Last week, the Government of Nova Scotia released its 2024 Budget “Building Nova Scotia, Faster.” The budget features investments in housing, healthcare, and the skilled trades. The budget has the makings of one that primes the economy to focus on the social realities of the province, and it is timely to do just that. The Government of Nova Scotia announced a welcomed move to index personal income tax brackets and the basic personal amount to Nova Scotia’s rate of inflation. Indexing is good as it safeguards taxpayers from being moved into higher income brackets and does not rely on government to continually adjust the brackets every year as it will be done automatically. There is, however, a lack of clarity around the “largest tax cut” in Nova Scotia history.
This is not a tax cut, despite being framed as such. Nova Scotia will still have some of the highest tax rates in all of North America. Indexing simply adjusts the existing structure to inflation, not creating an actual decrease in the tax burden borne by residents. This distinction is crucial to understand the true impact of this policy. The Government of Nova Scotia has room to reduce the tax burden on Nova Scotians and simply preventing “bracket creep” through indexing does not equal a tax cut, it is effectively ensuring that taxes remain the same.
Nova Scotia also produced a deficit budget this year and while investments are needed, the Government also needs to keep an eye on the debt burden of the province. The projected deficit will be $467 million and Nova Scotia’s debt will rise to $20.2 billion and interest charges will amount to $823 million for 2024. Presently, the Government of Nova Scotia does not have an immediate plan to return to a balanced budget and is projecting deficits over the next four years and during this timeframe, the debt-to-GDP ratio is expected to rise. Nova Scotia is already one of the most indebted provinces in our country and prolonged deficit spending could leave the province more vulnerable to unforeseen economic shocks if they do occur. Strengthening the province’s fiscal outlook should be a priority for government as it will give government more space to reduce tax burdens while preparing for the short- and long-term health of the province.
Striking a balance between making critical investments and reducing expenditures is not easy. The Government of Nova Scotia’s budget will likely have a positive effect on many of the challenges to province faces, but it is imperative that they show fiscal restraint sooner rather than later.
Rhonda Tulk-Lane is the CEO of the Atlantic Chamber of Commerce, a nationally accredited organization, a collaborative force comprising of 90 chambers dispersed throughout Atlantic Canada. United in purpose and driven by a collective vision, the Chamber leverages its widespread influence to advocate for policies conducive to economic growth, foster meaningful partnerships, and champion the interests of businesses both large and small.
