Download Introduction Suggestions to generate revenue

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Submission to New Brunswick pre-budget consultation
December 2013
Introduction
The New Brunswick Federation of Labour is New Brunswick’s largest central labour body
representing 40 000 members; 18 different unions, 378 locals and 7 district labour councils.
Founded 100 years ago, the New Brunswick Federation of Labour has a long history of working
to adopt and implement progressive labour and social legislation, policies and programs.
Announcing this consultation one week in advance is not conducive to participatory democracy
where individuals and organizations can make presentations on what they would like to see in
the upcoming provincial budget. This consultation has historically taken place in the new year
and changing it without sufficient notice is not acceptable.
The consultations should be open to the general public and should not be limited to stakeholder
groups invited. Is the Department prepared to share a list of the organizations approached as
stakeholders?
The New Brunswick Federation of Labour, nevertheless, is pleased to make the following
recommendations for the 2014-2015 provincial budget.
Suggestions to generate revenue
The New Brunswick Federation of Labour agrees with the government’s objective of returning to
balanced budgets and shares the Auditor General’s concerns with the structural deficit that has
resulted in five consecutive budget deficits.
According to both the recent Auditor General’s report and Finance Minister Higgs’ Second
Quarter 2013-2014 Fiscal Update, the government of New Brunswick has a revenue problem
rather than a spending problem.
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For example, the Second Quarter 2013-2014 fiscal update says: “Relative to first quarter, total
expenses has improved by $93.2 million, however revenue projections have deteriorated by
$131.5 million....”
The New Brunswick Federation of Labour is hence suggesting a number of ways in which the
provincial government can generate increased revenues.
1) Finish reversing tax cuts to 2008 level
Taxes are the cost of belonging to a society. A progressive tax system is required to ensure
economic prosperity benefits all New Brunswickers and not just a select few. In a progressive
tax system, the more money you earn, the higher the percentage of tax you pay. It is more
equitable to tax income rather than consumption and services. Taxing consumption and
services increases the tax burden most on the people who can least afford it.
The New Brunswick Federation of Labour recommends finishing reversing the tax cuts and to
return to the 2008 income and corporate tax rates for the 2014-2015 budget.
Also, the stated goal of lowering individual taxes for wealthy New Brunswickers and
corporations was to stimulate the economy by attracting new companies and new investors.
This goal, nevertheless, has not been achieved. As stated by New Brunswick economists Joe
Ruggery and Jean-Philippe Bourgeois in their report published by the Canadian Centre for
Policy Alternatives called The Fiscal and Economic Implications of Tax Reform in New
Brunswick:
This [tax] reform is ineffective because it will do little to stimulate
economic growth. Expanding economic activity in the province
is a laudable policy objective. However, stimulating provincial
economic activity in the presence of national and international
competition requires well-designed and properly targeted
policies, not blunt instruments such as the tax cuts
implemented by the previous government. New Brunswick does
not have the funds to throw at large corporations in the
blind hope that they may move some of their activities to this
province. And, it does not have the funds to subsidize workers
to come to New Brunswick instead of other Atlantic provinces.
More importantly, pursuing a regional tax competition policy
is a self-defeating strategy that in the end would leave all
governments in the region more fiscally vulnerable.
2) Health care reform
Our health care system, as it exists today, is not sustainable. Community Health Centres (CHC)
have enormous potential. Key features of these health centres include:
serving a defined population;
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focusing on health promotion and disease prevention;
using multidisciplinary collaborative teams of health professionals;
salary reimbursement for all staff;
community development and participation in governance.
Studies of Community Health Centres in Quebec, Ontario and Saskatchewan indicate that it
costs ten to thirty percent less to serve patients at Community Health Centres than patients
served in the traditional way. The study also found that the quality of care received in the
Community Health Centres is as good as the care received in more traditional settings.
3) Public automobile insurance
In 2004, the all-party select committee on public automobile insurance established by the Lord
Government recommended a new initiative for New Brunswick with a projected economic
impact of $275 million in its second year of operation. That committee unanimously
recommended the made-in-New-Brunswick automobile insurance model that would have
provided a comprehensive and high level no-fault automobile insurance at an affordable rate
to all New Brunswickers.
