Tobacco tax rates will also increase, effective at midnight, he said.
The combined tax increases are among the largest in New Brunswick history, totalling about $200 million.
But even with the new measures, the projected deficit is expected to hit $478.7 million in the upcoming fiscal year, up from the previously estimated $411 million this year, Higgs said.
Meanwhile, the finance minister is projecting $102 million deficit in 2015-16, but says a balanced budget would still be achievable that year if the economy turns around.
Premier David Alward had promised his government would balance the province’s budget before the 2014 election.
The tax hikes also break a 2010 election pledge by Alward’s Progressive Conservatives to stabilize the province’s finances without raising taxes or cutting services.
"Our plan is to hold the line on the taxes as they are," Alward had said. "Raising any tax will be a last resort."
The increases also come with only about 18 months left before the next provincial election.
"If the price is to be paid for doing what's right, our consciences are clear."," Higgs told reporters.
Given the current fiscal situation, further tax measures are needed to rebalance revenues and spending for a more sustainable budget, he said.
Starting July 1, personal income tax rates will jump by up to 33 per cent, depending on an individual’s tax bracket, while corporate rates will increase by 20 per cent, Higgs said.
The new tax rate for a package of cigarettes will be $4.75, a 50-cent increase, while a carton will cost $38 in taxes, compared to the current $34.
“We are committed to correcting the province’s structural deficit which was created by poor management decisions in the past and worsened by the sluggish global economy,”
During last year’s budget speech, the finance minister had told reporters: “We think New Brunswickers are paying enough tax.”
For the past few months, however, Higgs has been hinting tax increases would be likely to fight the deficit and free up money for new spending.
There isn’t public support for the additional cuts he would have to make to balance the budget, he has said.
“New Brunswickers who are being asked to contribute a little more in this budget need to be assured that we are committed to spending their tax dollars prudently,” Higgs assured on Tuesday.
Personal income taxes up in all brackets
Personal income tax rates will be returned to 2006 levels.
The increases include:
- 9.1 per cent to 9.68 per cent on the first tax bracket (up to $38.954)
- 12.1 per cent to 14.82 per cent on the second tax bracket (from $38,954 to $77,908)
- 12.4 per cent to 16.52 per cent on the third tax bracket (from $77,908 to $126,662)
- 14.3 per cent to 17.84 per cent on the fourth tax bracket (over $126,662)
Although these rates are higher than the current rates, they are lower than those that were in effect for 2007 and 2008, Higgs said.
They are also lower than those in the other Maritimes provinces and Quebec, he said.
The largest percentage increase in personal income tax will be on those in the top two income brackets.
Under the new model, a single individual with taxable income of $40,000 will pay about $6 more biweekly in personal income taxes in 2014, or about $156 for the year.
For a one-earner family of two with a taxable income of $80,000, the increase represents about $47 more on a biweekly basis, or about $1,222 for the year.
Two-earner families in which each person earns $45,000 per year will pay a combined total of $64 more every two weeks, or $1,664 a year.
Initiatives announced in 2009 to help protect low-income New Brunswickers from tax rates will continue, said Higgs.
Single individuals with incomes up to $15,667 and one-earner families with incomes up to $27,779 will pay no provincial income tax.
In addition, single individuals with incomes up to $35,334 and one-earner families with incomes up to $55,000 will continue to receive “some benefit” from the Low-Income Tax reduction, Higgs said.
"As our economy rebounds, we'll look at what adjustments can be made" to income tax levels, he said.
Businesses will share burden
The general corporate income tax rate will increase to 12 per cent from the current 10 per cent, which will generate about $17 million in additional revenue in 2013-14, and $22 million in 2014-15.
Still, New Brunswick will continue to have the lowest general corporate income tax rate in Atlantic Canada, Higgs said.
Rescinding the personal and corporate income tax cuts brought in by the previous Liberal government are expected to generate about $320 million and $25 million a year respectively, officials have said.
The New Brunswick Business Council has already come out in support of the provincial government raising corporate income taxes.
New Brunswick has one of the lowest corporate tax rates in Canada, CEO Susan Holt has said.
But Kevin Lacey, the Atlantic director of the Canadian Taxpayers Federation, has argued it’s naïve to think the government would use the extra revenue on the deficit.
Businesses would also pass any corporate tax increases on to consumers, Lacey has said.
Corporate tax rates fell to 10 per cent in 2011, but the former Liberal government had intended the rates to fall to eight per cent by July 2012.
The Alward government halted the tax cuts at 10 per cent in 2011.Suggest a correction