Tag Archives: HST

Jul 05 2016
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Business, Economy, Government

The HST bogeyman

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Okay, I get it. Everyone hates taxes. But there are taxes and then there are taxes – a distinction that certain business groups and assorted advocates routinely refuse to make as they stir their various pots of public outrage.

Here’s the background, courtesy of Chris Morris, who works the Legislature Bureau of the Saint John Telegraph-Journal: “According to numbers obtained from the provincial government through a right to information request, the (Canadian Taxpayers Federation) said (last) Monday promised tax credits won’t cover the additional costs for average working families.”

She continued: “The harmonized sales tax in New Brunswick will increase by two percentage points on Friday, Canada Day, to 15 per cent from 13 per cent. Kevin Lacey, Atlantic director of the taxpayers federation, a not-for-profit citizens group that lobbies for low taxes, said figures obtained from the Finance Department show that of the 331,309 households in the province, 225,361 – or 68 per cent – will pay more tax even after HST credits are factored in.”

As for Mr. Lacey, here’s what he told Ms. Morris in an interview: “If you are an average, middle-class working family, you are still going to pay big dollars under this HST increase. That is on top of income tax increases brought in three years ago. New Brunswick is going in the wrong direction with regard to taxes. Taxpayers are shelling out more and more every year.”

I understand that Mr. Lacey has a job to do, and more power to him. But a couple of things occur.

Firstly, the income-tax hike in New Brunswick came after a sustained period of income-tax reductions. So, as economists like to quip, it’s a zero-sum game. That said, taxes on income must be the most inequitable way possible to separate a middle-class family from its money.

The poor pay little or no taxes on their earnings. The rich have, at their disposal, plethora schemes (legal and otherwise) to avoid levies on their fat hauls. It’s the poor slobs in the middle (meaning, most of us) who bear the brunt of satisfying the taxman.

Secondly, virtually every economist in the world agrees that taxes like the HST, which is a consumption claw-back, is vastly more efficient and fair than an income one, as long as the former is not regressive – that is, it doesn’t hit the poor disproportionately hard, as they tend to spend most of what they earn.

As Laval University economist Stephen Gordon wrote in the Globe and Mail a few years ago, “The basic idea comes down to the role of taxes in determining the rate of return on investment. Higher returns generate higher levels of investment and – as investment accumulates – higher levels of productive capacity. That increased capacity in turn generates higher levels of output, employment and wages.”

On the other hand, he noted, income and corporate taxes reduce rates of return to the point where stuff doesn’t get done and people don’t get employed. Consumption taxes, meanwhile, levels out the playing field: You pay on what you buy. Again, though, they only work fairly if those who have little money to purchase anything qualify for timely rebates.

If the middle class does exist in New Brunswick (and the jury is still deliberating that point), Mr. Lacey and his ilk should advocate for rollbacks in taxes on income, not cuts to a regulated, humanely applied regime of consumption levies.

Even more useful might be pushing for a system that does not slip into regressive HST charges on the very people the Taxpayers Federation represents.

After all, some taxes are better than others.

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Feb 01 2016
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Economy, Politics

For whom the road tolls

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“Popular” is not exactly the word that leaps to mind when talking about toll roads and tax hikes, but if you’re contemplating steps to render both as facts of life for New Brunswickers, a little spin goes a long way.

So it was earlier this week when the provincial minister of the Gallant government’s strategic review, Victor Boudreau, and Finance Minister Roger Melanson, very nearly spilled the beans, observing that of all the options for eliminating the provincial deficit they’ve presented to the public, the most “popular” were tolling roads and raising the HST.

Of course, neither Liberal MLA spoke directly to either issue in advance of next week’s budget, preferring, instead, to issue vague assessments of the vox populi’s current mood on the twin subjects of spending cuts and revenue raising.

