Canada’s federal equalization program is motivated by good intentions. However, the program has unintended consequences, and creates perverse incentives that have allowed at least two “have-not” provinces to shun sensible economic opportunities.
New Brunswick Premier Brian Gallant, seems poised to follow through on a campaign promise to institute a moratorium on hydraulic fracturing.
Over fifty years, observers have become inured to troubling reports of Atlantic Canada's economic difficulties.
Even the most jaundiced observer would recognize, however, that data for the last two years describes something different. The regional economy is not experiencing continued slow decline: it is starting to implode.
The recent native protests in New Brunswick against proposed hydraulic fracturing ('fracking') are not only devoid of facts but harm the potential for prosperity and lower personal taxes. Add in the anti-fracking frothing in neighbouring Nova Scotia, and also in Quebec, and it adds up to ill-advised provincial policies, this despite the safety of fracking.
Before detailing the potential for a lighter personal income tax burden if more resource development was allowed, here are the facts on hydraulic fracturing for oil and gas.
Last weeks provincial budget was a heap of bad news for New Brunswickers. First they learned that they will continue to be burdened by a government with shaky finances driven by annual deficits and mushrooming debt. Topping that off, Progressive Conservative Finance Minister Blaine Higgs proposed a series of highly damaging tax increases as a way out of New Brunswicks deep fiscal hole. Unfortunately, these tax hikes will cast a dark cloud over New Brunswicks economic prospects and likely bring little revenue in return.
New Brunswicks new tax plan: Ontario take note: New Brunswick is considering a 10% income tax rate and a 5% corporate tax rate
Ontario Premier Dalton McGuinty could learn a thing or two from his colleague in New Brunswick, Liberal Premier Shawn Graham.
In 2006, after defeating the incumbent Conservative government, the newly elected Graham took a page from McGuinty's playbook and increased personal and corporate taxes. However, unlike McGuinty, Premier Graham seems to have learned from his mistakes and is reversing course.