The Higgs government is cutting income taxes to offset the impact of carbon taxes on the majority of New Brunswickers.
Finance Minister Ernie Steeves introduced legislation Tuesday that would lower the tax rate on the lower income bracket from 9.68 per cent to 9.4 per cent, a rate that applies to the first $43,835 of income.
The tax cut accounts for $28 million of the $163 million in carbon tax revenue the province will collect this year under a pricing system it adopted to comply with the federal government's requirements.
"It is anticipated to benefit over 420,000 taxpayers, putting money back in the pockets of the taxpayers," Steeves said, as he introduced the bill.
The Progressive Conservatives had faced calls to use the revenue on climate fund projects.
Tax cut 'a sensible approach'
But returning the money to New Brunswickers falls in line with calls by many economists and environmentalists.
"It's a sensible approach," said University of Ottawa economist Nic Rivers, an expert on carbon pricing, who said it creates a disincentive to burn fossil fuels while giving people more money to stimulate the economy.
"This is 'tax what you burn, not what you earn,'" Rivers said.
Premier Blaine Higgs said it was always the goal of the federal plan to have at least a portion of carbon tax revenue refunded to consumers.
"That was kind of the principle, and that's why we did it," he said.
In provinces that have refused to adopt carbon prices, Ottawa is applying the tax and is sending people rebates.
The national climate plan requires provinces to tax greenhouse gas emissions at $40 per tonne this year, which translates into 8.8 cents per litre of gasoline.
Last year Higgs opted to slash the provincial gas excise tax to partially offset the carbon tax. But this year, rather than slash it even more — an approach Ottawa frowns on — he said he wanted to find another way to return some of the money to New Brunswickers.
Use extra revenue to further reduce emissions, says opposition
Opposition Liberal Leader Roger Melanson said he calculated the tax cut would work out to $68 per person per year.
"It's not significant when you stop and do the math."
Melanson said he'd rather see the $28 million used to pay for more government programs to reduce emissions.
Higgs said Melanson's per-person math "wouldn't be far off," but he said the reduction is an important signal the province wants lower taxes.
"This is a start to continue the momentum that we're feeling right now in our province, the people who want to live here, who want to work here," he said.
But he ruled out using the entire $163 million in carbon tax revenue for a much larger income tax cut.
"There's a balance here," he said.
The income tax cut only accounts for a small portion of the total carbon tax revenue this year, and $36 million will still be devoted to climate change projects, about the same as last year.
Ottawa requires the carbon tax to increase each year, and the premier said he could lower income taxes further each year in tandem with carbon price hikes.
"I'd like to say yes," he said. "A tax reduction is as good as a wage increase."
Steeves's bill also raises the low-income tax threshold to $17,840 from $17,630. People below that threshold pay no provincial income tax.