A Telegraph-Journal editorial criticizes subsidy-induced job growth. Citing AIMS’s “I’ll take New England Anyday!”, it recommends “freezing — and then cutting — marginal tax rates and … removing barriers to private-sector job creation.” Read the full editorial here.
The idea of government subsidies going up in smoke is usually only a metaphor for wasteful spending. Here in New Brunswick, however, that metaphor has become unfortunately literal, with the Liberal government promising up to nearly $1 million in payroll rebates to a medical-marijuana producer in Moncton.
In doing so, the provincial government extolled the virtues of the firm, Organigram, the looming potential for the marijuana industry, and the heady prospect of hundreds of jobs in the next two years. All of these are solid reasons for allowing the firm to prosper — on its own.
On the same day, taxpayers discovered that they may have to pay up to $7.5-million stemming from a loan guarantee to the Co-Op Atlantic group of companies. That guarantee was made mere months before the company filed for bankruptcy protection and 400 workers lost their jobs.
Together, these two episodes illustrate the futility of government attempting to subsidize job creation. There are firms, like Organigram, who don’t need subsidies. And there failing firms, like Co-Op Atlantic, who shouldn’t receive them.
What might that alternative look like? A report this week from the Atlantic Institute for Market Studies outlines a much better path to economic growth. The study compared taxation levels in the Maritimes with the more prosperous New England states. Not surprisingly, AIMS found Atlantic Canadian jurisdictions are less competitive than their New England peers on sales, income and corporate taxes. To cite just one of those disadvantages: New Brunswick’s top provincial income tax rate is 25.75 per cent, while the highest New England rate, in Vermont, is a scant 8.95 percent.
That imbalance doesn’t just create a severe competitive disadvantage for Atlantic Canada versus New England. The tax burden is just as big a problem for any entrepreneur in Atlantic Canada looking to establish or expand a business.
Fiscal discipline, freezing — and then cutting — marginal tax rates and a focus on removing barriers to private-sector job creation: that is the formula for long-term economic growth. Anything else is just blowing smoke.