New Brunswick Votes

Brian Gallant defends tax plan on richest New Brunswickers

Liberal Leader Brian Gallant is fending off criticism about his tax plan on the wealthiest New Brunswickers.

Liberal Party revises number of people needing protection from plan

Liberal Leader Brian Gallant speaks to reporters on Sept. 12 after voting in his riding. He defended his party's tax plan that would raise rates on the wealthiest in the province. (CBC)

Liberal Leader Brian Gallant was fending off criticism about his tax plan on the wealthiest New Brunswickers Friday.

But he was having trouble detailing how many people in the province would be paying the highest income taxes in the country under the proposal without some protection from its new high rates.

"When you actually look at the math, it's only a couple of hundred people that are making over $500,000 that would be asked to be paying more [than people in Quebec]," Gallant said early Friday in an interview with the CBC's Harry Forestell.

"But we have also made it very clear that we would offset anyone that would be asked to be paying, even the couple hundred people, more under our plan to ensure they are lower than the province of Quebec," Gallant said.

Later in the day, Liberal officials acknowledged the numbers quoted by Gallant were a mistake. They said anyone earning more than $370,000 would likely be facing the highest income taxes in the country and would need to have some amount "offset" to avoid that happening.

Liberals estimated that might affect 600 people. Overall, about 6,500 residents in total will be facing a tax increase of some kind.

'Didn't do their homework'

New Brunswick Progressive Conservative Leader David Alward jumped on the mistake as evidence Liberals have not thought their tax plan through.

"What is clear is they didn't do their homework," said Alward.

Liberals have proposed creating two new tax brackets, one at 21 per cent for people making more than $150,000 and one at 25.75 per cent for those making more than $250,000  both significant increases over the current top rate of 17.84 per cent.

The idea is designed to raise nearly $30 million to either fight the deficit, or pay for new Liberal spending plans.

New Brunswick's tax rates and proposed Liberal changes
$0-$39,305 9.68%
$39,306-$78,609 14.82%
$78,610-$127,802 16.52%
$127,803-$150,000 17.84%*
$150,001-$250,000 21%*
$250,001 and higher 25.75%*

*Proposed Liberal changes

In combination with federal income taxes, high income earners in New Brunswick will be facing a top rate of 54.75 per cent, the highest marginal income tax rate in North America, according to UBC economics professor Kevin Milligan, an expert in provincial tax issues.

"If you get to a point where the tax is so high that enough activity is scared away that you raise no revenue, there's really no point to it," said Milligan.

"I don't know [if] they are at that point, but they are certainly closer to that point than they are [to] being able to rake in a lot of money from it," he said.

Alward says high income rates will make it tough for New Brunswick to attract medical specialists, skilled workers and entrepreneurs — an argument Liberals themselves made five years ago when they tried to lower the top rate to 12 per cent, less than half of what they now propose.

Gallant says Liberals have always planned to build in an "offset" so that no wealthy New Brunswick resident pays higher taxes than those that exist in Quebec, but the party's campaign material makes no reference to that idea.

For example, party figures say someone earning $750,000 a year in New Brunswick will see an increase of $41,709 in their provincial tax bill under the Liberal plan. That would push their total income tax bill $13,000 higher than in Quebec.

"We made it very clear the tax brackets we would create and we also made it very clear we would not allow anyone to be paying more than the province of Quebec," said Gallant.