On taxes, TJ missing the point

The Telegraph-Journal ran an editorial this morning lauding the idea of the province’s being able to collect more taxes in their local markets rather than relying on Ottawa to send them money via transfers.

As they say:
Provincial services would be paid for through provincial taxes – a more cost-effective process, which would create clear lines of accountability. Never again would taxpayers have to wonder how much of the tax deducted from their paycheques is being used to bankroll federal surpluses or pre-election spending sprees.

And then they counterpoint:

Left to rely on its own resources, the province would be forced to cut services or tax New Brunswickers more deeply. The gap between “have” and “have less” provinces would increase, and so would the migration of New Brunswick’s educated workers to provinces with lower taxes or better services. Immigration, seen by many as a key to maintaining New Brunswick’s economy and population, would slow. Even job creation would become more difficult, because potential employers and employees would have reason to fear the bite of local taxes.

So the TJ concludes that New Brunswick needs both – more direct taxation and more Equalization.

When I read this editorial, I thought I was reading the Times & Transcript. This is just a silly position. How can you argue for the provinces’ to have more direct taxation and more Equalization at the same time?

Be clear about this. New Brunswick, under any formula, is going to need billions of more Equalization in the coming years as its population continues to decline while the cost of government continues to increase. Add in Quebec, PEI, Nova Scotia and Newfoundland and the Federal government will need tens of billions of dollars more just to satisfy the growing need.

So any suggestion of the Feds backing off taxation and letting the provinces tax more (implication: the feds would drop their tax rates and the provinces would increase theirs), is just plain silly – if you want more Equalization for New Brunswick.

Which the TJ, admittedly and the Premier, do.

Don’t confuse people, TJ editor. An average accountant in Calgary will pay thousands more in taxes than the average accountant in Moncton – even though the tax ‘rate’ in Calgary is much lower. That’s because they earn so much more.

The government needs to focus its efforts on growing the economy, raising the private sector wage level (slowly but consistently) and growing high value jobs. Looking for more handouts from Ottawa, I really believe is a doomed strategy.