N.B. carbon tax revenues likely to continue funding yearly income tax cuts: Higgs

For the last two years, the province has used revenue from the carbon tax to cut income tax, something the premier said is part of a longer-term tax relief strategy.

Premier Blaine Higgs says future increases to the provincial carbon tax are likely to fund offsetting income tax cuts as the province looks to give “sustainable long-term tax relief” to New Brunswickers.

The past two budgets have included some form of income tax cut funded entirely by revenue generated from increases to carbon pricing, something Higgs said is part of the logic of the federally mandated program.

“The idea is, and that’s part of the whole carbon tax philosophy, is that there’s a portion of that that goes back to the people that are paying the tax,” Higgs told reporters on Tuesday.

“That’s why we do that and it likely will continue.”

In last year’s budget, $28 million in carbon tax revenue was set aside to lower the income tax rate to 9.4 per cent from 9.68 per cent on earnings up to $43,835. This year the government has set aside $40 million to raise the basic personal amount on which New Brunswickers pay no taxes by $903 to $11,720. The low-income tax reduction threshold has also been raised to $19,177, meaning single tax filers making less than that amount will pay no provincial income tax.

The $40-million tax cut is being directly funded by the projected increase in revenues as the carbon tax rises to $50 a tonne, or 11 cents per litre of gasoline, on April 1.

In the three years since the provincial carbon tax was implemented, some form of tax cut has been introduced. Of the approximately $170 million in expected carbon tax revenue, $149 million, or 87 per cent, is tied up in tax cuts. That includes $81 million for the 4.4 cents per litre cut to the provincial gas tax in 2020, used to soften the blow for consumers as carbon pricing rose to 6.6 cents per litre of gasoline.

Ottawa has said similar consumer offsetting measures won’t be acceptable after more stringent regulations begin next year. The department of Environment and Climate Change said it expects all provinces to comply with the new regulations but didn’t answer a direct question on if New Brunswick would have to undo its previous tax cut. Higgs said his understanding is that the old tax cut can remain on the books, and that the regulations will only apply to future gas tax offsets.