ST. JOHN’S, N.L. – Taxpayers in Newfoundland and Labrador will bear the brunt of a budget that hikes HST and gas taxes, cuts jobs and imposes “temporary” income-based levies to fight a deficit that will still reach almost $2 billion.
It’s the first budget for the new Liberal government that won power last fall after 12 years of Progressive Conservative rule.
Finance Minister Cathy Bennett said the Tories squandered historic wealth with spending increases and tax cuts hinged on volatile oil prices that have since crashed.
“The previous government’s willingness to mortgage our future has left Newfoundland and Labrador with the biggest deficit and highest net debt ever recorded in our history,” she said in her speech to the legislature.
“As our premier has said, knee-jerk reactions have created mistakes that, unfortunately, Newfoundlanders and Labradorians are paying for now.
“Band-aid solutions will not fix the challenges we face.”
Gas taxes are going up by 16.5 cents per litre starting June 2 and will be reviewed next fall.
An income-based levy of up to $900 is being imposed on all taxpayers to fight the deficit, with the exception of those earning $20,000 of taxable income or less. Bennett said this “temporary tax” will be phased out starting in 2018 as finances presumably improve.
The HST rate will increase by two percentage points to 15 per cent as of July 1 — reversing a rollback Premier Dwight Ball campaigned on, calling the higher rate a “job killer.”
Measures to cut government spending and raise cash are expected to cost average families $3,000 in new taxes and lost baby bonuses while eliminating about 650 public-sector and 2,000 private jobs.
Bennett, who did not buy new shoes as per budget day tradition, said the hard-hitting blueprint affects everyone in the province.
Income taxes are going up for all brackets. Those earning $35,000 to $70,000 will pay 13.5 per cent, up from 12.5 per cent. The rate goes up another percentage point in 2017.
Corporate income tax rates will rise to 15 per cent from 14 per cent, retroactive to Jan. 1, 2016.
Starting Friday, tobacco tax rises one cent per cigarette.
Class sizes are increasing for Grades 4 to 12, affecting an undetermined number of teaching positions. And the operational grant to Memorial University of Newfoundland has been cut by $14 million.
Bennett stressed that the province has still provided cash to help the university keep tuition rates among the lowest in the country, but that it’s up to administrators to set fees.
The budget forecasts a return to modest surplus by 2022-23, assuming Brent crude sells for US$74 a barrel, up from about US$44 in trading this week.
“Our province has been left in a very difficult situation because of the circumstances and the decisions the former administration made, and because of the rapid decline in oil price,” Bennett told reporters Thursday.
“And we have a tremendous amount of work to do to change that.”
Highlights of the Newfoundland and Labrador budget presented Thursday:
—An $8.5-billion spending plan that raises the Harmonized Sales Tax to 15 per cent from 13 per cent as of July 1.
—An income-dependent “deficit reduction levy” of up to $900 a year for the highest earners to fight a deficit still forecast to reach $1.8 billion this fiscal year. Those with $20,000 taxable income or less exempt.
—Offshore oil royalties that once provided 30 per cent of provincial revenues have crashed to an estimated seven per cent at $502.1 million.
—Gas tax increase of 16.5 cents per litre as of June 2, to be reviewed in the fall.
—Starting Friday tobacco tax rises one cent per cigarette.
—Class sizes to increase for Grades 4 to 12, operational grant to Memorial University of Newfoundland cut by $14 million.
—Measures to cut spending and raise cash will cost average families $3,000 a year, and will trim about 650 public-sector jobs and 2,000 private jobs.
—Income tax hikes for all brackets. Those earning $35,000 to $70,000 will pay 13.5 per cent, up from 12.5 per cent. The rate goes up another percentage point in 2017.
—Corporate income tax rate goes to 15 per cent from 14 per cent, retroactive to Jan. 1, 2016.
—Return to modest surplus by 2022-23, assuming Brent crude trades for US$74 a barrel, up from about US$44 in trading this week.