The Budget and the Economy
NDP Caucus, February 2009
www.cfib.ca
Canadian Federation of Independent Business
The current situation:
What CFIB is saying
Canada needs political stability, volatility
only serves to deepen economic
uncertainty
Canada needs economic stability
Avoid deficits
Prudent, strategic spending
Avoid bailout packages
Develop a long-term personal income tax plan
Focus economic policy on SMEs
www.cfib.ca
The current situation:
What CFIB is doing
Continues to meet with MPs, MLAs in all
parties
Appealed for political and economic
stability in a letter to federal and
provincial leaders
Surveyed our members on spending, tax
and ‘stimulus’ principles
www.cfib.ca
Economic stimulus:
What it means to SMEs
 Balanced budget
 No large-scale bailouts unless:
 In the form of repayable loans
 Temporary only
 Linked with criteria and specific, long-term outcomes
 Short and long-term ‘stimulus’
 Focus on initiatives aimed at supporting all families and
businesses: tax relief
 Longer-term ‘stimulus’
 infrastructure investment
www.cfib.ca
Current economic environment:
National business expectations
120
115
110
Record high,113.8 (March 2002)
108.4
1988 = 100
104.2 104.0
105
100.5
101.8
97.7
100
94.4
95
90.5
90
85
80
www.cfib.ca
90.9
90.5
86.9
Previous low, 85.2
(Aug.1990)
6-week average, 90.3
89.3
Confidence
reaches
lowest
levels
since 1990
Nova Scotia Business Expectations:
SME Overview
Significant decline in confidence began in
4th Quarter, 2007
Until that time, optimism in Nova Scotia
led Atlantic region; top third in country
Beginning 2008, optimism in Nova Scotia
lowest in Atlantic region; bottom third in
Canada
www.cfib.ca
Nova Scotia Business
Expectations: SME Overview
125
120
1988=100
115
110
105
100
Nova Scotia
95
90
New Brunswick
97.5
92.0
85
Sept. 2007 Dec. 2007 Mar. 2008 Jun. 2008 Sept. 2008 Oct. 6-Nov. 16
www.cfib.ca
Government and Economy:
What’s working
 Better Regulation Initiative*
 Small Business Advocate for energy rate
hearings
 Buy local marketing efforts
 Broadband initiative
 Office of Employer Advisor – WCB
Exceptions: Tobacco regulations, Home heating rebate
www.cfib.ca
NDP and Economy
Appreciate support for balanced budget
Caucus support for SME sector
Focus on working families, like small
business families
www.cfib.ca
CFIB’s Focus
TAXATION
www.cfib.ca
Does the Current Nova Scotia Tax System
Promote Entrepreneurship?
Select three responses only
Don't Know
25%
No
72%
Yes
3%
Source: CFIB, Focus on Atlantic Canada Survey, September 2008, N=305.
www.cfib.ca
How Government Can
Encourage Entrepreneurship
Select three responses only
Reduce tax burden
69%
Reduce the regulatory burden
52%
Increase financing opportunities
Market Atlantic provinces within Canada
40%
29%
Promote Atlantic Gateway
26%
Increase regional cooperation
27%
Market Atlantic provinces internationally
22%
Improve information, training and advice services
16%
Improve access to new ideas and innovations
15%
Other/ No Answer
4%
0%
20%
Source: CFIB, Focus on Atlantic Canada Survey, September 2008, N=314.
www.cfib.ca
Tax is top
issue
40%
60%
80%
SME Priorities: Nova Scotia
Total tax burden
85%
Gov't regulation and paper burden
62%
Shortage of qualified labour
55%
Employment Insurance
49%
Cost of local gov't
42%
Gov't debt/deficit
39%
Workers' compensation
38%
Availability of financing
Provincial labour laws
22%
17%
Other 8%
Source: CFIB, OMO Survey No.62, N=869
www.cfib.ca
Tax is top
issue
Why tax is a top priority
Nova Scotia has:
 3rd lowest level of basic personal exemption in Canada
 3rd lowest level of basic spousal exemption in Canada
 One of only 3 provinces that do not index personal income tax
brackets; but other 2 (PEI and MB) increase the exemption
intermittently; not NS
 One of only 3 provinces with an income surtax
---------------------------- 3rd highest provincial fuel tax rate in Canada
 3rd highest small business tax rate in Canada
 Highest corporate tax rate in Canada
 2nd highest WCB premiums in Canada
 Second highest debt per capita in Canada
www.cfib.ca
Why tax is a top priority
Single earner of $40,000 pays $3,258 in provincial
income tax
 3rd highest in Canada
One-earner with $40,000 income with two
children pays $2,681 in provincial income tax
 Highest in Canada
Source: New Brunswick Department of Finance 2008
www.cfib.ca
Spending: Cross-country comparison
Province
Increase in Total Expenditures*
(1997-2008)
Alberta
145%
Newfoundland & Labrador
103%
Nova Scotia
97%
Manitoba
85%
British Columbia
84%
Saskatchewan
80%
Prince Edward Island
79%
Ontario
77%
Quebec
59%
New Brunswick
56%
www.cfib.ca
Nova Scotia Government Departmental Spending
1998 - 2008
120%
Spending (110%)
100%
Increase
80%
60%
40%
Inflation (27%)
20%
0%
Population Growth (0.3%)
1998
2000
2002
Year
www.cfib.ca
2004
2006
2008
SME tax priorities
Reduce small business tax rate
85%
Reduce provincial fuel tax
79%
Reduce personal income tax
79%
Reduce payroll taxes
75%
Reduce user fees
58%
Reduce general corporate tax rate
56%
Reduce HST
Increase small business threshold
53%
29%
Source: CFIB, Focus on Atlantic Canada Survey, September 2008, N=289.
www.cfib.ca
The way forward: Upcoming budget
Fiscal measures must encourage – not discourage
– entrepreneurship
 Plan must be outlined to reduce overall tax burden on
Nova Scotia’s working families
 Implement practical, ongoing increases in the basic personal
exemption
 Increase basic spousal exemption up to basic personal
exemption
 End bracket creep immediately
 Reduce small business tax rate (i.e. 0.5% every year for next
four years)
 Offset the impact of minimum wage increase by reducing small
business tax rate or extending the minimum wage schedule
www.cfib.ca
The way forward: Upcoming budget
 Hold spending to inflation + population growth
(overall expenditures cannot continue to
increase by 8 to 9 per cent)
 Balance budget
 Continued debt repayment, earmark savings in
interest payments to tax relief
 Continuation of Better Regulation; outline for
plan past 2010
www.cfib.ca
Atlantic Comparison
Province
What’s Working
What Needs Work
NB
Commitment to reduce
the total tax burden on
businesses and families.
No commitment to
measure, report and reduce
the red tape burden.
NL
Significant tax reduction
past two budgets
Large spending increases
NS
On-going commitment to Minimal tax relief for
measure, report and
businesses and families.
reduce red tape.
PE
Commitment to reduce
small business tax rate to
1% by 2010.
www.cfib.ca
Deficit budgets
Other Issues
Pre-budget consultation process
Budget date (fixed budget date)
NS Tax Review
CFIB’s top three for 2009:
Personal income tax
Regulatory reform
Shortage of qualified labour
www.cfib.ca