Crowley demands provincial tax cut

By JEFFREY SIMPSON / Staff Reporter

The head of a public policy think-tank is calling for the province to bring back its previously proposed tax cut.

Brian Lee Crowley, president of the Atlantic Institute for Market Studies, said the unexpected increase in funds from the federal government this year has put Premier John Hamm’s government in a position to cut income tax by 10 per cent. “There’s lots of evidence that suggests that the best bang for their buck is going to be through tax reductions – and personal income taxes are a good place to start,” Mr. Crowley said in a recent interview.

Mr. Crowley said a tax cut, along with paying down the province’s debt, would be an effective way to stimulate the economy.

A tax cut would also avoid the trap of becoming increasingly dependent on federal transfer payments.

“There are lots of examples where the feds have made various kinds of promises to the provinces, and the provinces have ramped up spending as a result and then been left holding the bag,” he said.

“We should learn from that experience.”

Finance officials project revenue to be up $249 million this year, including
$187 million more from Ottawa.

That new federal money came from $119 million in increased equalization payments, $44 million through the Canada Health and Social Transfer and an extra $23.7 million through adjusting previous years’ payments.

“It’s always important to treat it as a bonus that’s going to be a one-time thing,” Mr. Crowley said. “It’s a big mistake to build this into program spending as if it were a reliable, long-term source of revenue.”

Mr. Crowley said the Tories have unwisely decided to use most of the extra money to increase spending in several government departments.
“They’re a bit like kids in a candy store,” he said. “The manna is raining from heaven and they’re not asking too many questions about where it’s coming from and how dependable it is.”

The tax cut, which was a 1999 election promise, took effect in January.
Just a few months later, the Tories said they couldn’t afford to continue and completely or partly scrapped it for about 200,000 Nova Scotians. They blamed Ottawa for not adequately funding the rising cost of health care.
But a rash of spending announcements in health, education, community services and other departments in recent weeks has pushed program spending up $157 million.

Some of the ways the Hamm government has decided to spend the influx of federal money are:
– $60 million for future road and bridge work;
– $47 million for health care;
– an extra $6.6 million in library and public school funding for textbooks, computers, school maintenance and breakfast programs.

Mr. Crowley said those types of spending announcements make him nervous because most of the money will likely be spent on the salaries of government employees.

“It’s very hard to reduce that spending because you have to lay people off or cut their salaries, and it’s just a huge political headache.”
He said infrastructure improvements aren’t too bad a way to spend the extra cash because they can have some beneficial spinoff effects.
Finance Minister Peter Christie said the government stands behind its spending commitments.

“We were very clear about what our priorities were – health and education,”
Mr. Christie said. “So that’s the direction we went.”

Mr. Christie said reintroducing the tax cut isn’t being discussed.

But provincial revenue is also expected to increase $63 million, mainly due to an extra $51.5 million in corporate income tax. Any surplus left at the end of the fiscal year, March 31, goes toward paying down the province’s $12.4-billion debt.