Reform Grits tax plan will lure new companies to province and help the economy, expert says
FREDERICTON - New Brunswick's coming tax changes will attract business to the province and will help stimulate the sagging local economy, says one of the country's leading tax experts.
"Given New Brunswick's needs and what this will do in the long run, I think this is an excellent package for the province," said Jack Mintz, chairman of the University of Calgary's School of Public Policy Studies.
"I think it will serve the province very well."
The Liberal government's four-year tax plan, presented in the legislature last week, pledges $143.5 million in personal and business tax savings in 2009-10.
By 2012-13, those savings will reach $380.2 million.
Overall, the Liberals are moving from a four-rate, four-bracket tax scheme to a two-rate, two-bracket system. By 2012 the two rates will be set at nine per cent and 12 per cent, respectively.
On the business tax side, the Grits plan to drop the province's general corporate income tax rate from 13 per cent to eight per cent by 2012. The move will surpass the federal government's call for all provinces to lower their corporate income tax rate to 10 per cent.
Mintz, the architect of the Graham government's original tax reform blueprint, said the final changes will have a "very significant" impact on the province's ability to attract investment and new business.
"From an international perspective, countries will see this as a signal for investing in New Brunswick," he said, noting the province's combined corporate tax rate of 22 per cent would be below the average of countries in the Organization for Economic Co-operation (OECD), a group of 30 countries that includes the United States and much of Europe.
"New Brunswick starts looking like Switzerland," he continued.
As well, Mintz said the personal income tax cuts will help create jobs and stimulate the economy, provided the reductions are affordable and don't cause the government to run long-term deficits.
"Permanent tax cuts can have a really significant impact on people and their spending habits," he said. "You can argue that tax cuts will have a faster impact (in boosting the economy) than infrastructure spending.
"New Brunswick has positioned itself well in that respect. I think it is a very positive thing for the province."
The Liberals - who plan to run a $741-million deficit in 2009-10 - borrowed many ideas from Mintz's initial tax blueprint, though they declined to implement some of the biggest elements.
The original plan claimed that tax cuts - up to $500 million a year - could be funded through a carbon tax and a boost to the Harmonized Sales Tax (HST).
The HST, it was proposed, could be put back up to 15 per cent - an increase of two percentage points.
Published Monday March 23rd, 2009 - Telegraph Journal