Premier Blaine Higgs says future increases to the provincial carbon tax are likely to fund offsetting income tax cuts as the province looks to give “sustainable long-term tax relief” to New Brunswickers.
The past two budgets have included some form of income tax cut funded entirely by revenue generated from increases to carbon pricing, something Higgs said is part of the logic of the federally mandated program.
“The idea is, and that’s part of the whole carbon tax philosophy, is that there’s a portion of that that goes back to the people that are paying the tax,” Higgs told reporters on Tuesday.
“That’s why we do that and it likely will continue.”
In last year’s budget, $28 million in carbon tax revenue was set aside to lower the income tax rate to 9.4 per cent from 9.68 per cent on earnings up to $43,835. This year the government has set aside $40 million to raise the basic personal amount on which New Brunswickers pay no taxes by $903 to $11,720. The low-income tax reduction threshold has also been raised to $19,177, meaning single tax filers making less than that amount will pay no provincial income tax.
The $40-million tax cut is being directly funded by the projected increase in revenues as the carbon tax rises to $50 a tonne, or 11 cents per litre of gasoline, on April 1.
In the three years since the provincial carbon tax was implemented, some form of tax cut has been introduced. Of the approximately $170 million in expected carbon tax revenue, $149 million, or 87 per cent, is tied up in tax cuts. That includes $81 million for the 4.4 cents per litre cut to the provincial gas tax in 2020, used to soften the blow for consumers as carbon pricing rose to 6.6 cents per litre of gasoline.
Ottawa has said similar consumer offsetting measures won’t be acceptable after more stringent regulations begin next year. The department of Environment and Climate Change said it expects all provinces to comply with the new regulations but didn’t answer a direct question on if New Brunswick would have to undo its previous tax cut. Higgs said his understanding is that the old tax cut can remain on the books, and that the regulations will only apply to future gas tax offsets.
Higgs says the trend of yearly tax cuts is part of the government’s effort to reduce the overall tax burden on the province to make it a more attractive place to live.
“We’ve started on a program to try and make life cheaper long-term and so every year our goal is that we will have a reduced tax model,” Higgs said.
“They aren’t one-off changes, they are structural changes.”
But according to Liberal finance critic Rob McKee, the funds raised by the carbon tax would be better spent on helping the province lower emissions.
“They need to be more aggressive in addressing climate change initiatives,” McKee said. “I would like them to use those funds towards legitimate climate change initiatives.”
This year $47 million will go into the province’s Climate Change Fund. That figure includes $36 million in carbon tax revenue, as well as $11 million sent to the province by the federal government, leftover from the year spent under the federal backstop prior to the introduction of the provincial system in April of 2020.
But in the 2020-21 fiscal year, $10 million of the $36 million earmarked for the fund went unspent. Both the Liberals and Green Party have raised concerns over what projects are being funded by the money as well, saying some do nothing to directly address emissions.
“Some of it went unspent, some of it went toward that projects were questionable whether they fit in that envelope,” McKee said.
“They need to be more aggressive.”
The Liberals have also called for some sort of rebate program using proceeds from the provincial gas tax to address high gas prices and the increased cost of living spurred by inflation, saying the income tax cut does nothing to help people who are struggling now.
“We’re seeing increases in gas prices today, we’re seeing increases in groceries today, the cost of living, everything is going up with inflation and they’re delaying the benefit until next year,” McKee said.
Higgs had called on the federal government to put a pause on the carbon tax until gas prices fall, but said the province won’t pursue other interim measures to address the issue.
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