New Brunswick Finance Minister Ernie Steeves says cabinet has discussed tax cuts as the province’s project surplus has grown by $100 million over the first quarter.
Stronger than expected revenue growth and large federal transfers have helped to propel large surprise surpluses the last two years in a row, but Steeves says the province is expecting that growth to slow in the next few quarters.
“We do expect this revenue boost to continue in the short term. Even the parliamentary panel up in Ottawa has said short term this is going to work for New Brunswick, (but) long term we have to find some other revenue,” Steeves told reporters on Monday.
After projecting a surplus of $35 million in March’s budget, the province is now expecting a $135.5-million surplus after first-quarter results showed higher than expected HST and personal income tax revenues. Steeves said cabinet is discussing what will happen with the extra money, which could include tax cuts.
“I want to make it part of the culture of New Brunswick that we are regularly lowering taxes instead of raising them so we are looking at that,” he said.
New Brunswick-based economist Richard Saillant said it’s strange to see Steeves pitching a potential tax cut while saying he expects growth to slow in the coming years.
“They’ve been saying for a while that this is temporary, it’s a windfall and I’m not excluding the possibility that some of it may be temporary indeed,” Saillant said.
“But at the same time we have a minister of finance that’s contemplating tax cuts and when you cut taxes that’s a permanent decrease in your revenue growth, so why is it that the government is hinting at a structural long-term move when it’s saying most of it is a windfall?”
In the 2020-21 fiscal year New Brunswick posted a $408-million surplus, largely driven by COVID-19-related federal spending. The following year, in 2021-22 a projected deficit of almost $250 million became a surplus of $488 million driven by higher than expected tax revenues as the economy experienced a post-pandemic boom.
Saillant says he could see a similar pattern playing out this year, as strong immigration numbers and high inflation are likely to continue through the year, which should pad income tax and HST revenues.
“Why is it that all of a sudden the momentum in revenues would just stop?” he said.
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