Nova Scotia's 10% income tax cut

Minimal benefit to low income taxpayers but a windfall to wealthy
July 25, 2003

HALIFAX - According to a study released today by the Canadian Centre for Policy Alternatives the Nova Scotia provincial income tax cut for 2004 will provide minimal, if any, benefit to middle and low income taxpayers, while providing a windfall to wealthy Nova Scotians. The study is part of the CCPA-NS series "Who really Benefits from Nova Scotia's Income Tax Cut." Using the most recent taxation data from Canada Customs and Revenue Agency the study examines the distribution of the income tax cut between 13 income groups.

According to the study's author, CCPA-NS Director, John Jacobs, "The provincial government has promoted the tax cut as a boost to working families, but in fact the tax cut provides little benefit to the average worker especially workers with low incomes." The study finds that Nova Scotians earning $10,000 to $20,000 a year make up 24% of taxpayers but they will receive only 4.4% of the tax cut and an average tax cut of $64. The real beneficiaries of the 10% income tax cut are upper income taxpayers. For example the 7,000 Nova Scotians earning $100,000 to $150,000 will receive an average tax cut of $1,500.

According to the study the average worker in Nova Scotia makes about $30,000. Fifty-one (51%) percent of Nova Scotian taxpayers earn less than $30,000 but this income group will only receive 16% of the total tax cut. The 20% of Nova Scotians who earn more than $50,000 will fare much better receiving 56% of the total tax cut. "In other words," says Jacobs, "of the $147 million tax cut $81 million will be divided between 82,000 Nova Scotian's earning more $50,000 while $23 million will be split between the 220,000 taxpayers earning less than $30,000."

"The tax cuts come at a social cost," according to the author. "by providing a disproportionate return to wealthy citizens the tax cuts will increase income inequality. They also undermine the government's ability to adequately invest in programs and services which are already at the lowest level in Canada."

"When taken in the context of cuts to programs and services and increases in user fees many Nova Scotians," says Jacobs, "will be worse off with the implementation of the 10% income tax cut."

The study finds the $155 tax rebate misleading. The rebate is relatively proportionate in it distribution of the tax cut, but this misleads taxpayers as to the true nature of income tax cuts. According to Jacobs "the 25% of Nova Scotians earning less than $20,000 will find that, when the 2003 tax rebate is taken into account, they will end up paying more taxes in 2004 than in 2003"