Canada

New Brunswick to cut income tax using carbon tax revenue

New Brunswick plans to use $28 million in carbon tax revenue to cut the rate for the lowest income tax bracket.

Finance minister Ernie Steeves introduced legislation Tuesday that would lower the rate to 9.4 per cent from 9.68 per cent on earnings up to $43,835. The province says about 420,000 New Brunswickers will benefit.

The low income threshold, or the amount on which no income tax is paid, has also been increased from $17,630 to $17,840.

The tax cut is being funded with $28 million in carbon tax revenues that had been left unaccounted for in March’s budget and was one of several options discussed by cabinet. The province expects to bring in a total of $163 million from the carbon tax in this fiscal year.

Read more: N.B. cabinet still deciding what to do with $28 million in carbon tax revenue

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Premier Blaine Higgs says the decision falls under the same principal of the federal backstop, that sees revenues rebated to consumers. Higgs told reporters that it’s an attempt to begin lessening the tax burden on New Brunswickers and continue attracting people to move to the province.

“We’ve been long known as one of the highest taxed jurisdictions in the country,” Higgs said.

“Well this is a start to continue the momentum that we’re feeling in the province.”

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Higgs wouldn’t say if the tax cut could become a yearly trend as carbon pricing increases annually. This year, the federal government required carbon pricing to rise to $40 per tonne of carbon, which is 8.8 cents per litre of gasoline. It’s slated to rise another $10 per tonne next year, about another 2.2 cents a litre at the pumps.

“I’d like to say yes,” Higgs said when asked about the possibility of a yearly tax cut.

“I’d like to see us have a balanced and a fair approach to taxation in our province. I look at it in the same way as people want to increase wages, but a tax reduction is the same as a wage increase, or a balance of the two. So it’s part of an ongoing process.”

When the Higgs government first introduced its carbon pricing plan, it came with a reduction in the gas excise tax to soften the blow to consumers. Rather than face the full brunt of a 6.6 cent per litre increase, consumers saw a 2.2 cent increase. The 4.4 cent per litre cut to the gas tax is projected to cost the province about $70 million this year.

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Read more: Carbon tax revenue to go to climate change fund, not rebates: N.B. minister

Not all are happy with the approach, however.

Interim Liberal leader Roger Melanson told reporters he had calculated that the tax cut works out to just $68 per person. He’d rather see the money used for green projects to combat climate change.

“We’ve been pushing this problem forward for so many years. By not using fully the price on pollution to address climate change, it’s going to take more time to address climate change,” Melanson said.

This year’s budget set aside $36 million for climate change projects, the same amount as last year. Only $20 million ended up going to climate change projects in 2020-2021, with the remaining $10 million going to general revenue. The department said that was due to issues posed by the COVID-19 pandemic and won’t happen again.

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