The Higgs government is cutting income taxes to offset the impact of carbon taxes on the majority of New Brunswickers.
Treasury Secretary Ernie Steeves passed a law on Tuesday to lower the tax rate for the lower income bracket from 9.68 percent to 9.4 percent. This rate applies to the first $ 43,835 of income.
The tax cut accounts for $ 28 million of the $ 163 million in carbon tax revenue the province will collect this year under a pricing system it put in place to meet federal government requirements.
“It is expected to benefit more than 420,000 taxpayers and put money in taxpayers’ pockets,” said Steeves when introducing the bill.
The progressive conservatives were asked to use the proceeds for climate fund projects.
Tax cut “a sensible approach”
Returning the money to New Brunswickers, however, meets the demands of many economists and environmentalists.
“It’s a sensible approach,” said University of Ottawa economist Nic Rivers, an expert on carbon pricing.
Nic Rivers, an economist at the University of Ottawa, praised the provincial tax cut related to carbon tax offsetting. (Nicholas Rivers)
“This is ‘tax what you burn, not what you earn,'” said Rivers.
Premier Blaine Higgs said the federal plan’s goal has always been to return at least some of the carbon tax revenue to consumers.
“That was kind of a principle and that’s why we did it,” he said.
In provinces that have refused to introduce carbon prices, Ottawa is applying the tax and sending discounts to people.
The national climate plan stipulates that the provinces will tax greenhouse gas emissions this year at USD 40 per ton, which corresponds to 8.8 cents per liter of gasoline.
Last year, Higgs decided to lower the excise tax on gas in the province to partially offset the carbon tax. But this year, instead of slicing it up any more – an approach Ottawa frowned upon – he said he wanted to find another way to return some of the money to the New Brunswickers.
Use extra revenue to further reduce emissions, opposition says
Liberal opposition leader Roger Melanson said he calculated that the tax cut would work out to $ 68 per person per year.
“It doesn’t matter if you stop and do the math.”
Melanson said he would rather see the $ 28 million being used on more government programs to reduce emissions.
Liberal opposition leader Roger Melanson wants to see the $ 28 million earned from income tax cuts to fund emissions reduction programs. (CBC News)
Higgs said Melanson’s math per person is “not far off,” but he said the reduction is an important signal that the province wants lower taxes.
“This is a beginning to continue the momentum that we are currently feeling in our province, the people who want to live here, who want to work here,” he said.
But he ruled out using all of the $ 163 million carbon tax revenue for a much larger income tax cut.
“There’s a balance here,” he said.
The income tax cut accounts for only a small fraction of total carbon tax revenue this year, and $ 36 million continues to be spent on climate protection projects, roughly the same as last year.
Ottawa is demanding that the carbon tax be increased every year, and the prime minister said he could cut income taxes further every year along with the price increases on carbon.
“I want to say yes,” he said. “A tax break is as good as a wage increase.”
Steeves’ bill also raises the low income tax threshold from $ 17,630 to $ 17,840. People below this threshold do not pay provincial income tax.