Will New Brunswick Introduce Yet Another Tax On Prosperity?

Bob Manning is a New Brunswick entrepreneur and business owner.

How much property tax should businesses pay in New Brunswick?

Less than homeowners because businesses create jobs and opportunity and fuel our economy? Or more than homeowners because businesses make money that should be shared with citizens?

Well, if you think businesses should pay more than homeowners, I have good news for you. Businesses in New Brunswick pay on average close to three times as much property tax as homeowners – it’s true in the cities, towns and villages.

Businesses in New Brunswick are already paying their fair share of property tax, and then some.

But now some provincial politicians want to introduce a new tax on machinery and equipment for large, industrial operations – the kind of manufacturers that create hundreds of jobs in communities around the province. Saint John Liberal MLA Gerry Lowe, a former Saint John city councillor, introduced a bill to tax machinery and equipment last year in a misguided attempt to fill Saint John’s coffers after years of poor fiscal management.

The idea of a new tax on machinery and equipment has been referred to a legislative committee that will hold hearings into the matter this summer. It’s an obvious bit of political theatre – “soak the rich,” something that plays well in the coffee shops of New Brunswick with those who are covetous of others’ success.

Except taxing machinery and equipment is not a tax on the rich, it’s a tax on jobs and prosperity.

Bad Public Policy

Machinery and equipment have been exempt from property taxes in New Brunswick since the 1960s. We’re not alone in this regard. In fact, no province east of Manitoba charges property tax on machinery and equipment. They recognize that it hurts investment and limits job creation.

The three provinces that do tax machinery and equipment (Manitoba, Saskatchewan and Alberta) do so in limited ways largely to capture revenue from oil and gas extraction and mining. But even in Alberta, the main cities of Calgary and Edmonton do not tax machinery and equipment.

Manufacturers in New Brunswick employ over 30,000 people directly and represent thousands of more jobs indirectly. A new tax on machinery and equipment will put those jobs at risk.

Based on analysis done by Turner Drake & Partners, a tax on machinery and equipment will increase property taxes on many major businesses – pulp mills, sawmills, advanced manufacturers and so forth – by between 500 and 1000 per cent. That is a massive new cost they will need to absorb and, importantly, one their competitors in other provinces do not need to pay.

Capital is incredibly mobile. If high taxes mean it costs significantly more to operate a business in New Brunswick than next door in Quebec or Nova Scotia, businesses will make new investments in those more cost-effective locations. Sure, they have sunk costs with existing operations, but this new tax is certain to close the door on expansion or other capital investment.

It will choke out growth in New Brunswick.

Incent Growth, Don’t Penalize It

Businesses in New Brunswick already face a heavy tax burden. They pay some of the highest taxes in the country, WorkSafeNB premiums continue to soar and our top marginal tax rate for personal income is one of the highest in Canada. Yet despite this nearly Scandinavian level of taxation, our public services and infrastructure continue to lag behind other provinces. And of course, our total debt is approaching $15 billion this year.

So maybe, just maybe, this high business tax environment, asking businesses to “just pay more,” isn’t working. And maybe introducing another punitive tax on businesses that create jobs isn’t the right answer to solving New Brunswick’s problems.

It’s clear that New Brunswick’s property tax system is broken. We should work together to build a tax system that incents investment and job creation rather than penalizing it. A stronger economy means more jobs at higher salaries which will create the tax revenues that New Brunswick and its cities, towns and villages are clamouring for.

As the legislative committee explores adding a new tax on machinery and equipment, I hope they do their homework and truly understand the impact of this misguided policy on jobs and the economy and work instead to build a tax system that drives new growth and job creation.

Businesses in New Brunswick can’t “just pay more” anymore.

Bob Manning is a New Brunswick entrepreneur and business owner raising his family in Saint John. He is past Chair of Enterprise Saint John and the Saint John Chamber of Commerce and is a former Board Member of the Canada Revenue Agency. He writes an occasional column for Huddle addressing important business issues.

Huddle publishes commentaries from groups and individuals on important business issues facing the Maritimes. These commentaries do not necessarily reflect the opinion of Huddle. To submit a commentary for consideration, contact editor Mark Leger: [email protected]