Apologist for tax increases

Some have said that I am an ‘apologist’ for tax increases as I didn’t completely go nutso when the Libs raised taxes in the last provincial budget.

Upon reflection, you are correct. I am an apologist for taxes.

More specifically, I believe that governments need taxes to pay for vital public services. As a result, I don’t think the word ‘tax’ is – as my wife is fond of saying to the kids – a ‘potty’ word.

Ireland dropped its corporate tax to 12% – some say this has been a key part of its resurgence. Without being an economist, I can still see a straight line between some tax cuts and economic growth.

But let’s not forget that Ireland tracks just how much new tax revenue is generated every year from its economic development – and it runs into the billions each year.

So that’s why I am an apologist for taxes.

My position is that we need to have a ‘competitive’ tax environment and we need to ensure that those who should be paying taxes – do pay tax – i.e. provide funds to support vital public services.

Case in point. The Daily Gleaner is running a story today about a downtown retailer who will have to ‘cut spending’ and ‘layoff’ workers as a result of the draconian measure of raising the small business tax rate in New Brunswick from 1.5% to 5%. I won’t say the name of the firm because the point is not to single out anyone but to prove my case. The owner of this business says the tax increase will cost him between $2,000 and $3,000 per year. Let’s, for the sake of argument, round that to $2,500 per year.

First, he will have to ‘layoff’ to recoup $2,500?

Second, simple math says that if the tax increase will cause him to lose $2,500 – he must have approximately $71,429 in annual profits (you do the math on this you will see my point).

So, am I wrong here? If a small business makes $71,429 in profits – is it too much to think that they could pay $3,751 (5%) in provincial corporate taxes? Is that too much tax?

I understand businesses don’t like to pay tax. That’s fair. I don’t much like to pay tax either.

But the fact of the matter is real simple. The number one source of revenue for the New Brunswick budget is Equalization – and that source keeps increasing every year. Taxes paid by businesses like this one in Freddy Beach make up one of the smaller sources of revenue.

So, from a public policy perspsective (you know, that whole self-sufficiency thing), we need to generate oodles more taxes from the local economy – something like $1.5 billion per year.

While I don’t think we should try and extract that from small Fredericton-based retailers, I think that somebody who makes $71k in profits should not be too worried about antying up $3,700 in taxes.