June 9, 2008 10:32AM

A Flat Tax in New Brunswick?

Canada’s Atlantic provinces historically have been statist, but decades of big government have not worked and now policy makers are looking to adopt a growth‐​friendly 10 percent flat tax to boost the economy.

Alberta already has a flat tax, which has worked well, so tax competition is having a positive impact on Canadian fiscal policy. The Telegraph Journal has more details:

The New Brunswick government is considering a fundamental rebalancing of the tax system tilting towards consumption taxes and relieving citizens and businesses from the burden of hefty income taxes with a flat tax by 2012. Finance Minister Victor Boudreau released the government’s discussion document on tax reform on Wednesday that proposes replacing the system of four different tax brackets with a single rate of 10 per cent, which would tie the province with Alberta for the lowest tax rate. Large businesses also stand to gain under the various proposals that could see their corporate taxes fall from 13 per cent as far as five per cent, giving it the lowest rate in Canada. …To pay for the deep tax cuts, the document is suggesting the Harmonized Sales Tax be raised by two per cent, essentially moving into the tax room vacated by the federal government. …Niels Veldhuis, a senior economist at the Fraser Institute, insisted the 10 per cent single rate would act as an incentive to keep young New Brunswickers home and attract new immigrants to the province. “I would label this as a revolutionary document because it doesn’t focus on one aspect of the tax system. It goes through and delineates what are the major problems with New Brunswick’s taxes, from personal income tax, corporate income tax, to capital taxes to property taxes,” Veldhuis said. “I think this is a model for the other provinces because these are very important topics; the province should be commended for putting this out there and the aggressiveness.” Finn Poschmann, the director of research for the C.D. Howe Institute, said a flat tax will also be a benefit for families. “Flat rate tax makes life a little bit simpler, that is worth something,” Poshmann said. “For flattening the tax system is good for rewarding investment, rewarding work so when you take on an extra shift or get some overtime pay, you don’t blast up through the bracket schedule.” …Tom Bateman, a political scientist at St. Thomas University, said…the Liberals appear to be outflanking [the Tories] on the taxation issue. “It is consistent with the government’s general view that it needs to market to play a greater role in economic development,” Bateman said. “In that respect that would put the Liberal Shawn Graham government firmly on the right of the political spectrum. This should make every Progressive Conservative blush I would think.”