Halifax – The Atlantic Institute for Market Studies (AIMS) today released a report about the differences in major tax rates in Atlantic Canada and New England – our nearest regional competitor – that have an impact on take-home pay, investment, and job creation.
As reports and books from AIMS have noted since the organization’s inception, the Atlantic provinces face continuing challenges in attempts to become economically prosperous. Unfortunately, in most cases, the region’s economic problems are worse today than they have been at any point in the previous twenty years. This is the result of poor public policy choices, not poor luck.
“There is a collection of poor policy choices holding Atlantic Canadian economies back,” said AIMS President Marco Navarro-Génie. “This study is important because it draws attention to the continuous reflex to increase taxes as an easy measure to raise more revenue, but which generally weaken struggling economies even further.”
Today’s report focuses on the consequences of tax rates – that is, on the costs governments impose on residents and businesses. Personal tax rates, including the generosity (or lack) of basic personal exemptions from personal income tax; the range of tax brackets applied to corporate income; and lastly, sales tax rates are examined in the four Atlantic provinces and six New England states.
The study finds, notwithstanding regional tax differences, that in general, the six U.S. states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut have a significant tax advantage on most measurements when compared with the Atlantic provinces.
“Atlantic Canada’s ability to succeed and prosper, in attracting private sector investment, creating jobs, and increasing wages and salaries and even its tax revenues, depends on its affordability and attractiveness relative not just to other provinces but also to competitive tax jurisdictions on the east coast of the United States,” said Mark Milke, author of Tax Competitiveness: New England and Atlantic Canada Compared. “Tax competitiveness matters because taxes are real costs for residents and businesses. Tax levels that are too high can impede investment, entrepreneurial activity, and much-needed job creation.”
To close the gap with its immediate southern neighbours and other provinces with more growth-oriented tax codes, Dr. Milke recommends Atlantic Canada’s provincial governments should consider the following options to add fiscal room and thus tax reductions in the region:
• Allow for further resource exploration and development, including onshore exploration and the development of natural gas, which has proved a boon to revenues owing to economic and job growth in other jurisdictions, such as Pennsylvania and Saskatchewan (“off” years notwithstanding).
• Tax reform to unleash untapped economic opportunities by moving to a simpler, lower and flatter income tax code with emphasis on lowering taxes on investment and job creators.
• Revisit existing spending envelopes in provincial budgets with an eye to better value-for-money expenditures and the creation of room for tax reductions.
The combination of new energy economic development and more carefully controlled spending would result in more revenues from an expanded corporate, personal and natural resource tax base, and free up budgetary room to reduce Atlantic Canada’s high taxes, which put the region at a significant tax disadvantage relative to its neighbours.
AIMS is calling on governments in Atlantic Canada to prioritize tax reform along with tax reductions on income and investment. Our region’s anemic and in some cases non-existent economic and employment growth is evidence Atlantic Canada’s high tax model is not working. Lower taxes will encourage entrepreneurial initiative, job creation and investment in Atlantic Canada, which is need to grow the economy, create jobs, and to keep and attract workers.
The Atlantic Institute for Market Studies is an independent Canadian, non-partisan research institute that provides a distinctive Atlantic Canadian perspective on economic, political, and social issues. The Institute seeks to stimulate public debate with well-considered argument and evidence-based data, setting the benchmark on public policy that can help our region reach its maximum potential. AIMS does not receive government funding.
For more information (media only), please contact:
Report author Mark Milke, PhD
Marco Navarro-Génie, PhD
902-429-1143, ext 225
John Williamson, MSc