Carbon Tax Will Hurt New Brunswick

The idea of a "tax shift" appears to be quite popular among politicians nowadays. New Brunswick government too, is considering such tax shift as a way to reform the provincial tax system.

The opportunities are plenty. Some of the tax burden would be shifted from income to consumption. Income taxes could be lowered - instead of a complex four-rate structure, New Brunswick could have either a two-rate 9%/12% tax or a 10% flat tax, just like in Alberta. Businesses too would be given massive tax cuts - existing 13% could be lowered to 10% if not to 7% or 5%. In return, shoppers would be paying extra 2 cents on the dollar in sales taxes and those evildoers who use fuel will pay additional tax on their carbon dioxide emissions. At first it may seem like a reasonable and environment-friendly approach. But only at first.

Even when it comes to shifting the tax burden from income to sales tax - unless the government doubles the personal exemption to bring it at par with the full-time minimum wage ($16,000), this tax reform will hurt the low income earners. Offsetting the impact of the tax shift with quarterly cheques (similar to the GST credit) isn't such a good idea since low income earners need their money now, not in three months time. (Plus - the government will have to hire someone to calculate the credits and mail out the checks.) Municipalities too will face higher operating costs if the HST goes back up to 15%.

And then there's the carbon tax. Which will affect not only those who drive their cars to work, not only those who use oil or electricity to heat their homes but virtually every product in New Brunswick:

"100 per cent of all goods are moved internally by truck in New Brunswick and when you put that in the context of adding on a carbon tax, that's going to increase the cost beyond reason," said Nelson.

In the discussion paper, the proposed carbon tax would follow the same model British Columbia began using on Canada Day. Nelson said the higher costs which would face the transportation sector because of a carbon tax would affect everyone whether they drove or not, specifically the everyday consumer.

"You're going to pay it in higher costs for food, clothing, medicine, building supplies, everything that's delivered by truck because you don't see a train rolling up to Wal-Mart."

Nelson said if New Brunswick's proposed carbon tax plan was coupled with the carbon tax plan proposed last month by federal Liberal leader Stephane Dion, it would be catastrophic for the province's economy.

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Actually, even if there was a freight train rolling up to Wal-Mart, that wouldn't be much of a help, as locomotive fuel too will be subject to carbon taxes.

There is much better way to provide for lower provincial taxes: Negotiate public debt consolidation with the Bank of Canada. New Brunswick currently pays $600M on the provinces $7Billion debt. If the province borrows money from the Bank of Canada (at 4% per annum) to buy back government bonds (on which the average interest is 9%), that will result in $320M in savings, so taxes could be reduced without hiking the HST and with no need for the carbon tax grab.