Mr. Boudreau: “There has been a lot of work being done over the last number of months. I do think you’re going to see something that is going to, at the end of the day, address the fiscal challenge we are facing as a province, but doing it while maintaining. . .balance.. . .New Brunswickers have made it clear they don’t want to see deep cuts to health care and education.”

He also allowed that the debate over toll roads has been the most interesting component of the consultations: “A lot of people want tolls, but very few people want to pay for them.”

There you have it, ladies and gentlemen: This province’s existential problem in a nutshell. We New Brunswickers want to lasso the moon; we just don’t want to buy the rope.

In this, of course, we’re no different than anyone else. Still, our unique set of economic circumstances insists that we adopt a colder-eyed approach to solving our shared problems than ever before.

When Mr. Gallant began his review of government spending months ago, he declared that everything was on the table – on both the expenditure and revenue side of the ledger.

If that’s true, then next week’s budget should reveal a dramatically reduced (in both size and cost) civil service, with those savings redirected into strategies and programs that are likely to grow the economy and create jobs and, in so doing, goose tax revenues to public coffers.

But let’s not kid ourselves. We are well past the point where even the most efficiently run government and bureaucracy can pull our fat from the fire. This is not an overnight proposition. It will take years of lean, mean management in the public sector to keep the ship of state of a steady keel.

In the meantime, emergency measures are urgently, if lamentably, necessary. And that means tolls and taxes, neither of which, incidentally, need be especially onerous.

Virtually every economist I’ve consulted over the years stipulates that taxes on consumption are eminently more efficient and fundamentally fairer than levies on income. What’s more, those who subsist below a certain standard of living ought to receive rebates equal to their HST outlays.

Indeed, if all provinces along the East Coast actually harmonized again their harmonized sales taxes into one 15 per cent regime for all, as Nova Scotia Premier Stephen McNeil suggests they do, the unfair competitive pressures on the private sector would melt.

Tolls are somewhat more difficult to administer and collect than taxes without undermining the monetary value of the exercise, itself. But it can be done, and to great effect, as it is in other jurisdictions across North America.

Think of taxes and roadway fees as temporary measures that, nonetheless, toll for thee.

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Jul 16 2015
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Business, Economy, Politics

The perfect picture-panic province

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What a marvelous time to be the youngest premier in Canada, representing the oldest population in the nation. Could anything in Brian Gallant’s professional experience be less desirable than the thankless job he now faithfully executes?

The 32-year-old’s to-do list would give Hercules a panic attack.

First, there’s the little problem of a $12-billion long-term public debt, and a $500-million annual deficit that just won’t go away no matter what tweaks he executes to civil-service spending.

Second, there’s a litany of campaign promises that inveigh against any reasonable tool to manage the province’s fiscal crisis.

There will be no new revenue streams in the foreseeable future – not from onshore natural gas development, not from a putative pipeline from Alberta into Saint John, not from the high-tech or natural resources sectors, not from manufacturing, not even from community economic entrepreneurship. Nada. Zip. End of story. Period.

Third, the cost of health care in New Brunswick is rising alarmingly, given the tax base that remains to help pay for emergency rooms, walk-in clinics, family physicians, fully equipped hospitals.

This province “boasts” the highest per-capita spending on “interventional” medicine (as opposed to the preventative type) in the country. We are, as a populace, fatter, drunker, and more likely to cough our lungs out than any other region of Canada.

Fourth, we continue to endure the steady outmigration of our “best and brightest” to other parts of the nation, the continent and the world. And, even when other parts of the nation (Alberta), the continent (the Midwestern shale patch) and the world (the European Union) fail to retain promise, our ex-pats routinely choose places other than home in which to roost (Brazil, Venezuela).

And then, of course, there are the awful employment numbers, reported far and wide around this tiny province.

According to a piece by John Chilibeck in the Saint John Telegraph-Journal, published last Saturday, “New Brunswick’s bleak jobless situation became even gloomier in June, with the unemployment rate shooting up into double digits again, to 10.8 per cent. . .Statistics Canada’s monthly labour force survey (reported that) employment in the province fell for the second consecutive month, down 3,500 in June.”

