By Graham Cox and Neil Cole
In June 2008, New Brunswick’s Department of Finance released a paper entitled ``A Discussion Paper on New Brunswick’s Tax System". The report recommends implementation of a flat-tax system, a dramatic decrease in corporate tax rates, and increases in consumption taxes. Unfortunately, the discussion paper paints an overly flattering picture of its proposed changes and ignores the negative consequences of a flat-tax system.
A progressive tax system is also the most equitable way of redistributing wealth because it redirects funds in the form of services that are equally accessible to rich and poor alike.
Most economists refer to flat taxes on income and consumption taxes (like the HST) as regressive forms of taxation. This basically refers to the fact that, with a flat tax, the fewer assets or income you have, the greater the burden the tax imposes. A regressive tax is also discriminatory against women who consistently earn, on average, less than the national average on yearly earnings. A flat tax, combined with corporate tax breaks, will severely destabilize New Brunswick’s tax base. With an estimated $100 million per year reduction in tax revenues, low and middle-income earners, approximately 60% of New Brunswick taxpayers, will end up paying more than their fair-share for tax-funded public services we all use. The government’s discussion paper alleges that restructuring our tax system will attract new business and investment in our province. However, there is no evidence, other than partisan think-tank opinion pieces dressed-up as ``research", to support this claim. The reality is that benefits provided by the proposed tax cuts will be negligible for most New Brunswickers and will result in higher out-of-pocket costs. Research released in 2008 by Ryan Macdonald of Statistics Canada confirms that quality public services provide substantial benefits to individuals and businesses. This kind of change at a time when tuition fees put university out of reach for most New Brunswickers is counterproductive. Investment in public education, ensuring that all citizens in New Brunswick receive quality k-12 and access to post-secondary education, is crucial and the real key to New Brunswick’s future. Access to quality education translates into higher earnings, higher productivity, and participation in our communities, that will strengthen our province. Unfortunately, reducing New Brunswick’s tax revenues will mean a reduced capability to properly fund our universities and colleges. An erosion of our tax base will create more of a shortage in government funding for universities. That will eventually increase tuition fees even higher, as universities will be forced to make up for lost revenues with charging higher tuition fees. In the absence of adequate student financial assistance in the form of bursaries and grants, the results will be higher student debt loads and non-completion rates for low-income students. High tuition fees and the prospect of student debt discourages low-income youth from participating in post-secondary education. Low- income youth are the ones who would benefit most from accessible post-secondary education and would ensure a life of productivity, self-sufficiency, and life-long contribution to the economy of this province. A university or college education is a prerequisite to at least earning a middle-class income — exactly the constituency needed to increase the income tax and consumer base. A progressive tax system is also the most equitable way of redistributing wealth because it redirects funds in the form of services that are equally accessible to rich and poor alike. Those who have benefited the most from our economy and public services pay more taxes. These taxes are then used to provide needed services to help the most vulnerable, provide services accessible to everyone, and act as an insurance ``safety net" for workers of all strata who fall on hard times. After the Second World War, a progressive tax system narrowed the unsustainable chasm between the wealthy and poor in Canada, made public healthcare a reality, and allowed all Canadians to share in the wealth they had created. Over the past 30 years, because of the policies similar to those espoused by the Graham Liberals, inequality has grown and many are suffering despite unprecedented wealth in Canada. The New Brunswick Liberal’s policies are destined to make inequality worse in one of Canada’s most underdeveloped and disadvantaged provinces. The Graham Liberals promised in the 2006 provincial election to change New Brunswick by leading a race to the top, not to the bottom. They promised to address migration of young New Brunswickers to Ontario and Alberta. Unfortunately our province continues to lose our best and brightest, many of them post-secondary graduates saddled with large debt. It is clear that adjusting the tax system to their disadvantage, with the addition of even more student debt is going to hasten this destructive trend. The Canadian Federation of Students rejects the government’s flat-tax proposal and calls for a fair system of taxation to properly fund public services. ~~ Graham Cox is a graduate student at the University of New Brunswick and the Chairperson of the National Graduate Caucus of the Canadian Federation of Students. The Canadian Federation of Students is the largest student organization in Canada, representing over half-a-million students. Neil Cole is the Vice-President External for the Graduate Student Association of the University of New Brunswick, Local 67 of the Canadian Federation of Students.