A New Brunswick Liberal campaign promise to substantially raise taxes on the wealthy will push total income tax bills for some in the province well beyond levels in Quebec, a tax expert says, contrary to claims being made by the Liberal campaign.
"It will put New Brunswick's top rate almost five percentage points higher than any province in Canada," Kevin Milligan told CBC News. He's an associate professor of economics at the University of British Columbia and a provincial tax expert. "When you get a tax rate that is so far ahead of everyone else you can start to see real shifts in investment."
Liberal Leader Brian Gallant has been promising to create a fifth and sixth income tax bracket with high rates for the wealthy to generate nearly $30 million in new revenue to help fund some of his election promises.
But the party has said that would generate the second highest tax bills on the rich in the country, not the highest.
"All New Brunswickers are struggling under the Alward Conservatives, they have all seen tough times," Gallant told supporters on the first day of the election campaign. "We think if we're going to ask New Brunswickers to pay a bit more it makes sense to ask the one per cent of the richest of us."
According to the Liberal plan, New Brunswickers with income above $250,000 will have it taxed in the new sixth bracket at a rate of 25.75 per cent. That's well above New Brunswick's current top rate of 17.84 per cent and identical to the top rate in Quebec.
Quebec's special deal
Liberals say because provincial rates in the lower tax brackets are less than in Quebec, overall tax bills in New Brunswick — even for the wealthy — will remain lower.
"New Brunswickers at all income levels would continue to pay less overall tax than Quebecers," says the party's policy document on the proposal.
But that ignores the fact federal income taxes in Quebec are lower than in New Brunswick because of a special deal Quebec has to opt out of certain federal programs.
Ottawa charges less income tax in Quebec, so the province can charge more and run its own programs instead.
The top combined federal and provincial income tax rate in Quebec is currently 49.97 per cent, well below the combined top rate Liberals are proposing for New Brunswick at 54.75 per cent.
Milligan says studies consistently show when taxes go up significantly on the wealthy, they often employ accounting manoeuvres to shelter or move their income to other provinces or countries
"My sense of tax rates this far above everyone else could lead to a situation where you don't really raise any net revenue from this. All you get is the pain and none of the benefit of higher taxes," said Milligan
A spokesperson for the Liberal campaign said no one was available Thursday to comment on the tax issue.
Victor Boudreau defended tax rate in 2009
However, New Brunswick Liberals used to oppose high tax rates for the wealthy and in 2009 introduced legislation to lower the top rate to 12 per cent.
Victor Boudreau, the Liberal finance minister at the time, said high taxes on the rich hurt the province's economy.
"Most doctors, most specialists, earn more than $250,000 a year," said Boudreau in an April 2009 interview.
"So if we want to attract doctors and specialists, if we want to attract the highly skilled workers that we need ... if we want to attract people with entrepreneurial spirits here that may come and invest in New Brunswick or start new businesses create jobs, we do need to attract people in those higher income brackets."