(July 13 – 10:15 ET) – Economists at the Bank of Nova Scotia have released their latest report, Fiscal Pulse: The 2000 Provincial Budgets … Upping the Ante. It looks at the financial position of each province.

According to the report, the provinces are expected to maintain an aggregate budget surplus for several years, with a significant boost from the solid economic growth forecast for Canada of 4.5% in 2000 and 3.2% in 2001. The fiscal dividend is financing both new spending initiatives and tax cuts. Federal and provincial tax relief will total about $5 billion in fiscal 2001, even with the scheduled Canada/Quebec Pension Plan contribution increases.

The provinces are also partially decoupling from Ottawa to better pursue their own tax reduction strategies. Several provinces, notably Nova Scotia, New Brunswick, Ontario, Manitoba and British Columbia, are making this change in 2000.

Corporate taxes are also coming down in the provinces. Health care remains the biggest spending issue nationwide, now accounting for almost 40% of provincial program spending compared to 34.5% five years ago.

In Ontario strong revenue growth due to economic expansion is spurring broader provincial tax cuts, infrastructure rebuilding and greater debt retirement, Scotia says. With balanced books and robust revenue growth, Quebec is striving to maintain its momentum with an enlarged personal income tax cut and targeted reductions in corporate taxes.

Out west, B.C. is trimming its personal income taxes, lowering small business taxes, and introducing a manufacturing investment tax credit. Alberta’s strong revenues and commitment to debt retirement has reduced the province’s interest costs to just 5¢ per revenue dollar. Saskatchewan’s debt repayment and annual tax reductions are now paying off. Manitoba is chipping away at its personal, property and small business taxes.

Down east, New Brunswick continues to focus on the importance of its small business sector, cutting its small business income tax rate. PEI has introduced only its second-ever personal tax cut this year alongside a small budget surplus. Newfoundland is proceeding with its three-year personal income tax cut. Nova Scotia should meet its target of deficit elimination by fiscal 2002-2003, thanks to strong growth due to offshore energy.
-IE Staff