Newfoundland and Labrador is planning to finish the next fiscal year with a record surplus, the government said as it unveiled a range of tax cuts in a pre-election budget on Thursday.
Finance Minister Tom Marshall, who delivered the budget speech, projected a surplus of $261 million.
It will be the province's third year in a row in the black. The government also announced it finished the2006-2007 fiscal year with a $76-million surplus.
Fuelled by the offshore oil industry, Newfoundland and Labrador will be parlaying its fiscal turnaround into a series of broad-based tax cuts, including to personal income taxes, Marshall said.
"It is clear that cutting taxes creates economic growth," he told the house of assembly.
"Our government is transforming Newfoundland and Labrador from the province with the highest personal income tax rates in Atlantic Canada to the province with the lowest personal income tax rates in Atlantic Canada."
Personal income tax brackets will drop effective July 1, with the lowest bracket dropping to 8.7 per cent from 10.57 per cent.
The highest bracket will drop to 16.5 per cent from 18.02 per cent.
Other tax measures include:
- Eliminating the personal income surtax, applied largely to middle- and high-income earners, effective July 1.
- Indexing of the personal income tax system to inflation to protect taxpayers from "bracket creep" that happens when workers gradually move into higher brackets. That change is also effective July 1.
- Raising the threshold for corporate income tax to $400,000from $300,000, effective for 2007.
- Cutting the retail sales tax on used motor vehicles to 14 per cent from 15 per cent, effective midnight Thursday.
Marshall said that while Newfoundland and Labrador has had high personal taxes compared to other jurisdictions, its business taxes are reasonable. However, he said the province's image needs fixing.
"We're trying to attract people with skills to come here, and that perception of high taxes means that a lot of them don't come here," Marshall told reporters during a pre-budget news conference.
"This is something we have to do to be competitive."
Moves come as election campaign looms
With a general election scheduled for Oct. 9, the budget also includes some crowd-pleasing moves. For instance, the government is raising the minimum wage by $1 to $8 per hour, to be phased in by April 2008.
As well, the government will provide free textbooks for core subjects from kindergarten to Grade 12. The move, Marshall said, is part of an existing poverty reduction strategy. In a similar vein, the government is adding more public housing.
Post-secondary students will also be getting a break, with the reinstatement of needs-based grants— of up to $70 per week— and a continuation of a freeze on tuition fees at Memorial University and the College of the North Atlantic.
About 170 fees have been dropped or eliminated, Marshall said.
Dependent on non-renewable resources
Meanwhile, Marshall was frank about the province's current dependent on non-renewable resources.
About $1.7 billion is forecast to comefrom thosesources, with the offshore oil industry alone turning over $1 billion in royalties and business revenues. The mining industry is expected to generate $227 million in royalties.
"We know that these resources aren't going to last forever and we therefore have to take advantage of the resources we have now to plan for the day when they won't be there any more," Marshall told reporters.
But Ted Howell, the president of the Newfoundland Ocean Industries Association, said the offshore oil industry needs tobe extended beyond the three fields now in production.
"Those resources are being depleted so we need to generate additional exploration so we can develop additional oilfields offshore," Howell said.
"Then and only then will this revenue be sustainable for the long term so we can get our fiscal house in order."
Keep eye on debt: Marshall
Although the government will be paying down its net debt by about $66 million— and reducing its debt servicing costs by $51 million— Marshall warned that the province's long-term problems remain worrisome.
"We have put our fiscal house in order… but we [cannot] lose sight of one fact— that we still carry a very significant debt," Marshall told reporters.
At about $23,000 for every resident, Newfoundland and Labrador's per capita debt is more than double the Canadian figure.
The budget speech comes just two days after a throne speech used the phrase "masters of our own house," the same slogan that was a rallying cry duringthe Quiet Revolution in Quebec.
Premier Danny Williams said his government is seeking self-reliance in its affairs, even though he is battling Prime Minister Stephen Harper over a new equalization formula that Williams says will sap the province's oil-based strength.
Williams has also come under fire over an impasse that has stalled development of the Hebron oil field, which local businesses say has kneecapped the economic growth that the province has been enjoying. Williams had demanded a better benefits regime for the field than the three already in production southeast of Newfoundland.
Marshall reiterated the throne speech's themes while bringing down his budget, with no apologies for what a Hebron delay might mean.
"We should not be afraid to take a strong stand," he said.