Higgs pledges to cut provincial sales-tax rate if re-elected
Reduction of HST to 13 per cent would be implemented over two years, costing government estimated $450M
Premier Blaine Higgs, speaking as leader of the provincial Progressive Conservatives, said Thursday he'd reduce the province's harmonized sales tax to 13 per cent — if he is re-elected this year.
Higgs appeared at a news conference in Moncton, while several cabinet ministers, with Progressive Conservative candidates, gathered at three other locations across New Brunswick to make the co-ordinated election promise.
"We're able to do this because we can and because we've been fiscally responsible since we started, since the very beginning," Higgs said of the promised tax cut.
Higgs said the harmonized tax would be reduced to 14 per cent as part of the 2025 budget, then reduced to 13 per cent in 2026.
"All the while, we'll maintain our balanced budget," he said.
The writ hasn't yet been dropped, but the co-ordinated announcement appeared to be a campaign salvo by the Progressive Conservatives ahead of this year's election, which must be held by Oct. 21.
The harmonized sales tax, a federal-provincial tax created in the late 1990s, originally stood at 15 per cent, with a federal rate of seven and provincial rate of eight per cent.
The tax applies to all goods and services sold in the province, with some exceptions including basic food products and prescription drugs.
Former prime minister Stephen Harper cut the federal portion to five per cent in 2006, and in 2016, former New Brunswick premier Brian Gallant raised the provincial portion to 10, bringing the total rate back up to 15 per cent.
Following the announcement, Higgs fielded questions from reporters about why his government is waiting until after an election to reduce the tax, rather than now or in previous years.
Higgs said reducing the HST has to be legislated in a move done typically around the budget's release. He also said that doing so immediately would require businesses to make "changes in everything they do."
He added that the province previously wasn't in good enough shape fiscally to reduce the tax, referring to previous decisions by his government to delay or cancel certain capital projects early on in its mandate, coupled with budget surpluses aimed at lowering the provincial debt.
"We have a team that's focused on, on doing what's right for New Brunswick, but doing it in a way that we can prudently manage it," Higgs said.
Higgs also revealed Thursday that reducing the provincial portion of the HST by two percentage points would lower annual government revenue by about $450 million.
He was asked how the government would be able bear that reduction in revenue while handling the demands on health care and social services brought on by record-high population growth seen in recent years.
In response, Higgs said his government would promote greater efficiencies within departments, as well as more collaboration between the Horizon and Vitalité health networks.
"We're looking under the hood to work with people on the floor in the hospitals or in a nursing home," he said.
"When everyone is looking for what they can do differently or how they can improve what they do, and how we can help them to improve what they do, it makes a huge impact."
Citizens need help today, say critics
Higgs's election promise was met with criticism from his political opponents, including Liberal Leader Susan Holt, who framed it as a desperate attempt to buy votes.
She said her party has proposed things his government could do immediately to help New Brunswickers with the cost of living, without significantly reducing revenue available for services like health care.
"Our team has committed to taking the [provincial sales] tax off electricity bills as an essential item to help people today. We have committed to take Higgs's fuel tax off the price of gas. We have committed to putting a rent cap in place and to overhauling the property tax system to make sure people can afford to live in their homes," Holt said.
The "fuel tax" refers to a clean fuel surcharge on motor fuels the Higgs government has allowed suppliers to pass on to consumers to deal with new federal regulations.
Holt said her party has not committed to any tax increases if elected, and would deliver a balanced budget and continue to pay down the provincial debt.
Green Party Leader David Coon said at a time when the province's health-care system is in "a death spiral," he thinks it's unreasonable for Higgs to talk about reducing the taxes that help pay for doctors and nurses.
"First things first, we need to fix the health-care system, ensure people have access to a permanent family care team, and get rid of the waiting list before we look at significant tax cuts on the scale that the premier's talking about," Coon said.
As for plans to reduce the cost of living, Coon said a Green government would implement a rent cap, revamp the property assessment system and alter climate change policies to put less of the financial burden on individuals, and more of it on large industrial emitters.
"[That's] where the greatest amount of carbon pollution is coming from, and it's industry that has the greatest number of alternatives for reducing their carbon emissions and therefore avoiding paying ... the price on carbon."
Tax reduction is bad fiscal policy, says economist
If the goal is to help New Brunswickers most in need while maintaining essential services, reducing the sales-tax rate is one of the worst fiscal policies that could be implemented, said Richard Saillant, a Moncton economist and public policy consultant.
"This is probably one of the worst moves that he can make as a premier. It's not a sign of leadership," Saillant said.
As an example, Saillant said a household that spends $200,000 per year will save $4,000 based on the tax cut, whereas a middle-class family that spends $50,000 will save just $400.
That makes the tax cut a very "inefficient" way of helping those who need it the most, he said.
"I wish that we would have found a way more creative way to use what's likely to be about $500 million a year, to focus on those that truly need help," he said.
Making the proposal even worse, Saillant said much of the surplus money the province has found in recent budgets was the result of record population growth.
That growth is set to level off in coming years, and if greater investments in public services and infrastructure aren't made, New Brunswickers will continue to suffer from limited access to health care and housing.
"We have massive investment needs in health care. We have massive investment needs in boosting the supply of housing, and these are things that allow us to help all New Brunswickers," said Saillant.
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With files from Shift