Yesterday, Nova Scotia's Minister of Finance proudly stood up to table a tiny surplus, and to convince us that a stable economy is good. However, stable is another word for stagnant. With no net job growth to speak of and very little economic growth, and with consumer spending flat; these are not good signs. They tell us that the government failed to use fiscal policy to provide the boost our economy needs; it did the opposite.
The government’s proposed wage settlements –which are effectively real wage cuts - have been used to produce the surplus. This government continues to undermine collective bargaining rights and as a result is faced with hundreds of expired collective agreements. This behaviour actually poses a risk to our ‘stable’ economy and jeopardizes our ability to retain those valuable educators, health care providers, and others public servants.
The investments in the budget fall far short of what is needed; 750 more families might have access to child care for their four-year olds, but thousands more are left without access to affordable, quality, regulated child care in their community. The investments in public education including $10 million set aside to improve classroom conditions or the small investment to hire 20 or so speech language pathologists or psychologists, is not enough to solve the problems.
What about that 'tax cut'?
At the same time, the ‘tax cut,’ ie. raising the basic personal amount will remove $85 million from our revenue base. It is called a tax cut, but here is what it actually means: most Nova Scotians will be taxed the same amount all year, but at the end of the year some Nova Scotians will be able to reduce the amount owed a bit more via the increase to this non-refundable tax deduction. This will have no impact on those who need it the most because their incomes are already too low to pay tax (and thus will benefit women less because they have higher poverty rates and lower incomes than men). The additional amount any Nova Scotian will deduct is between $2 and $263 a year (a change that will affect everyone earning up to $75,000-a cut-off well above middle class). The average Nova Scotian will deduct an additional $160 dollars from provincial taxes owing when you file your 2018 taxes (in 2019).
In summary, this 'tax cut' provides no help for those with very low incomes, is a drop in the bucket for others, and phases out at $75,000 - well above the median NS income of $30,000. If the intent was to help low income families or even the 'middle-class,' it's very poorly targeted.
Strategic Investments: Ways to better spend $85 million
While these tax deductions are insignificant for most people, collectively $85 million in strategic investments could go a long way. The Nova Scotia Alternative Budget shows just what could be done with $85 million, consider that $30 million would eliminate NSCC fees or $34 million would allow for a 10% reduction in university tuition fees. We could begin building a real affordable child care system or expand our long term care system, or make pharmacare available to more people without fees or increase access to affordable public transportation. With so many real social needs, this is certainly not the time to cut taxes.
If the government really wants to help those living in poverty it should invest to lift those living on income assistance out of poverty by giving them more money now. If that $85 million was used to enhance the Poverty Reduction Credit for example, it would mean thousands of dollars more per year for the lowest income Nova Scotians, actually lifting some people out of poverty. Instead, thousands of Nova Scotians including families with children will endure another year of struggling to pay for the basics of shelter, and food, while stretching their miserly support even further to cover the costs of inflation. The government allocates $2 million to initiate a plan to address poverty, with a promise to invest up to $20 million in ‘innovative’ approaches. A government in its fourth year should already have a plan. It’s past time to make substantive improvements and investments in poverty reduction.
Evidence-Based Meaningful Investment, Not Arbitrary Targets
The budget revealed that we are paying $1.6 million to set up a Cap and Trade system that will increase costs but not raise revenue to help transition to a greener economy, while mitigating the negative impacts of that carbon price. A carbon tax could have raised $154 million this year to do just that and create green jobs. Another missed opportunity.
The largest increase is a 39% raise for the Department of Business for more payroll rebates—an unproven, definitely unsustainable incentive of millions provided to already profitable businesses with headquarters and thus profits flowing elsewhere including Bermuda.
As for the future, this government repeated its goal to meet the magic 30% Debt to GDP target as if the Ivany report makes it reputable even though it lacks any theoretic or evidence-based rationale. Lowering the debt to GDP ratio to an arbitrary target will not strengthen our economy.
After years of fiscal restraint, if not for the federal government investment, this budget’s dribs and drabs would not be noticed in most people’s lives in any meaningful way. Nova Scotians continue to struggle to find jobs or to pay for a very costly higher education in order to improve their employability.
With an election call presumed shortly, it will be critical to pay attention to how fiscal policy figures into party platforms or promises. Nova Scotia needs a government that will make investments within a sustainable fiscal framework balanced to provide much needed improvements to our public services, give the economy the boost it desperately needs, and create much needed employment.