Higher taxes on gasoline, tobacco expected

Premier David Alward's Tory government hasn't let much slip about tomorrow's provincial budget, but gasoline and tobacco are among the most likely targets for tax increases.

The premier and Finance Minister Blaine Higgs have promised not to raise the 13 per cent Harmonized Sales Tax, but there have been no such pledges about the gas tax and the tobacco tax - both significantly lower than in neighbouring Maritime provinces.

Kevin McCann, New Brunswick general manager for Wilson Fuel Co. Ltd., said he has been warning for the past six months that the gas tax was in the crosshairs of the new Tory government.

"They haven't had much discussion on it, and Alward has been pretty quiet about what's going to happen in the budget, but you don't have to be a rocket scientist to realize they have to increase revenues and reduce expenses," McCann said.

"They've said they're not touching the HST. So the provincial gas tax could get them $40 million or $50 million pretty quick."

McCann said he thinks the increase will be in the four-cent range, possibly going to about 15.5 cents per litre from the current rate of 10.7 cents per litre.

Given that the gas tax in Nova Scotia is 16.5 cents, McCann said a four-cent increase in New Brunswick "would still keep us a penny or so lower than Nova Scotia."

McCann said an increase of any amount will have an impact on the provincial economy.

"There's no question a high pump price alters behaviour," he said. "People definitely start behaving differently with their vehicles. They stop going for Sunday drives, they cut down driving the second vehicle, if they have one, and they pick up groceries on the way home from work. There's no question there is as relationship, so as the price goes up, usage goes down."

And although the province isn't raising the HST, a higher provincial gas tax becomes part of a compounded price upon which the sales tax is charged - so higher pump prices will mean more HST revenue for provincial coffers.

"It's a tax on a tax," said McCann about the HST. "It's a double whammy."

For the first time, Alward warned New Brunswickers late last week to expect some pain in the budget as the Tory government begins its attack on a soaring deficit, now estimated at about $820 million, and a rapidly rising net debt, now more than $9 billion.

"We will have a strong start this year and we'll be coming forward with a long-term strategy," he said. "The plan will balance the need to reduce our spending and also (increase) revenues."

Don Desserud, a political scientist at the University of New Brunswick in Saint John and a veteran observer of provincial affairs, said he's not expecting a terribly painful budget from the recently elected Tories.

"I'm not anticipating a slash-and-burn budget," he said. "I don't know that this budget will deliver what they need. I'd be willing to bet the public will say, 'It's OK,' but the people who looking for economic stimulus or spending cuts - the people who are saying the government is bloated and they have to cut back on spending - they will not be happy and they will say this doesn't go nearly far enough and it's quite timid."