Opposition, labour group call for tax reform in N.S. amid rising cost of living

Nova Scotia's Opposition and a major labour group in the province are calling for tax reform so that workers can keep more money in their pockets as they struggle with the rising cost of living.

The Nova Scotia Liberals and an Independent member of the legislature have each introduced bills to automatically adjust provincial income tax brackets to annual inflation. Tax-bracket indexing ensures that pay raises equal to the annual rise in the cost of living don't bump taxpayers into higher income tax brackets.

Indexing is in place at the federal level and in every province except Nova Scotia and Prince Edward Island.

Premier Tim Houston, however, has rejected those calls, saying there will be no major tax reform until health care is "fixed."

"There's a lot of work to be done in health care … there will be no changes to the tax structure until we've moved the needle on health care in a significant way," Houston said last week after tabling his government's second budget.

Houston's comments show that the government is "looking at things backwards," said Independent member Elizabeth Smith-McCrossin, who tabled one of the tax-indexing bills. In an interview Tuesday, she said income levels are a top determinant of people's health.

Nova Scotia Liberal Leader Zach Churchill agreed, and said in an interview Tuesday, "when people can't afford to put healthy food on the table or are stressed out about their finances, people get sicker."

The province's $14.4-billion budget allocates $6.5 billion toward health. A finance department official said indexing tax brackets would have deprived the government of about $125 million in revenue.

Nova Scotia NDP Leader Claudia Chender said that figure represents a fraction of the province's budget but is "a really meaningful (amount) to the people for whom it could be in their pockets."

Chender said the province's failure to index tax brackets or raise income assistance rates shows that the government "doesn't seem to grasp the severity of the cost-of-living crisis that people are living in."

Smith-McCrossin said that neglecting to index tax brackets for inflation is especially harmful to the lowest-income Nova Scotians because the province has a low basic personal income exemption level. In 2022, Nova Scotia permitted the least amount of income to be free from taxation compared to other provinces. Alberta had the highest exemption level that year, allowing residents to earn up to $19,369 free from provincial income tax.

Smith-McCrossin's bill proposed raising the basic income exemption level to $12,510.

"By choosing not to index or raise basic personal tax exemption, I believe the government is actually purposely keeping people in poverty," Smith-McCrossin said.

Danny Cavanagh, president of the Nova Scotia Federation of Labour, says he is in favour of tax indexing because low- and middle-income workers are struggling with the rising cost of food, fuel and housing.