In the spring of 2007, then Attorney-General T.J. Burke commissioned an independent actuarial
study. It found that New Brunswick consumers paid $518 million between 2003-2007 in
insurance premiums above the value of claims paid out and the required hold-back by the
insurance industry.
Imagine what half of a billion new dollars could do for our economy and communities. Why not
keep the money here in New Brunswick to meet our own needs, rather than being issued to
shareholders of multi-national insurance companies as dividends? A public automobile
insurance program would accomplish this.
4) Royalties for our Natural Resources
Our economy being so dependent on natural resources, royalties derived from these natural
resources is an important source of revenue for our province.
There are a number of ways that the provincial government can improve the revenue derived
from our natural resources. This brief merely highlights two such examples. Overall, the
provincial government should manage royalties to ensure that they are comparable with other
Canadian jurisdictions. New Brunswick cannot afford to provide royalty holidays.
One example pertains to the royalties received from potash. In July 2007, the provincial
government waived $35 million in potash royalties. In exchange PotashCorp announced that it
would create 140 permanent full-time jobs upon completion of a new mine. Recently the
company announced that it will be laying-off staff, including 130 jobs in New Brunswick. This
means that 10 jobs remain in the province.
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A second example pertains to timber royalties. In 2008, the New Brunswick Auditor General’s
Office conducted an extensive review of how royalties are determined for timber products in the
province. Here is an extract from the report:
5.36 The fact that the mills directly or indirectly control so
much of the source of timber supply in New Brunswick means
that the market is not truly an open market. In such a situation
it is not possible to be confident that the prices paid in the market
are in fact fair market value.
5.37 This flaw in the design of the system for establishing timber
royalties could create a second problem. Under subsection 3(2)
of the Crown Lands and Forests Act, “The Minister shall encourage
the management of private forest lands as the primary source of
timber for wood processing facilities in the Province…” If however
the royalty system provides an incentive for processing facilities to
keep prices paid to private land owners low, the result may be
fewer private land owners who are willing to supply timber to
New Brunswick mills. Crown land would then become a greater
source of supply thereby creating an obstacle to the Minister
in attempting to encourage private sources as the primary
source of supply.
Unfortunately three of the substantive recommendations to improve how royalties are set were
not implemented, namely:
Establish a new system to determine what is a fair market value;
Establish royalty rates on a regional basis;
Implement a new timber royalty system that allows royalties charged to reflect changes
in market indices on a frequent basis, which would be at least quarterly.
5) Index and increase minimum wage over time
In 2011, the province had 9.7% of its workers earning minimum wage, women being the majority
of minimum wage earners, as compared to 6.8% nationally.
At present, the minimum wage is set at $10.00 an hour, very near the poverty line. However it is
not indexed to the cost of living and the current government does not plan to increase it anytime
soon. What this really means is that since April 2012, the purchasing power of thousands of
workers has continued to decrease. Let us recall that we waited until 2012 to see N.B.’s
minimum wage match that of the other provinces.
Hence the NBFL recommends that the provincial government increase the minimum hourly
wage by $0.25 per hour per year for the next four years, to reach $11.00 an hour in 2017.
Indexing and raising minimum wage levels over time will cost little to the provincial government
but will increase its revenue through raised income taxes.
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6) Maintaining New Brunswick Liquor as a Crown Corporation
New Brunswick Liquor Corporation is one of the most efficiently run liquor agencies in the
country with an excellent expense to sales ratio. It generated $164.1 million in profit in fiscal
year 2012-2013. Over the past four years, it contributed over $645 million to the provincial
economy. This is a powerful way of raising government revenue. It is not in the best interest of
New Brunswickers to privatize this crown corporation.
Only one Canadian province, Alberta, has privatized its liquor stores. We can learn from their
experience. After its privatization, liquor prices have increased. Studies have also found that as
a result of privatization of liquor stores in Alberta, there are higher government regulation and
enforcement costs for municipal police departments. The government of Ontario considered
privatization in 2005 and rejected the idea. The government of Nova Scotia considered
privatization about 10 years ago and rejected the idea.
