POLITICS

New Brunswick Premier David Alward faces growing pressure to raise HST

02/12/2013 03:13 EST | Updated 04/14/2013 05:12 EDT
FREDERICTON - As New Brunswick's deficit grows, New Brunswick Premier David Alward is under mounting pressure to break a campaign promise not to raise taxes such as the HST.

In recent weeks, Alward has mused about the possibility of holding a referendum to raise taxes or implement tolls amid increasingly gloomy numbers on the province's fiscal state.

The idea is gaining support from unlikely sources.

"If folks don't want to support an increase to the HST, I hope that people realize what that means for the level of services that we won't be able to maintain," said Susan Holt, president of the New Brunswick Business Council.

In an unusual move, the collection of business leaders is advocating an increase in the 13 per cent sales tax as well as a hike in the corporate tax rate in order to generate revenue.

Originally forecast at $183 million, the deficit for this fiscal year ending in March is now expected to top $411 million.

"We certainly wouldn't be making suggestions like increasing corporate taxes or increasing the HST if we didn't think we've reached a point where all solutions must be pursued," Holt said.

Alward has said his government is exploring all options as its prepares its 2013-2014 budget in the face of rising pension costs and growing unemployment.

The Progressive Conservative premier said he has been surprised by the number of people suggesting a tax increase.

"I think there is a recognition of the challenges we face," he said. "There is also a recognition that services are important to us and we need to find ways to deal with it."

The province's Taxpayer Protection Act requires an election mandate or a referendum if the government wants to introduce a new tax, raise the HST or impose highway tolls.

Last month, Alward said a referendum is possible before an election next year, but he stressed it's premature to conclude one will be held.

"You can't put the cart before the horse," he said.

Kevin Lacey, Atlantic director of the Canadian Taxpayers Federation, said a referendum should be called to give New Brunswickers a chance to vote against increasing the tax.

"The largest impact (of raising the HST) would be on lower- and middle-class taxpayers," Lacey said.

"They would bear the brunt of any of these tax increases, and what we're demanding is that if the province wants to raise it, fine, but go to the taxpayers and try to get approval for it."

He said the Alward government needs to do more to reduce spending by cutting the size of the public service before considering tax increases.

"The problem in the economy is not that taxpayers don't pay enough tax," Lacey said.

Rod Hill, an economist at the University of New Brunswick in Saint John, agreed with Lacey's view that raising the HST would adversely affect the working class.

Instead, Hill wants the government to increase personal income taxes.

"The fairest way to go is to increase taxes on those people most able to bear it, so that's why we're advocating an income tax increase rather than a sales tax increase," he said.

He said the government is banking on "a pipe dream" if it expects future revenues from shale gas exploration or a proposed west-east oil pipeline to alleviate its fiscal distress.

"The revenue promises of these natural resources are greatly overblown, and even if they exist, they are many years away," Hill said.

"In the meantime, we've got to pay for the public services that we're getting."