses are forecast to stay flat for the next few years, and we congratulate the government for its recent efforts to reduce our deficit.
In fact, our debt levels and spending rates are similar to other provinces in Canada. (see previous blog post for graphs) Where we differ, unfortunately, is in our revenue prospects.
In 2008, provincial revenues stopped growing. New Brunswick was the only province that reported reduced GDP in 2009-2010. Our economy has stalled and it is now forecast to grow at the slowest rate in the country.
The New Brunswick Business Council believes that difficult times call for difficult measures. That’s why we propose an increase to the corporate income tax rate to generate revenues that will decrease our deficit and ultimately our $10 billion debt.
Please do not misunderstand; members of the Business Council aren’t keen to pay more tax. But New Brunswick needs to return to balanced budgets as quickly as possible, and we believe that as New Brunswickers we must tighten our collective belts to help our province achieve this goal.
Currently, New Brunswick has the lowest corporate tax rate in Canada. Our rate is 10 per cent, while the Canadian average is 12.5%. For each percentage increase in the rate, New Brunswick could generate an estimated $10 million dollars. That won’t eliminate our deficit overnight, but it’s a step in the right direction.
Additionally, the Council believes that an increase in the consumption tax rate would benefit New Brunswickers in the long run. We understand that no one wants to pay more tax. In fact, legislation exists to prevent an HST increase without a referendum or election. While New Brunswick’s biggest consumers will feel an HST increase most, we recognize that this increase will be hard to bear for our provinces’ poorest. We know that New Brunswickers can come up with creative solutions, such as an increase to the low income tax threshold or a provincial tax rebate program, to eliminate these impacts.
We ask you to consider this: an increase in HST could eliminate our deficits and reduce our debt substantially. Once we achieve balanced budgets and reduce our debt payments, New Brunswick will be able to invest strategically, for the long term, in what matters.
Another idea to increase provincial revenues is to stimulate investment in the growth engine of our economies: the export-focused new and growing businesses in our communities. Adopting enhancements to the Small Business Investor Tax Credit (SBITC) program as recommended by FutureNB will help give growing New Brunswick companies a better chance to compete and win globally.
Business Council members are fervent competitors. It’s essential that New Brunswick’s economy generates and supports businesses that can compete on the international stage with efficient operations, quality products and services, and strong company performance. So in calling for an increase in taxes, we urge that competitiveness be our goal.
The Business Council wants to help the government achieve balanced budgets. We’re prepared to pay more corporate income tax and to pay more HST, with those revenues used to decrease our debt. We support enhancements to the SBITC and urge continued commitment to the strong government renewal work that is curbing spending and reducing our deficits today. Once deficits are eliminated and debt service payments reduced, our province will be on a stronger footing from which we can grow.
The New Brunswick Business Council is also taking direct measures to foster more successful entrepreneurs in our province. Further details on these actions will be provided in the weeks ahead.
As business people, each of us has made hard decisions on cost cuts in the past. We’ve also had to work with our staff and customers to grow sales revenues. There are thousands of New Brunswickers today who are working hard to manage their own expenses, income and debt. We know it is not easy work. All of us, business, labour, our elected officials, individuals, we must all do our part.
Your ideas and comments on this (and particularly on creative options for HST increases) below.
The views expressed herein represent the views of the Council as a whole, and do not necessarily represent the views of any individual member or company. Positions are developed on the basis of consensus, not unanimous agreement.