03/26/2013 01:10 EDT | Updated 05/26/2013 05:12 EDT

New Brunswick Budget 2013: Income, Tobacco Taxes Hiked To Fight $479 Million Deficit


FREDERICTON - Faced with a swell of red ink, the New Brunswick government went back on its word not to raise taxes and delivered a budget Tuesday that it hopes will generate enough revenue to make up for sagging growth.

Personal income and corporate tax rates will rise in the government's $8.5-billion spending plan, its penultimate budget before an election scheduled for next year.

The Progressive Conservatives promised during the last election not to raise taxes. But Finance Minister Blaine Higgs said he was left with little choice after past budgets that tinkered with spending failed to bring down a deficit that is projected to creep to $479 million in the 2013-14 fiscal year, a $68 million increase from this fiscal year.

"If there is a price to be paid for doing what's right, then our conscience is clear," Higgs told a news conference before tabling the budget.

"This budget strikes a balance between the difficult decisions we have made to address spending and increase revenues while still making strategic investments to strengthen our economy."

The deficit includes a one-time expense of $110 million for public pensions.

As of July 1, personal income taxes will rise to 2006 levels, a measure expected to generate $136 million in revenue for 2013-14. Higgs said higher income earners would face the biggest tax increases.

The corporate income tax rate will increase to 12 per cent from 10 per cent, resulting in an estimated $17 million in additional revenue.

The government is also hiking tobacco taxes, a measure anticipated to pour $15 million into its coffers. As of Wednesday, smokers will pay two cents more per cigarette. The tax on loose tobacco and cigars will also go up.

The government had considered a possible increase to the HST, but Higgs said Tuesday it has ruled that out during this mandate.

Kevin Lacey, the Atlantic director of the Canadian Taxpayers Federation, said the budget dips too deep into the pockets of New Brunswickers.

"This budget was a slap in the face to average middle-class families here in New Brunswick," Lacey said.

"These are big tax increases that the province is facing."

Liberal Leader Brian Gallant said the budget is a step backwards for a government that committed to growing the province's economy without hiking taxes.

"They said that they had a plan to balance the books without raising any of the taxes, which we see is not the case," Gallant said.

"It's very unfortunate for New Brunswickers to see the government has no plan to balance the books and no plan to get our economy back on track."

The province is also forecasting its net debt to swell to $11.6 billion by March 2014, a jump of $594 million.

The government will continue its three-year plan to reduce the size of the public service through attrition, filling only critical positions, Higgs said. The public service was decreased by 637 jobs out of a total complement of about 51,000 in 2012-13.

Higgs said the government will also launch a program aimed at reducing sick leave among public servants by 20 per cent by March 2015 for an estimated savings of $20 million.

A new resource royalty regime will be introduced during this session of the legislature that will help prop up the province's revenues, Higgs said.

He added while it is possible to balance the books by 2015-16 if economic growth and revenues exceed projections, he would not commit to it.

There is no increase in funding for public universities and the New Brunswick community college. Tuition increases will be capped at $150.

Higgs has also promised to sell the government airplane. In the past, the government only said it would consider the idea.

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