Tuesday, February 9, 2016

It's Budget Consultation Time - So How Do We Compare On Taxes And Fuel Prices?



(Scroll right to the bottom for Fuel Prices and Income Tax Charts)

With the provincial budget consultations underway, the letters begin arriving from lobby groups and individuals asking for this or that tax to be raised or lowered or changed. Letters arrive saying we are the highest taxed or not taxed enough. A pet tax credit or program should receive funding. Or something people don’t like should be scrapped. This isn’t new. The same process happens every year around this time. The arguments made by each group haven’t waivered much regardless of the political party in government or for that matter, the level of government, since I was first elected to Halifax Regional Council back in 2004

Also around this time the province and the feds (again regardless of the political party in power) roll out their “pre-budget consultations”. This has always amused me because the truth is the budget is largely wrapped up before Christmas. Sometimes even with a de facto approval in principle. (Provincially you have already seen some of those budget decisions being rolled out such as Pharmacare changes and cuts to Health Department staffing so expect more budget announcements soon).

Unfortunately, it does make the annual process of consultations seem a bit disingenuous. Rather than consultations, these become more about testing the waters (remember Minister Whalen suggesting Film Tax Credit changes might be worth considering at a budget consultation Chamber event shortly before the budget was tabled?)

This is not the fault of the current finance minister, or the last one, or even the one before that. They didn’t create the timing. It’s just part of the bureaucracy of how things are done. No one has bothered to change it. It’s the same process which results in Nova Scotia budgets always seeming to be introduced after the fiscal year has begun (unlike New Brunswick which, for example, introduced theirs last week).

To her credit, former Finance Minister Diana Whalen expressed concern about the timing of consultations herself in 2014 when she floated the idea that consultations be moved to the fall. But alas it never happened. It’s a bigger project than it sounds if you want to do it right.

The consultations can result in some minor changes. Certainly there is tinkering around the edges of the budget right up until the end. Updated financial information coming in February sometimes results in a new tax or program cut close to the end to fill a gap. Last year’s Film Tax Credit changes for example seem to have been about filling a gap (I’ll talk more about the Film Tax Credit both in a future post and my new book which I hope to have out later this year), but it’s rare for the final target or the big issues to change.

As to whether we are the highest or lowest taxed on income, or whether we have the highest or worst fuel taxes I’ll let you reach your own conclusions. To help you answer those questions below are two charts we have put together in my office. One is for fuel taxes and one for income taxes.


FUEL TAXES

The first shows the total price of gasoline and diesel. This is based on the selling price and taxes for each province at a specific point in time (February 2, 2016). Using data provided by Natural Resources Canada the chart shows the total price (the whole bar and the price at the beginning of the bar). Additionally, the portion of the bar shaded in green is the percentage of that price which is tax. This is a combination of fixed per litre taxes such as motive fuel taxes, and percentage taxes such as sales tax. For any given day or base price point, the percentage of tax in the price will change somewhat (if gasoline price drops then the percentage made up from tax increases because of the fixed price per litre taxes). This is, as I say, a snapshot in time.

(In a future post I plan to discuss why gasoline prices no longer trend with crude oil prices and how the New York spot price may become a challenging price for the Utility and Review Board to use in Nova Scotia to price retail fuel if Obama introduces a $10 tax on barrels of crude oil.)


  
INCOME TAX

This chart shows the tax brackets federally and across Canada for different income brackets. This too is a snapshot in time and is for the end of January. This is important because it doesn’t reflect any income tax changes which may have been introduced by the New Brunswick government in their recent budget, but does include changes introduced before Christmas by the federal government. Income tax is far less straight forward than fuel taxes. For most Canadians, you will pay both the provincial and federal income tax. However, both start at different points because the basic personal exemption varies widely across Canada. As well, incomes within each tax bracket vary significantly. For example, if you are in Nova Scotia a fourth income tax bracket kicks in around $93,000, federally it’s around $150,000, and in Alberta it kicks in at over $200,000.

Income tax is the perfect example of where the best province to be in from a tax perspective very much depends on your income. Needless to say, this also does not account for variabilities in what tax deductions are available in each province and whether they are refundable or non-refundable. Nor does it account for income splitting among seniors for federal income. The possibilities and combinations are endless. (Due to the width of this chart you may wish to right click and open it in a new window to read it easier)