The largest one-time tax reduction package ever introduced in New Brunswick is a major part of the province’s 2009-10 budget, unveiled Tuesday.
New Brunswick is projected to run a deficit of about $441 million. Including pension expenses, the deficit is expected to rise to over $740 million
The budget also features focused investments in priorities such as health care and education, and $1.2 billion for infrastructure projects.
For 2009-10, the budget allocates investments amounting to $7.838 billion, reflecting growing expenditure pressures, including the impact of weakened market returns on provincial pensions and the increased costs of delivering key social programs. Excluding the extraordinary pension expense, the province is facing a deficit of $440.9 million for 2009-10. Including the extraordinary pension expense, the projected deficit is $740.9 million. This will result in a projected net debt increase of $968.7 million.
“Budgetary deficits will be temporarily necessary as we provide stimulus to help our province overcome these challenges, but we are already taking steps to ensure that New Brunswick emerges from deficit within four years,” Finance Ministre Victor Boudreau said.
To achieve this objective, the province will constrain spending increases to less than 2% annually over the 2010-11 to 2012-13 period.
Capital investments totalling $1.2 billion for infrastructure and support for business will help to stimulate, grow and diversify New Brunswick’s economy over two years, the government said.
Tax cuts will be phased-in between 2009 and 2012, and result in $143.5 million in tax savings for New Brunswick residents and businesses in 2009-10 alone, growing to $380.2 million by 2012-13.
The saving to individuals alone in the first year of the plan is $124 million, while businesses will save about $20 million. In the fourth year, savings to individuals will have increased to $336 million, while businesses will save $44 million.
The cornerstone of this plan is New Brunswick’s move from the existing four-rate, four-bracket personal income tax structure to a two-rate, two-bracket structure. By 2012, the existing four-rate personal income tax structure will be replaced with two rates of 9% and 12%.
This plan enhances the Low-Income Tax Reduction, increases the Low-Income Seniors’ Benefit, and increases the Tuition Rebate; and introduces a mechanism to improve accountability to taxpayers for provincial and municipal property taxes.
Currently, the Low-Income Tax Reduction is phased out at 5% of income. For 2009, this will be reduced to 4%, and subsequently phased out at 3%, providing $13 million in tax relief annually to low- and middle-income individuals and families.
The Low-Income Seniors’ Benefit will be enhanced by increasing the benefit amount to $300 from $200 in 2009, and the government will increase the Low-Income Seniors’ Benefit to $400 in 2010. This measure will provide additional tax relief of $3.5 million in 2009-10, rising to $7.4 million for 2010-11.
The maximum lifetime rebate of the Tuition Rebate will be doubled to $20,000 from $10,000, and the maximum annual rebate will be doubled to $4,000 from $2,000. The estimated additional savings to New Brunswick individuals is $2 million in 2009-10.
This budget will also provide business with tax relief amounting to an estimated $20 million in 2009-10, rising to $44 million by 2012-13. To this end, the general corporate income tax rate will be reduced from 13% in 2008 to 8% in 2012.
Effective Jan. 1, 2009, the small business limit will be increased to $500,000 from $400,000. With this increase, New Brunswick will be tied for the highest small business income limit in Canada.
Enhancements will also be made to the Small Business Investor Tax Credit and the Labour Sponsored Venture Capital Tax Credit. Together, these enhanced credits will provide additional tax relief of $3 million in 2009-10, and this will double by 2012-13.
Further tax relief will come about as a result of the High Energy Use Tax Rebate, which will be extended for an additional year; and a Forestry Industry Investment Tax Credit that will be offered for one year.
The budget also contains measures to achieve program and administrative savings, and changes to the government’s wage policy in 2009-10 that will result in expenditure savings of $182 million. The revised policy will freeze wages for two years, and apply to all unionized and non-unionized employees in parts of the public service.
IE