Nova Scotia Increases Taxes

Increase in Taxes - A Sign of Things to Come?

To cope with a $9 Billion deficit, and an expected deficit of $222 Million in 2010-2011, Nova Scotia will raise its Harmonized Sales Tax to 15% starting on July 1st, and create a new "high income" tax bracket, taxing those with incomes above $150,000 at 21%, beginning retroactively on January 1, 2010. This 21% rate is one of the highest penalties for those with top earnings in the country. With other provinces and the federal government itself facing large deficits, this may signal the advent of new taxation trends for the years to come.

Other tax initiatives include:

• HST offset for low income earners (less than $30,000) of $240 per year plus an additional $57 for children under 19 and living at home
• Elimination of the 10% surtax on provincial income tax payable greater than $10,000 effective January 1, 2010
• Taxes on small business (under $400,000) declining to 4.5% from 5%, effective January 1, 2011
• Capital taxes on non-financial institutions declining and set to be eliminated in two years
  

How does this compare to taxation changes in other provinces? See KBR budget summations in archived issues by linking here.

The bottom line for Nova Scotians? At a time when recovering economies need fiscal stimulus, consumers will pay more (and this penalizes in particular, young familiesin the middle class) and the tax disincentive for high income earners may create a brain drain Nova Scotia may miss for its future. Planning to reduce, change or diversify investment or business income sources may help to average down these new tax rates. So will RRSP contributions which save tax dollars on a proportionately higher basis for high income earners.

Your thoughts?

Evelyn Jacks is President of The Knowledge Bureau and author of Essential Tax Facts 2010, Master Your Taxes, and Make Sure It's Deductible; all available from the Knowledge Bureau bookstore at bulk purchase pricing for advisors and their clients.