All of which must leave the impression, even in the minds of the most circumspect among us, that we are circling the drain. And that gives us the equipoise to blame the current office holders for their mismanagement, misalignment and even malfeasance.

Still, how much blame for what ails us can we properly assign to a new government, less than a year into its mandate, or even its one-term predecessor (party politics, notwithstanding)?

A friend of mine cornered me at a local grocery check-out recently and demanded to know why I haven’t been holding this young premier’s feet to the fire. “He’s obviously way over his head,” he declared as we surveyed the price of beef from Alberta. “So, what’s up with you? Have you gone soft, or something?”

To which I replied: “I was the first out of the gate telling the government to raise the HST by one percentage point. I was one of the first to tell this government to monetize shale gas, responsibly.”

My friend replied: “Well, I’m not for raising the HST, and as for shale gas, I’m for it as long it doesn’t affect me in any way possible.”

In other words, everything is better than the status quo, except for the status quo.

What a marvelous time, indeed, to be the youngest premier in Canada, representing the most calcified attitudes in the nation: The perfect picture-panic province.

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May 06 2015
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Government, Politics

In praise of laziness

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Cathy Rogers, MLA for Moncton and the province’s social development minister, is exactly right when she says, in so many words, that hiking the provincial portion of the Harmonized Sales Tax (HST) is the easy way out of New Brunswick’s fiscal fiasco and economic swamp.

So what’s wrong with that?

Why must we endlessly review our options through the nearly Calvinist lens of public sacrifice (do better, be better, go forth and die in penury and virtue), rather than embrace the rather obvious, less dramatic proposition that a two-percentage point hike in the HST – boring though it may be – would, in four years, help balance the budget and send our international creditors into a well-deserved, deep and abiding slumber.

Ms. Rogers, by contrast, would rather we first figure out how to run ourselves as a proper citizenry than pay the bills. As for the HST, she says, “it’s like asking for a bigger allowance without first learning how to manage our allowance better.” Calling it a “quick fix” and a “lazy way to find a solution”, the minister would rather we put our shoulders to the wheel just as the wheels fall off the semi-tractor trailer that is the rusting, heaving, wheezing truck of state.

Of course, she’s not the only one in this Liberal cabinet who’s willing to stand in the middle of the road, proclaiming loudly, only then to skirt to the curb, squeaking quietly.

There’s also Donald Arseneault, Minister of Energy and Mines, who thinks that a year-long examination into things we already know about shale-gas development in the province is a profoundly responsible use of public money and time, (though he has allowed in his quieter moments that just such an exercise might actually hurt New Brunswick’s economic prospects).

Ms. Rogers’ conundrum is, however, particularly perplexing. On the one hand, she declares that she is opposed to raising the HST today, but is willing to consider the prospect a year from now. Meanwhile, so-called “wealthy seniors” should be prepared to pay more for their nursing home costs to. . .you know. . .help balance the books before the government musters the political courage to do the smart thing: boost consumption taxes for everyone on discretionary items (not food, not fuel oil, not shelter, not kids’ clothing or daycare).

Still, who are these “wealthy seniors” of whom she speaks?

“We know that based on income 87 per cent of seniors cannot afford the daily cap (of $113 a day),” the Saint John Telegraph-Journal quoted her saying last week. “We can take something from this, but not everything. It is an indicator. We have to wait until we get more data to get more details on liquid assets.”

And while we wait for “more data”, New Brunswick’s new, wholly invented, politically contrived demographic – the wealthy senior – lives in fear of a government that has not yet determined who or how best to bilk him.

Nice work, if you can get it.

Always trust Government of every ideological stripe to render the straightforward, complicated; the clear, obfuscated; the fair, inequitable.

It’s called spin and it stinks.

More than this, it depends, for its effectiveness, on enormous amounts of energy, busy work and low cunning. In other words, it’s the opposite of “lazy”.

