Should New Brunswick implement a payroll tax?
LE3 .A278 2009
2009
Hobson, Paul
Acadia University
Bachelor of Arts
Honours
Economics
The purpose of this thesis is to investigate the viability of a provincial payroll tax for New Brunswick. Existing federal, provincial, and territorial payroll taxes are examined, and their use in Canada is compared with other Organisation for Economic Co-operation and Development (OECD) countries. Equity and efficiency considerations are examined both theoretically and through a review of the empirical literature. As well, the treatment and structure of such a tax is discussed. The legal implications of payroll taxes are examined by looking at the tax collection agreements between the federal and provincial governments, as well as the recent Supreme Court case concerning Employment Insurance collection. Finally, the myth of payroll taxes as job killers is addressed. Payroll taxes are found to be some of the least distortionary taxes currently employed in Canada. They are a slightly regressive tax, although less so than indirect commodity taxes. The “job killer” myth is found to be generally false in the long run, although somewhat ambiguous in the short run. While the province is constrained by being unable to alter the income tax base or the sales tax rates due to the Tax Collection Agreements, and the Harmonization Accord, a payroll tax would provide a means of creating a two tiered income tax system which is favourable towards capital, without opting out of the agreements. It is concluded that a provincial payroll tax should be seriously considered in any discussions pertaining to tax reform, especially those surrounding the reduction of taxes on capital.
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https://scholar.acadiau.ca/islandora/object/theses:555