It's Tough To Be A Taxpayer

Especially in Quebec and Nova Scotia. Both provinces have not only taken away the tax breaks, brought in by the Conservative government, but they've also added a few tax hikes on top of that.

In Quebec, they're adding yet another percentage point to the QST, effective 2012 (on top of the previously budgeted increase from 7.5% to 8.5% in 2011). The province raises gas taxes, (allowing big cities to add their own levy on top of that,) increases user fees and tuition fees and, here's the nastiest of them all - introduces healthcare premiums; up to $200 a year by 2012. It looks like Quebecers are getting the worst of the two worlds. They get both higher taxes and higher user fees. And they can look forward for even more cash grab - this time, in form of a health deductible - with no trade-offs such as income tax cuts.

In Nova Scotia, the government chose not to bother with the two-year phase-ins. The HST goes from 13% to 15% effective July 1st. Plus, the government is creating a 21% income tax rate "for the rich". (23.1%, if you factor in the 10% surtax.) With the 29% federal income tax on top of that, this amounts to a 52.1% marginal tax rate (something we haven't seen since mid 1990's) on those making over $150,000 a year. (Which is not that much for a single-income family in Halifax.) Nova Scotia thus becomes the only jurisdiction in Canada, where every extra dollar above a certain threshold yields more to the government than to the person who has actually earned it. Anyone else is willing to experiment with an NDP government?

Both provinces use the deficit as an excuse for this barrage of tax hikes. But nowhere does it say that those tax hikes will be reversed once the deficit is gone. Moreover - if the governments are unwilling to exercise fiscal restraint when the revenues are down and the deficit is soaring, can we trust them to start cutting taxes when the economy is good and everybody is looking forward for more freebies from the government? One of the Nova Scotia NDP's campaign promises was to cut program spending by 1% to avoid tax hikes. What happened to that promise?

But the provinces still need the extra revenue, don't they? Well, how much of that extra revenue will have to be spent on "solidarity credits" and all other tax breaks and rebates, designed to ease the effect of the recent tax hikes on the low income earners? And then - how much revenue will be lost, because the taxpayers just don't like the idea of having to pay more in taxes than they are allowed to keep?

We reported in May that after passing a millionaire surtax nearly one-third of Maryland’s millionaires had gone missing, thus contributing to a decline in state revenues. The politicians in Annapolis had said they’d collect $106 million by raising its income tax rate on millionaire households to 6.25% from 4.75%. In cities like Baltimore and Bethesda, which apply add-on income taxes, the top tax rate with the surcharge now reaches as high as 9.3%-fifth highest in the nation. Liberals said this was based on incomplete data and that rich Marylanders hadn’t fled the state.

Well, the state comptroller’s office now has the final tax return data for 2008, the first year that the higher tax rates applied. The number of millionaire tax returns fell sharply to 5,529 from 7,898 in 2007, a 30% tumble. The taxes paid by rich filers fell by 22%, and instead of their payments increasing by $106 million, they fell by some $257 million.

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The same is going to happen in Nova Scotia and Quebec. Think about it: why would someone want to run a business in Nova Scotia, where the corporate tax is 16%, sales tax is 15% and the top income tax rate is 23.1% (21%+10% surtax), when in the neighboring New Brunswick, the sales tax is 13%, the corporate tax is 11%, the top income tax rate is 14.3% and the government is on its way to reducing income taxes even further?