A $260-million provincial surplus will cause political headaches for the Liberal government, say political pundits.
“The surplus clearly indicates that the Liberals got spooked and jumped the gun by raising taxes prematurely,” said John Williamson, federal director of the Canadian Taxpayers Federation, on Monday.
“It certainly creates an opportunity for the provincial Progressive Conservative party to step up and highlight that the governing Liberals raised taxes despite a promise not to.”
Finance Minister Victor Boudreau reported the province ended the 2006-07 fiscal year with a surplus of $236.8 million.
That compares with a forecasted surplus of $22.2 million. NB Power added another $21 million in black ink.
The surpluses come at a time when both organizations were warning of financial woes in the future.
The Liberal government raised personal and business taxes for 2007-08 to fight a forecasted deficit of up to $400 million. It also cancelled a promised energy tax rebate for homeowners.
NB Power is before the Energy and Utilities Board seeking a rate hike of 6.4 per cent.
Boudreau said Friday he has no intentions of reversing the controversial decision to raise taxes and scrap the rebate.
“It’s not because of one good year that we’re going to reverse it,” he said. “It was something that needed to be done for the years to come.”
Boudreau said the surplus was up because of metallic mineral taxes that brought in an unexpectedly high revenue of $112.2 million, and an extra $109.6 million from Ottawa for income taxes collected.
Most of the surplus will go to paying off the provincial debt, he said.
But Williamson warned that voters will remember broken election promises.
“Voters do have a long memory when it comes to politicians saying one thing on the campaign trail and immediately reverse themselves once they are in office,” he said. “When you raise taxes across the board, you are hitting a lot of voters.”
Williamson also said it’s no coincidence the Liberals picked the end of the week to announce the surplus.
“These Friday announcements are a clever way to downplay news governments would rather people didn’t talk about,” he said. “Bottom line: The tax increase was just not necessary.”
He also said the news doesn’t bode well for trying to attract more young workers and become self-sufficient.
“You do neither with higher taxes,” said Williamson.
St. Thomas University political science professor Rick Myers said Premier Shawn Graham’s government might get away with pleading poverty, raising taxes and raking in a big surplus as a one-time fluke.
“This only becomes a problem when it becomes a pattern. What they have here is a surprise one-time surplus.”
But the recent political history of the former federal Liberal government shows what happens if, year after year, a big surplus is recorded despite calls for belt tightening.
“You lose credibility,” said Myers. “It would probably be unwise to see (more surpluses in New Brunswick) several years consecutively.”
He predicted the Liberals won’t reverse their tax hike.
“I think they will try to deflect that,” said Myers. “They do have a number of things on their agenda that cost money.”
Charles Cirtwill, acting president of the Atlantic Institute for Market Studies, said New Brunswick isn’t the first government to have a surprise surplus.
“That is par for the course for a lot of governments,” he said. “They get into this overstating expected expenses, understating expected revenues and creating a crisis where there isn’t one.”
Cirtwill said it’s not necessarily bad to have a bigger-than-expected surplus. The problems start when you raise taxes and still rake in big surpluses, said Cirtwill.
“I certainly think that is going to make people a little more grudging of the tax increase, to see (them) rolling in cash,” he said.
Cirtwill said the Liberals should immediately roll back their tax hike on small business.
Official Opposition Leader Jeannot Volpe said Monday the Graham government’s tax increases have been shown to be unjustified.
“The Liberals told us that they needed to increase individual and business taxes because of a $400-million deficit,” said Volpe in a statement.
“However, last week, New Brunswick’s finance minister confirmed what we have been saying all along — there is no deficit, but a large surplus instead.”