Northern tax system should be reviewed

“We’re the only part of the country you can’t get to by road, so it shows you how far we have to go to actually consider tax cuts in our territory. We need your tax money to catch up.”

That’s how Premier Paul Okalik explained Nunavut’s position last week on the question of what to do with Ottawa’s multi-billion dollar budget surpluses.

This is not a complicated issue, and Nunavut’s message to Ottawa at last week’s premier’s gathering in Quebec City is easy to summarize: spend your money on us instead of giving it back to Canada’s taxpayers.

This is the only realistic political position that Nunavut, Yukon and the Northwest Territories could have taken in response to Ontario Premier Mike Harris’ simplistic demands for sweeping federal tax cuts. Since the amount of territorial or provincial income tax that you pay every year is calculated as a given per cent of the federal tax that you pay, any reductions in federal income tax rates automatically triggers a reduction in the amount of tax revenue available to provinces and territories. They know that if the federal government were to apply its surplus only towards cuts in personal income tax, Canada’s wealthier provincial governments, such as Ontario’s, would benefit the most, since they are best able to make up for the shorfall by raising their own tax rates.

For its part, the Nunavut government receives so little revenue in personal income tax, the issue must seem almost irrelevant to Nunavut government officials sometimes.

Nunavut’s first territorial government budget last May projected personal income tax revenues of only $16 million, a mere 2.6 per cent of the $610 million that the territorial government expects to receive this year.

“Anything that we would lose in territorial income tax would be picked up in some new way,” Finance Minister Kelvin Ng said in Nunatsiaq News last week. “It’s very neutral to us, revenue-wise.”

It’s clear where the interests of governments lie. But what about the interests of Nunavut’s lower and middle-income working people? Because of our crushing cost of living, Ottawa’s personal income tax burden hurts us more than it hurts our counterparts in southern Canada. Yes, it’s true that at 44 percent, Nunavut’s highest marginal tax rate is the lowest in Canada. But too many Nunavut residents are left with too little take-home pay.

Still, the southern press is fond of shocking their readers with lurid and distorted stories focusing on the Nunavut government’s utter dependence on Ottawa’s money.

But what they don’t tell you about that is that in personal income transfers such as the Canada Pension Plan, Employment Insurance, social assistance and workers’ compensation payments, individual Nunavut residents tend to receive less than many other Canadians — according to numbers from Statistics Canada compiled from the 1997 taxation year, only $16.48 for every $100 in employment income.

Canada’s biggest welfare bums were residents of Newfoundland, where taxfilers received an average of $34.60 in income support for every $100 of earned wages. Residents of P.E.I., New Brunswick and Nova Scotia aren’t far behind Newfoundlanders in their degree of dependence on government.

The tax regime north of 60 system hasn’t changed significantly since 1985. It’s now time to take another look at it. Canada’s three territorial governments should use their recently created northern forum to press Ottawa for changes to aimed at putting more employment income back into the pockets of northern residents. JB