So much conflict, so little time

by Bobby O’Keefe

At the best of times, the Nova Scotia Liquor Corporation has a wonderful conflict to try and manage. It is all at once given the responsibility for both maximizing the profit returning to its shareholders – the taxpayers of Nova Scotia – and promoting social responsibility. Basically it has to get to people spend as much on alcohol in Nova Scotia as possible while drinking as little as possible.

While that conflict in and of itself is a wonderful example of why the regulation and sale of alcohol should be separate, it gets better. Take the case of Ross Harrington. Mr. Harrington runs a wine-making supply store in Halifax. Being in a suburban area surrounded by many apartment buildings with limited space, Mr. Harrington found that many of his store’s customers lacked the space in their apartments or condos to keep their equipment for making their own wine – a perfectly legal activity. So, frustrated with efforts to get the government to adopt rules in place in other provinces to allow “brew on premises” stores (BOPs), he allowed some of his customers to make their wine within the confines of his store. After a time, a complaint was filed and the NSLC had the police investigate and charges were filed.

I’m not suggesting that he should not have been charged for doing something illegal. Any true act of civil disobedience is done with a willingness to face the consequences of those actions. What transpired after those charges is where it gets interesting. Rather than being found guilty of allowing people to brew in his store, those charges were dropped. Instead, he was found guilty of having liquor for sale, because Nova Scotia’s legislation is so vague that anything that could possibly become alcohol with the addition of yeast is considered liquor. Yes, even a carton of milk would qualify. That was followed up with a requirement for all homebrew shops to get a license, for a fee, from the NSLC, because apparently, selling sugar and grape juice constitutes selling alcohol. Worse for Mr. Harrington, the province has refused to budge on allowing him to allow in-store brewing.

The NSLC has offered a variety of reasons for not allowing the change. One, that they’re “concerned about the ‘end use’ of onsite brewing products” (see the Chronicle Herald article here for the quote). I have to admit I have no idea what that even means, but presumably they’re worried about underage drinking or people selling their homemade product, both of which are illegal regardless and entirely separate from the issue of BOPs. Another, that they’re concerned about the impact on the province’s wine industry. However, nobody from the Wine Industry Association of Nova Scotia has ever made a peep about BOPs having an impact – because they know it’s not an issue. Ontario and British Columbia allow BOPs and have thriving wine industries. Those province’s winemakers know that more people making wine means more people with product knowledge and that can be a benefit rather than a drawback for their industry.

The real problem is there to there’s a clear conflict in the situation. While BOPs pose no real threat to sales of local wines, they do pose a small threat to low priced, high volume wines that are ultimately very profitable to the NSLC. So NSLC the regulator refuses to change the regulations for fear that NSLC the retailer will lose money. Is there any doubt that the regulations are going to favour their own revenue streams?

Hate to say we told you so…

by Bobby O’Keefe

The headline in the September 22 Chronicle Herald certainly didn’t say anything surprising: Offshore gas royalties to recede; Darker days looming after revenues exceeded expectations over 10 years. We’ve known for years that the royalties coming to the province from Offshore Natural Gas projects would eventually shrink and ultimately dry up.

Of course, that really wasn’t the story that the article was trying to tell, at least from my read of it. Instead, the article focused on the fact that without these revenues in place in the past few years, the Province of Nova Scotia would have had a difficult time of paying for its programs and as these revenues disappear we’ll have an even more difficult time paying the bills.

Don’t say we didn’t warn you. In Ten Reasons to Remove Non-renewable Resources from Equalization published in 2002, Ken Boessenkool described how non-renewable natural resource revenues shouldn’t be treated as regular revenues and used to fund program spending – because doing so is like selling your house to pay for the groceries.

And in 2006 we reminded people of this in The 100 Percent Solution, pointing out how non-renewable resource revenues were unreliable and subject to wild swings, while on the other hand, government spending is reliable and typically a long-term commitment.

Yet we now seem surprised by the fact that a decline in natural gas revenues for the province is going to mean some tough decisions. Either find the money somewhere else or cut spending. Especially tough when you consider that today’s budget will feature a $590 million deficit.

What could have been done differently? Picture what the situation would be today if, instead of spending all that resource revenue, the full $1.3 billion in natural resource revenue went entirely to pay off the debt. Give or take, that would mean the province would be left with a debt of $11.0 billion instead of the current estimate of about $12.3 billion. More importantly, the province would be paying interest on $1.3 billion less debt – an annual savings of approximately $90 million. That’s annual, so this year, next year, and every year after that.

