Smith McCrossin: Time to invest in people & economy with a Big Tax Break

With Nova Scotia poised to have among the worst rates of economic growth this year and next year in Canada, Progressive Conservative leadership candidate Elizabeth Smith-McCrossin says it’s time for big change.

 

The Cumberland North MLA and longtime business owner today unveiled her Big Tax Break – the largest tax relief plan Nova Scotians have seen in over 30 years.

 

“It’s no coincidence that Nova Scotia’s economic performance has been the worst in Canada for the better part of three decades, while Nova Scotia’s tax rates have been among the highest,” said Smith-McCrossin.  “We can’t turn our province around through small steps and half-measures, we need to go big.  We need to invest in our people and businesses and end Nova Scotia’s reputation as Canada’s high tax capital.”

 

Smith-McCrossin’s Big Tax Break has five parts:

 

  • Increasing the basic personal allowance to $15,000 a year for Nova Scotians earning $75,000 and under; and $10,000 a year for the remainder of individuals;
  • Ending bracket creep by fully indexing personal income tax brackets – bringing Nova Scotia in line with the majority of Canadian provinces;
  • Ending personal income taxes on anyone earning less than $20,000 a year – taking 39,000 low-income Nova Scotians off the province’s tax rolls;
  • Reducing corporate taxes from 16% to 12% - bringing Nova Scotia’s rate down to the lowest level in Atlantic Canada; and
  • Reducing the small business tax rate from 3% to 0% - making Nova Scotia only one of two provinces with a zero small business tax rate.

 

“My Big Tax Break will help every Nova Scotian,” said Smith-McCrossin.  “It’s time to get on with helping people and businesses create the kind of economy that will create jobs and lead the country, instead of finding more excuses not to act.”

 

The cost analysis for most of the elements of the Big Tax Break was conducted by a research associate at the Economics Department of the University of New Brunswick and reviewed by a Nova Scotia-based certified professional accountant.  Information related to fully indexing personal income tax brackets (ending bracket creep) came from the Nova Scotia’s government Tax and Regulatory Review (better known as the Broten Report).

 

“There will be those who say we can’t do this in Nova Scotia.  There will be those who say we have to cut health, education and social services to deliver tax breaks of this magnitude.  They are wrong,” said Smith-McCrossin.  “We can identify enough savings within a $10.8 billion budget and turn those savings over to people and business to invest.”

 

Within 30 days of forming office, an Elizabeth Smith-McCrossin government will conduct an independent external review of government finances to identify 5% of savings within the province’s $10.8 billion budget.  The proceeds from these savings will then be turned over to Nova Scotians in the form of a Big Tax Break.

 

The 2014 Tax and Regulatory Review, led by former Ontario Liberal cabinet minister and now Nova Scotia Business Inc. CEO Laurel Broten cited the economic damage caused by Nova Scotia’s high tax regime.

 

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Contact:

Mitchell Maltby

902-414-6252

media@elizabethforleader.ca

 

BACKGROUNDER

 

The cost analysis for most of the elements of the Big Tax Break was conducted by a research associate at the Economics Department of the University of New Brunswick and reviewed by a Nova Scotia-based certified professional accountant.  Information related to fully indexing personal income tax brackets (ending bracket creep) came from the Nova Scotia’s government Tax and Regulatory Review (better known as the Broten Report).

 

The analysis provides two scenarios: no economic impact from the proposals and a positive economic impact.

 

In the case of the corporate income tax reduction, the analysis cited a 2016 study by the University of Calgary that concluded that a one per cent cut in the corporate tax rate increases the tax base by 11 per cent.  A four per cent reduction in Nova Scotia, as proposed under the Big Tax Break, would therefore increase the tax base by 44 per cent – resulting in an increase of corporate tax revenues by $41.5 million.

 

Table #1: Summary Listing Changes to Nova Scotia budget, given proposed tax changes (in $millions)

 

 

 

                                            tax policy reform

 zero tax elasticity

 +’ve tax elasticity

1. Reducing corporate income tax rate from 16%  to 12%

      - $130.1-m

      +$41.6-m

2. Reducing the small business tax rate from 3% to 0%

        - $10.8-m

      - $10.8-m

3. Raising the personal exemption for $75k- to $15,000 and $75k+ to $10,000

      - $382.9-m

    - $344.6-m

4. Removing all personal income tax on those earning $20,000 or less

        - $16.2-m

     - $14.6-m

5. Fully indexing personal income tax brackets (end bracket creep)

          -  $30.0-m

     - $30.0-m

    Total

     - $570.0-m

    - $358.4-m

 

6. Total Government of Nova Scotia expenditure

    10, 863-m

       10, 863-m

7. % of total spending needed, as spending reduction, to retain balanced budget

         5.2 %

         3.2 %

 

 

 

       

 

 

Table 2: Estimated Revenue Reductions from Removing Taxes Pad for Individuals Earning Less than $20,000 a year ($millions).

 

 

 

 

 

 

 

                               2015 calendar year

            2018/19 fiscal year

                                         income class

                                                                         # of returns

 total provincial tax paid ($’000s)

total provincial tax paid per person ($)

                             zero tax elasticity

positive tax elasticity                          

1. $4,999 and under

             290

              39

        134.48

 

 

2. $5,000-$9,999

          2,400

            258

        107.50

 

 

$10,000-$14,999

        13,480

         2,911

        215.95

 

 

$15,000-$19,999

        23,250 

       11,567

        497.29

 

 

Sum of the above

        39,430

       14,775

        374.71

     -$16.2-m

   - $14.6-m

 

 

 

 

 

 

Source: Canada Revenue Agency (2017); calculations made by author.

 

The 2014 Nova Scotia Tax and Regulatory Review made the following conclusions:

“...the province needs to focus hard on its corporate tax structure. Having the highest provincial corporate tax rate in Canada puts Nova Scotia at a distinct competitive disadvantage.” Pg 38

“Corporations operating in Nova Scotia and elsewhere have incentives to shift
profits outside the province, given that Nova Scotia’s corporate income tax rate is the highest among provinces. The 16 per cent general corporate rate has been in effect since 1991, and a reduction will almost certainly lead to more taxable income being allocated to Nova Scotia.”
Pg 39

 

 

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