www.cfib.ca

The Budget and the Economy

NDP Caucus, February 2009

Canadian Federation of Independent Business

www.cfib.ca

The current situation: What CFIB is saying

Canada needs political stability, volatility only serves to deepen economic uncertainty

Canada needs economic stability Avoid deficits Prudent, strategic spending Avoid bailout packages Develop a long-term personal income tax

plan Focus economic policy on SMEs

www.cfib.ca

The current situation: What CFIB is doing

Continues to meet with MPs, MLAs in all parties

Appealed for political and economic stability in a letter to federal and provincial leaders

Surveyed our members on spending, tax and ‘stimulus’ principles

www.cfib.ca

Economic stimulus: What it means to SMEs Balanced budget No large-scale bailouts unless:

In the form of repayable loans Temporary only Linked with criteria and specific, long-term outcomes

Short and long-term ‘stimulus’ Focus on initiatives aimed at supporting all families

and businesses: tax relief

Longer-term ‘stimulus’ infrastructure investment

www.cfib.ca

Current economic environment: National business expectations

108.4

104.2 104.0

100.5101.8

97.7

90.5

94.4

90.9

86.9

90.5 89.3

80

85

90

95

100

105

110

115

120

1988

= 1

00

Previous low, 85.2(Aug.1990)

Record high,113.8 (March 2002)

6-week average, 90.3

Confidence reaches

lowest levels since 1990

www.cfib.ca

Nova Scotia Business Expectations: SME Overview

Significant decline in confidence began in 4th Quarter, 2007

Until that time, optimism in Nova Scotia led Atlantic region; top third in country

Beginning 2008, optimism in Nova Scotia lowest in Atlantic region; bottom third in Canada

www.cfib.ca

92.0

97.5

85

90

95

100

105

110

115

120

125

Sept. 2007 Dec. 2007 Mar. 2008 Jun. 2008 Sept. 2008 Oct. 6-Nov. 16

1988

=100

Nova Scotia

New Brunswick

Nova Scotia Business Expectations: SME Overview

www.cfib.ca

Government and Economy: What’s working Better Regulation Initiative*

Small Business Advocate for energy rate hearings

Buy local marketing efforts

Broadband initiative

Office of Employer Advisor – WCB

Exceptions: Tobacco regulations, Home heating rebate

www.cfib.ca

NDP and Economy

Appreciate support for balanced budget

Caucus support for SME sector

Focus on working families, like small business families

www.cfib.ca

CFIB’s Focus

TAXATION

www.cfib.ca

Does the Current Nova Scotia Tax System Promote Entrepreneurship?

Select three responses only

Yes3%

No72%

Don't Know25%

Source: CFIB, Focus on Atlantic Canada Survey, September 2008, N=305.

www.cfib.ca

69%

52%

40%

29%

26%

27%

22%

16%

15%

4%

0% 20% 40% 60% 80%

Reduce tax burden

Reduce the regulatory burden

Increase financing opportunities

Market Atlantic provinces within Canada

Promote Atlantic Gateway

Increase regional cooperation

Market Atlantic provinces internationally

Improve information, training and advice services

Improve access to new ideas and innovations

Other/ No Answer

How Government Can Encourage Entrepreneurship

Select three responses only

Tax is top issue

Source: CFIB, Focus on Atlantic Canada Survey, September 2008, N=314.

www.cfib.ca

SME Priorities: Nova Scotia

Source: CFIB, OMO Survey No.62, N=869

85%

62%

55%

49%

42%

39%

38%

22%

17%

8%

Total tax burden

Gov't regulation and paper burden

Shortage of qualified labour

Employment Insurance

Cost of local gov't

Gov't debt/deficit

Workers' compensation

Availability of financing

Provincial labour laws

Other

Tax is top issue

www.cfib.ca

Why tax is a top priorityNova Scotia has:

3rd lowest level of basic personal exemption in Canada 3rd lowest level of basic spousal exemption in Canada One of only 3 provinces that do not index personal income tax

brackets; but other 2 (PEI and MB) increase the exemption intermittently; not NS

One of only 3 provinces with an income surtax----------------------------- 3rd highest provincial fuel tax rate in Canada 3rd highest small business tax rate in Canada Highest corporate tax rate in Canada 2nd highest WCB premiums in Canada Second highest debt per capita in Canada

www.cfib.ca

Why tax is a top priority

Single earner of $40,000 pays $3,258 in provincial income tax

3rd highest in Canada

One-earner with $40,000 income with two children pays $2,681 in provincial income tax

Highest in Canada

Source: New Brunswick Department of Finance 2008

www.cfib.ca

Spending: Cross-country

comparison Province

Increase in Total Expenditures*(1997-2008)

Alberta 145%

Newfoundland & Labrador 103%

Nova Scotia 97%Manitoba 85%

British Columbia 84%

Saskatchewan 80%

Prince Edward Island 79%

Ontario 77%

Quebec 59%

New Brunswick 56%

www.cfib.ca

1998 2000 2002 2004 2006 2008

Year

0%

20%

40%

60%

80%

100%

120%

Incr

ease

Spending (110%)

Inflation (27%)

Population Growth (0.3%)

Nova Scotia Government Departmental Spending1998 - 2008

www.cfib.ca

85%

79%

79%

75%

58%

56%

53%

29%

Reduce small business tax rate

Reduce provincial fuel tax

Reduce personal income tax

Reduce payroll taxes

Reduce user fees

Reduce general corporate tax rate

Reduce HST

Increase small business threshold

Source: CFIB, Focus on Atlantic Canada Survey , September 2008, N=289.

SME tax priorities

www.cfib.ca

The way forward: Upcoming budget

Fiscal measures must encourage – not discourage – entrepreneurship

Plan must be outlined to reduce overall tax burden on Nova Scotia’s working families Implement practical, ongoing increases in the basic personal

exemption Increase basic spousal exemption up to basic personal

exemption End bracket creep immediately Reduce small business tax rate (i.e. 0.5% every year for next

four years) Offset the impact of minimum wage increase by reducing

small business tax rate or extending the minimum wage schedule

www.cfib.ca

Hold spending to inflation + population growth (overall expenditures cannot continue to

increase by 8 to 9 per cent)

Balance budget

Continued debt repayment, earmark savings in interest payments to tax relief

Continuation of Better Regulation; outline for

plan past 2010

The way forward: Upcoming budget

www.cfib.ca

Province What’s Working What Needs Work

NB

Commitment to reduce the total tax burden on businesses and families.

No commitment to measure, report and reduce the red tape burden.

NLSignificant tax reduction past two budgets

Large spending increases

NSOn-going commitment to measure, report and reduce red tape.

Minimal tax relief for businesses and families.

PECommitment to reduce small business tax rate to 1% by 2010.

Deficit budgets

Atlantic Comparison

www.cfib.ca

Other Issues

Pre-budget consultation process

Budget date (fixed budget date)

NS Tax Review

CFIB’s top three for 2009: Personal income tax

Regulatory reform

Shortage of qualified labour