While that doesn’t completely pick up the slack of a $590 million deficit, it also doesn’t include any savings generated from having to lower expenditures to ensure natural gas royalties could be used for debt repayment, nor does it consider interest savings since natural gas royalties started to flow in 2001-2002 or from future natural gas royalties applied to the debt.

Of course, we already told you so.

AIMS’ 15th Anniversary Celebration

Join AIMS as we celebrate 15 years of “making a difference” at the Freedom Dinner with guest speaker Jawed Ludin, Afghanistan Ambassador to Canada.

Ambassador Ludin’s unique perspective brings new insight to the public policy issue that has become Afghanistan.

To learn more, click here.

To read more about Mr. Ludin, click here.

To order tickets, click here.

Anson Chan, our original speaker had to cancel due to a serious family illness.

Hyperbolic taxes

by Charles Cirtwill

I was recently accused of hyperbole for saying “Nova Scotia is already among the highest taxed jurisdictions in the country and, indeed, Canada remains one of the highest taxed jurisdictions in the world.”   

According to my critic, an economics professor at Mount Saint Vincent University, Nova Scotia is NOT among the highest taxed jurisdictions because four other provinces have own source revenues that are a higher percentage of their provincial GDP. Now, if you are 5^th out of ten you are still ONE of the highest. So, even on his flawed measure, my point is 100% correct.

However, I don’t know about you but I don’t pay my taxes as a percentage of provincial GDP but as a percentage of MY GDP, i.e. my income.

Fortunately for me, as part of its tax review the New Brunswick government posted an independent assessment of the comparative tax burden among Canadian provinces. What they found was so bad that it led to the “Plan for Lower Taxes in New Brunswick”.

The NB plan is available here: http://www.gnb.ca/0160/budget/buddoc2009/Plan_for_lower_taxes-e.pdf

On page 21 they conveniently break down the provincial income tax burden for income levels from $10,000 to $150,000 for a single tax filer. For every income over $50,000 Nova Scotian individual filers pay more in income taxes then if they lived in every other province, except Quebec. Yes, that is EVERY other province but one.

Between $35,000 and $45,000 Manitoba becomes less attractive (meaning we beat TWO provinces at that point), and under $35,000 only the rest of the west is still looking really good.

Recognizing that not every taxpayer is a single person, the NB government expanded this comparative work to other types of tax filers and to business – their findings are equally bleak and can be reviewed at:

http://www.gnb.ca/0162/New_Brunswick_Tax_System/Discussion_Paper-English.pdf

Even in Nova Scotia, where the government appears to have a remarkably more positive view towards high taxes (note the review was started under the Conservatives, so this isn’t a partisan observation but a systemic one), they found that our tax effort while “comparable to many industrialized countries” is “higher than the national average”:

http://www.gov.ns.ca/finance/en/home/taxation/taxreview/taxesandeconomy.aspx

So we are, according to the people charging the taxes, paying more than average and in some cases much more than most - no hyperbole, just facts.

All quiet on the eastern blog

by Charles Cirtwill

It has been a quiet summer – at least on the AIMS blog. They say it takes something like 28 days to form a habit. Alas it seems it was less than 28 days between the creation of our blog and the start of our summer holidays. That, and it is much harder to get fired up over waste, taxes and over-regulation while your daughter is doing her first 17 kilometer trail ride at Keji (three weeks after taking off her training wheels) or your son goes out in a K-1 for the first time…but I digress.

Of course, that is the key to the continued growth in government and the ease with which it constantly expands into every facet of our lives…we have more important things to worry about so we just don’t pay attention every second of every day to what they are up to with our money – and boy are they ALWAYS up to something.

But, we are back and the water cooler chatter is starting again.

Already we have discovered that in our absence the world has turned on its head:

- taxes are NOT high in NS and in Canada because we have more money to pay them and because SOME countries and provinces charge more than we do (from an op-ed in our local paper yesterday; not one of ours, I assure you)

- the reason for government to grow in the good times is, wait for it, because it CAN (from an op-ed at the beginning of the summer; again, not us)

- gas regulation continues to be an unabridged success, with rural and urban gas stations closing at a pace

- EI needs to be reformed because more people are receiving greater benefits at a time of economic downturn, but not enough benefits to fully replace actually working

Oh the list goes on – watch these pages and, don’t forget, a blog is an interactive thing – let us know what you’re thinking and by all means, ask us why we have not blogged on a certain pet peeve of yours – we still might not do it, but what’s a water cooler for if not to push each other’s buttons

Summer’s over – back to work!