Dr. Tom Cooper
Faculty of Business Administration, Memorial University
It’s a common past-time in NL to complain about taxes. Who pays too much, who pays too little, do we pay more taxes now than we used to, do we pay more than people living in Alberta or Nova Scotia? The debate is endless, and complex.
Tax revenue pays for services that we rely on for our overall quality of life but taxes that are too high can make it harder for people to make ends meet. Lower income and business taxes can be a competitive advantage for attracting businesses, investments and people to an area, but not enough tax revenue can lead to fewer public services and eroding public infrastructure which can deter new business growth. It’s a fine balance. But what is fair? And what does taxation really look like in NL?
A basic income tax comparison between provinces shows that NL is not necessarily the highest-taxed jurisdiction. A study by KPMG on personal tax rates for 2018 (federal and provincial) saw that NL taxpayers earning less than $36,927 were taxed at a rate of 8.70% versus New Brunswick (approximately 9.68%) or Nova Scotia (approximately 14.95% over $29,050, and 9.79% under that amount). Alberta and Quebec are significantly higher at 10% and 15%, respectively, for the same amount. NL was not the lowest taxed jurisdiction either, with British Columbia at 5.60% for incomes below $39,676 and Ontario at 5.05%.
When you compare higher income earners, a different story emerges. Albertans who earn at the higher end of the bracket, say $100,000, are still only paying 10%, whereas NLers making that same amount are taxed at 15.8%. Quebec’s income tax rates, by comparison, start at 15%.
“The fact is, while taxes affect us all, they affect us all very differently. Finding a balance from a policy perspective is an age-old puzzle and fairness really depends on your vantage point.”
Taxing appropriately can improve someone’s life. For example, a senior in NL on a fixed income may have more disposable income than a senior living in a jurisdiction with a higher personal rate of taxation, such as Quebec. However, tax rates can also act as an impediment, especially if a high income earner—such as a medical professional—is assessing whether to live in a province, such as NL, with a higher tax rate than, say, Alberta. The relative rate of business and municipal taxes also have huge public policy implications in attracting and retaining employers as well as funding municipal infrastructure.
The fact is, while taxes affect us all, they affect us all very differently. Finding a balance from a policy perspective is an age-old puzzle, and fairness really depends on your vantage point.