New Brunswick's Liberal government must ignore the critics and move quickly to implement its proposed tax reforms, says the president of the Atlantic Institute for Market Studies, a Halifax-based think-tank.
In fact, Brian Lee Crowley said Tuesday that the province should take it a step further and scrap corporate taxes altogether.
"Your efforts here have already raised the competitive hackles of your neighbours and, better still, scared them a little bit," he told a legislative committee examining the taxation overhaul.
"If implemented, they will move New Brunswick from middle of the road to the leader of the parade." But if you hesitate, or compromise, your competitors will beat you to the prize - the people and investment you need to sustain your province.
"I like a great deal of what I see in this paper, but talk is cheap."
Crowley's presentation to the bi-party committee marked the end of public consultations that started last month. The meetings were to gauge public reaction to measures laid out in the government's discussion paper on tax reform.
The paper suggests shifting the tax burden from income taxes to consumption taxes, with a goal to boost investment and job creation. Options include a two-percentage-point hike in the provincial share of the Harmonized Sales Tax and a British Colombia-style tax on carbon emissions. The paper also proposes replacing the four existing personal income tax brackets with a flat tax of 10 per cent.
But the suggested changes to corporate taxes interested Crowley the most. The paper includes various proposals that could see corporate taxes fall from 13 per cent to as low as five per cent, which would be the lowest rate in Canada. Crowley said the government should move further still, and eventually charge no corporate tax.
He said the Liberals should avoid the myth that corporate taxes have little effect on the average person.
"Corporations certainly cut the cheque for corporate taxes, but it is their employees - through lower wages, their customers - through higher prices, and their stockholders - through lower returns who make good on the promise to pay," he said.
"Businesses do not pay."
Cutting corporate taxes, Crowley said, lowers the cost of investing in New Brunswick - which will create jobs and actually increase tax revenue.
According to Crowley, who holds a PhD from the London School of Economics, the province has no choice but to reform the system. Changes to the tax code, he said, are essential for the Atlantic provinces to boost their economies and sagging populations.
However, committee member Brian Kenny, the Liberal MLA for Bathurst, told Crowley that his position on corporate taxes was the exact opposite of what many groups had expressed, particularly labour unions. Interim Opposition leader Jeannot Volpé, another committee member, was also left unconvinced.
Though he didn't disagree, Volpé, a former finance minister, said corporate tax cuts must be made gradually. He said government must move slowly to ensure that the necessary revenue continues to come in.
"I certainly wouldn't go to zero per cent right away. You need to have the cash to provide government services," he said.The taxation committee will submit its report by the fall. Any resulting changes will arrive over the next five years, though the government hopes to have some changes in place for next year's budget.
© Copyright; Foundation for Economic Growth and various authors. Individual authors retain their own copyright.
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