This week, New Brunswick’s Minister of Finance introduced a wide-ranging discussion paper that if translated to public policy would dramatically change the tax landscape in New Brunswick. There are some very interesting and progressive ideas in the paper. There are also a number of unanswered questions.

Two objectives appear to drive the discussion: put more money into the hands on New Brunswickers and make the province more attractive for business investment and people relocation. It’s important to note the paper is not government policy; it is a document designed to stimulate public discussion. That said, the Minister of Finance appears to be promoting some of the ideas in the paper. I trust he will be open to suggestions.

In simple terms, the paper would shift the burden of taxation from income to consumption. In my opinion, that’s a good thing. The challenge with such a shift is to ensure that people on low, marginal or fixed incomes are not penalized by measures that appear to favor working tax-payers over people on fixed incomes.

With that caveat, I buy into the program because it offers hope for the future. A low income tax environment will help to attract skilled people and it will help to attract new business to the province. Ireland is a great example of that premise.

The paper proposes the introduction of carbon taxes to reduce demand for gasoline and fuel oil. It would also increase the price of electricity because New Brunswick generates so much of its electricity by burning fossil fuels (oil, coal, natural gas). To offset the carbon tax, the paper proposes a carbon credit of $100 a year. That offsets the initial burden of the carbon tax but over time it appears to fall short.

There is also a proposal to increase the HST by 2%. I agree with that recommendation but again, subject to the proviso that there be relief for those people who will not benefit from an income tax reduction.

There is a section in the paper that deals with property taxes and the implications of market value assessments. This section is a bit convoluted but what I did like about it was the notion of three-year average assessments that would minimize and spread the impact of single-year assessment-spikes that lead to significant tax increases, even when there is no rate increase imposed by a municipality or a local service district.

One section in the paper that troubled me was the section on families. Authors of the discussion paper would introduce a non-refundable child tax credit up to $400 a year per child and a universal child care benefit of $600 a year for every child under the age of six. The former would appear to favor higher income earners and the latter would piggyback on the national child tax benefit. Neither addresses, in a meaningful way the issues of daycare costs or early childhood learning.

There is another issue and this may be an age thing but there appears to be nothing in the paper that addresses the needs of seniors. I’m not talking about nursing homes or acute care, I’m talking about those people who have worked all their lives and now live on a fixed income. They have no way to increase their earnings.

They cannot reduce consumption of basic goods and services without significant pain and inconvenience. They are voters and more likely to vote than young parents. The paper talks about balance in the tax system. There needs to be balance in the way our tax system treats young and old.

Perhaps the most interesting proposal is the notion of a flat tax on income. There are two proposals a flat 10% rate on taxable income and a two tiered rate of 9% and 12%. The former would apply to taxable income below $35,000 a year and the latter to taxable income above that number. The good news is that a flat tax appears not to apply to incomes of $25,000 and less. Both proposals would reduce the personal income tax burden in New Brunswick by a considerable margin and make us extremely competitive with Alberta.

The proposal I most like is the one to reduce business taxes from the current 13% to 10%, 7% or 5%. The latter two would make us the lowest business tax regime in Canada. That would make us extremely competitive.

There is one issue and that is tax leakage. The benefits of a low business tax for a New Brunswick-owned business would stay in the province. The benefits of a low business tax for an out-of-province owner might leak out of the province.

This paper gives us lots to think about.

W.E. (Bill) Belliveau is a Shediac resident and Moncton business consultant. He can be contacted at bill.bellstrategic@nb.aibn.com Atlantic Insight is a published Blog inventory of opinion articles published weekly in New Brunswick's print media as written by W.E. (Bill) Belliveau, who is a resident of Shediac, New Brunswick, and small business owner, operating his Moncton-based marketing consultancy, Bell Strategic. He can be reached by e-mail at mailto:bill.bellstrategic@nb.aibn.com