Somehow, in this universe, the sin of lassitude means telling the evident truth, doing the obviously right thing without breaking a sweat, and smiling easily without ever worrying about night terrors.

If these are my choices, I’ll take lazy man’s way out every day of the political week.

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Jan 12 2015
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Economy, Government

New Brunswick’s future: an axe, a prayer and good wireless

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Asking the hoi polloi what the political elites must do to keep the status quo from dissolving before the eyes of the common man and woman is standard strategy for first-term governments in the early stages of what they dread will be a crushing disappointment to everyone, including themselves.

Still, New Brunswick Premier Brian Gallant (four months old in electoral years) does it with such earnest panache, you can almost believe the words that issue from his  near-perfect mouth.

Almost.

“We need all New Brunswickers to participate with their ideas, suggestions and concerns so we can have a dialogue about how we are going to get our finances in order in this province,” he told a press conference in Fredericton last week.

“In the next few months, we will have a very open dialogue that will be fruitful. . .I am asking all New Brunswickers to give us their two cents, to give us their ideas, suggestions and concerns so we can come up with the best policies to help us get our finances in shape. . .Everything is on the table.”

Oh really, Mr. Gallant?

How do you feel about the HST?

A two-percentage-point hike in the consumption tax of this province would reap roughly $65 million a year for New Brunswick’s public coffers. Over your four-year mandate, that would amount to $260 million – plenty of good scratch to justify a moratorium (a word with which I am sure you are familiar) on hikes to personal, business, corporate and property taxes.

And yet, messing with the HST has proven to be political suicide across this great, self-aware, enlightened country of ours, ever since Paul Martin proved it could be done at great expense to his own and his party’s career. Sure, he managed to balance the national accounts in the mid-1990s – a feat for which Canadians never forgave him – but not before “reform-minded” barracudas from the west successfully labelled him a card-carrying “tax-and-spender”. The mud stuck and, of course, the rest is history.

So, then, if not the HST, how about highway tolls?

As you, yourself, have said, New Brunswick is fairly brimming with roads and thoroughfares – from the southeast to the southwest, from the north to the netherlands of moose country, where anyone who owns an ATV or snowmobile happily careens to his or her little parcel of pastoral heaven at whim.

Meanwhile, Mainers, Quebecers, Prince Edward Islanders, and Nova Scotians merrily trundle along our corridors, paid with local tax dollars, to points beyond our borders with nary a concern for such esoterica as infrastructure, stopping only to take in a view, gobble a piece of homemade blueberry pie, belch, and be on their way.

But just try to raise the possibility of tolling these folks.

It looks good on paper, sure. Still, remember what happened the last time this option carried serious weight in government.

“Finance Minister Blaine Higgs is acknowledging that putting tolls on provincial highways is an idea he is examining as the New Brunswick government tries to dig itself out of an $820-million deficit,” the CBC reported back in 2011.

“Higgs was urged to consider the imposition of highway tolls at a pre-budget meeting in Fredericton. . .The finance minister said many people have indicated during the pre-budget consultations and surveys that they are willing to pay highway tolls as a way to whittle down the province’s substantial deficit. And he conceded the policy is ‘something that is of interest.’”

What happened to Higgs? What happened to his boss, David Alward?

Enough said.

Perhaps, then, the solution to New Brunswick’s fiscal problem lies squarely on the cutting edge of the agenda.

Eliminate hospital services; curtail educational programs; fire the province’s civil servants; give everyone who remains an axe, a cord of wood, a holy bible, and a prayer, and send them off into the fine woodlands they so evidently cherish, there to build new, pioneer lives for themselves, all over again.

And when the hoi polloi, crushingly disappointed by Mr. Gallant’s earnestly failed efforts to keep their status quo plumply intact, come mewling, perhaps the besieged premier might finally say:

“Yeah. . .log cabins don’t come equipped with Netflix. Read your damn social contract, for a change.”

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