New Brunswick Liquor Corporation also has millions of dollars in capital assets (property,
buildings and equipment). The New Brunswick Federation of Labour believes that these assets
need to remain public and not be privatized.
NBFL Investment priorities
Although the provincial government must return to balanced budgets, the role of government in
society is to ensure that economic prosperity benefits everyone, not just a select few. A 2011
OECD study of the world’s richest countries shows that income disparity in Canada is on the
rise and that it is at a record high already. According to this report, two factors explain Canada’s
growing gap: a widening disparity in labour earnings between high and low paid workers, and
less redistribution of wealth. Tax policy and benefits reduce inequality less in Canada than in
most OECD countries.
New Brunswick does not fare well in terms of median income per household when compared to
the rest of Canada. The median total income for all Census families in Canada in 2011 was
$72,240; New Brunswick’s was $63,930, the lowest of all provinces and territories in Canada.
In terms of income inequality in New Brunswick, according to the 2012 New Brunswick Child
Poverty Report Card, prepared by Campaign 2000, the poorest 10 % of New Brunswickers have
2.7% of the income pie while the richest 10% of New Brunswickers have 24.8% of the income
pie.
It also should be noted that governments receive the highest economic returns on their
investments, not by making tax cuts, but by investing in people. The highest economic returns,
measured both in terms of increases to GDP (economic output) and jobs creation, go to
investments made in child care services, health care, social services, public infrastructure and
education.
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Hence the New Brunswick Federation of Labour is recommending a number of strategic
investments that should be made by the provincial government. These investments will
contribute to reduce the income disparity in the province.
1) Early learning and child care
Quebec’s universal seven dollars a day child care program more than pays for itself, according
to a recent study by one Quebec’s top economists. The study, done by Pierre Fortin and two
colleagues from the University de Sherbrook, determined that for every dollar that the
government of Quebec spends on child care programs, $1.05 is returned in the form of higher
tax revenues and lower spending for the provincial government on other program, with an
additional 44 cent benefit returned to the federal government.
These immediate economic benefits are in addition to the longer-term benefits from improved
educational, health and social benefits for children who attend early learning and child care
programs.
In New Brunswick, according to data produced by the Department of Education and Early
Childhood Development, as of July 2013, only 23% of children aged 0 to 12 have access to a
regulated child care space. The vast majority (73%) of services are centred the province’s three
largest cities, meaning that there lack of services is even more pronounced in other areas in the
province.
Most of the programs available (71%) are operated privately. Research shows that the highest
quality of care can be found in programs offered on a not-for-profit basis.
The New Brunswick Federation of Labour recommends that the New Brunswick government
takes the necessary steps to transform our current piecemeal child care system into a publiclyfunded and not-for-profit child care system as promised in the Progressive Conservative Party’s
2010 electoral platform: “Examine how we can shift the way childcare is financed, creating more
of a systemic approach.”
2) Pay equity
In May 2013, NBFL delegates attending the Convention adopted the following resolution: “Be it
resolved that the NB Federation of Labour will use all means available to ensure that the
provincial government lives up to its obligations to eliminate wage discrimination against women
in the public, quasi-public and private sectors.”
Hence, the NBFL supports the following recommendations made by the New Brunswick
Coalition for Pay Equity:
That the results of the pay equity program for community residence workers be released now
and ensuing pay equity adjustments be promptly issued, retroactive to April 1 2013;
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That the government issue the remaining wage adjustments in their entirety (lump sum) to
groups that have completed pay equity programs, meaning home support and child care
workers (transition house workers should have already received applicable salary adjustments);
If the government insists on 5 year instalments, it should divide them equally and issue them on
time;
That sectoral pay equity programs, with improved methodology, be implemented in all agencies
offering government-mandated services;
That the government conduct a consultation with unions, the Coalition for Pay Equity and
experts on the application of Pay Equity Act, 2009, and revise it based on the recommendations
made at the consultation;
That the provincial government adopt pay equity legislation for the private sector.
Thank you!
JD / UNIFOR 4501
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