On a political landscape generally barren of ideas — or, these days, crowded with utterly mad ideas — an oasis of economic sanity has suddenly appeared. I speak, naturally, of New Brunswick:
The New Brunswick government will slash corporate income tax rates to the single digits, giving the province the lowest corporate tax levels in Canada, Finance Minister Victor Boudreau said on Wednesday.
Boudreau offered a broad outline of a tax reform agenda that will be fully announced in March. The finance minister said the cuts will start in 2009 and be fully phased in by 2012.
“The key elements of our tax reduction package include gradual, yet significant reductions in personal income tax, as well as a target of a single-digit general corporate income tax rate in New Brunswick,” Boudreau said.
“It will help us through the economic slowdown more quickly, and as importantly, position New Brunswick as one of the most attractive jurisdictions for economic investment in all of Canada.”
Although the Liberal government is not giving precise numbers on how deeply it will cut taxes, it will apparently be below the 10 per cent target federal Finance Minister Jim Flaherty has asked provinces to hit within the next four years.
Alberta currently has the lowest provincial corporate tax rate, 10 per cent. New Brunswick’s is 13 per cent.
The all-party Select Committee on Tax Reform released its final report on Dec. 12 and recommended a flat personal income tax rate of 10 per cent, corporate taxes of five per cent and child tax benefits similar to the federal plan.
To pay for the deep personal and corporate tax cuts, the select committee on tax reform is calling for the harmonized sales tax to be raised to 15 per cent from 13, following two reductions implemented by the federal Conservative government.
Mr. Boudreau said the government is also looking at simplifying its personal tax system by either bringing in a flat tax or cutting the number of brackets from the four that are in place.
Meanwhile, back in (sigh) Ontario…
McGuinty criticizes banks, says he can’t cut taxes
…Mr. McGuinty said he cannot afford to cut corporate taxes because that would result in a loss of $2.5-billion in revenues for his government. He said Ontario is already heading into its first deficit in five years as the economy weakens. The deficit is expected to balloon well beyond the projected figure of $500-million for fiscal 2009 once Ontario kicks in its share of a multi-billion-dollar bailout package for the auto sector and provides a stimulus package for other ailing industries, Mr. McGuinty said.
Just so we’re clear: he can’t cut taxes for all industries, because he’s ploughing billions into one industry. Or in other words, the cost of the auto bailout will be borne by every other industry — directly, in terms of the taxes they pay, let alone opportunity costs. There it is, McGuintonomics explained in one paragraph.
And just in case you were in any doubt about the real cost of the auto bailout:
Ontario Premier Dalton McGuinty says a proposed $3.4-billion rescue package for struggling automakers is just the first of what could be several payments.
McGuinty says the money promised jointly by Ottawa and Ontario to the Detroit Three is simply a lifeline to sustain the industry. He warns it’s too early to speculate on how high the aid could go because the province is still assessing documents and plans.
Too early to speculate? Well, maybe:
Auto bailout tab pegged at $25-billion
Ottawa and Ontario would face huge bill by committing to 20% of U.S. contribution
TORONTO AND OTTAWA — Canadian governments could be staring at an auto bailout bill of between $15-billion (U.S.) and $25-billion, based on one estimate of the cost of keeping the Detroit Three car makers out of bankruptcy protection in the United States.
As the White House said yesterday it was still looking at the options for a bailout, Moody’s Investors Service Inc. said that preventing a collapse of the major Detroit auto makers during the next two years could cost Washington between $75-billion and $125-billion.
Ottawa and Ontario said last week that their commitment to Canadian units of the Detroit Three will be approximately 20 per cent of what the U.S. government provides, a number that matches those subsidiaries’ shares of their parent companies’ annual North American vehicle production. So the cost to the two governments could soar dramatically if they adhere to that promise, first outlined on Friday by federal Industry Minister Tony Clement.
TWENTY-FIVE BILLION DOLLARS.