Nova Scotia budget includes major tax cuts, reserve fund amid U.S. tariff threats

“The threat of U.S. tariffs continues to loom over us. We don’t know what will come, but we are ready to respond,” Lohr said in his budget speech. “It is clear we are entering a period of heightened uncertainty and heightened risk.”

Lohr said the province faces hard work in the years to come due to pressing issues such as slowing population growth and American protectionism, which could trigger a drop in exports. The Progressive Conservative government’s proposed solutions range from lowering taxes to increasing capital spending on hospitals and public housing.

Key tax measures

The $500 million in tax measures include a one percentage point reduction in the provincial portion of the harmonized sales tax, which would reduce HST to 14% from 15%; the indexation of tax brackets; and an increase in the basic personal amount that is shielded from the provincial income tax. The government says these moves will save the average household more than $1,000 this year.

The sales tax cut, the province’s first since 2010, will give it the lowest rate in Atlantic Canada, Lohr noted.

The indexation rate for 2025 was 3.1% based on previous inflation, the budget said. For the 2025 tax year, the basic personal amount would be $11,744 for all tax filers (the province has a reduction provision at income above $25,000 that would be removed).

Small businesses would benefit from a reduction in the small business tax rate to 1.5% from 2.5%, effective April 1, and more businesses would benefit from this lower rate as the income threshold increases to $700,000 from $500,000. This proposed increase to the small business threshold would make the threshold the highest among the provinces, the budget said. The reduction in the small business tax rate and the increased threshold are projected to save approximately 19,000 businesses $43.9 million in 2025–26, it said.

Also, the deed transfer tax of 5% on the value of residential property purchased by a non-resident of Nova Scotia would be increased to 10%. (Exemptions to the deed transfer tax are provided for specific situations.) The proposed higher tax rate would apply to transactions with an agreement of purchase and sale dated from April 1, onward, the budget said.

Other measures

The budget removes parking fees at all provincial hospitals, at a cost of $19 million, and drops the tolls from the two bridges spanning Halifax Harbour starting April 1, which will mean $39 million in lost revenue.

In response to threats by U.S. President Donald Trump to impose 25% tariffs on Canadian goods in March, Lohr said the province is looking to diversify its economy in areas such as critical minerals, wind power and hydrogen.

He repeated the message delivered multiple times by Premier Tim Houston since the start of the new year that the government also intends to rethink “outright bans” on the development of uranium and natural gas. “This means lifting bans and avoiding outright bans in the future,” he said in the speech.

Nearly $6 billion is earmarked for health care, an 8% increase from the previous year, including $1.4 billion for various capital costs and hospital expansions, with $26.9 million to cover the costs of the shingles vaccine for those aged 65 and older.

The province is describing the projected $2.3 billion in capital project spending — including the health infrastructure — as part of a wider strategy to “help stimulate the economy” amid the threat of U.S. tariffs.

Meanwhile, the government’s first budget since the Tories won a second consecutive mandate in the Nov. 26 election forecast that about 159 jobs in the civil service — out of the 11,324 positions — will be cut through attrition and retirements.

As climate emergencies ranging from hurricanes to wildfires have battered the province in recent years, the Tories are committing an additional $25 million to respond with the new Department of Emergency Management and a volunteer response group called the Nova Scotia Guard.