Breaking down the latest provincial budget releases

Since the start of the year, five provinces and two territories have tabled provincial budgets. This week, Alberta and Nova Scotia stepped up to the plate.

EY, in a Wednesday release, said the budget presented by Nova Scotia Finance and Treasury Board Minister Karen Casey on March 20 “contains a few tax measures” of note.

While “no changes are proposed to the corporate tax rates or the $500,000 small-business limit” or to personal income tax rates, says EY, the budget does propose two changes to personal credits/amounts.

Those are: removal of the $10,000 maximum on eligible medical expenses that can be claimed through the Medical Expense Tax Credit for a financially dependent relative, effective for the 2018 tax year; and the introduction of an Innovation Equity Tax Credit that will replace the current available credit.

The province has agreed “in principle” to enter the federal government’s coordinated cannabis tax framework for two years after recreational cannabis is legalized.

Further, Casey called for “a surplus of $29.4 million for 2018-19, and projects surpluses for each of the next three years,” says EY.

Read: The fundamentals behind marijuana stocks

Alberta’s March 22 budget mainly contained tax measures that had already been previously announced, says EY.

“The minister anticipates a deficit of $8.8 billion for 2018-19, and projects further deficits of $7.9 billion in 2019-20, $7 billion in 2020-21, $4.3 billion in 2021-22, and $1.4 billion in 2022-23,” says EY. Then, “A surplus of $0.7 billion is projected in 2023-24.”

Alberta, too, left corporate tax rates and small-business limit untouched. But it did propose two business tax measures including an Interactive Digital Media Tax Credit, which, after Apr. 1, 2018, would “reimburse eligible interactive digital media companies up to 25% of their eligible labour costs,” says EY.

Along with extending the Alberta Investor Tax Credit and the Capital Investment Tax Credit, the province will also raise the thresholds for its credit amounts and tax brackets by 1.2% in 2018, as part of its ongoing effort to annually index the tax system to inflation.

The budget confirmed “the sale of cannabis in Alberta will be taxed by the federal government under a federal excise tax.” Alberta expects to take in $26 million in taxes related to the legalization of marijuana.

“This budget continues to support the vital programs and services Albertans need,” Finance Minister Joe Ceci said Thursday. “It continues to work on the diversification of our economy and we need that vitally because of the wild swings in our revenues.”

The budget increases funding for core programs in education, health and community services. There is also money for previously announced incentive programs to diversify the energy-based economy and deliver more high-tech spots in post-secondary schools.

However, there’s a debt load of $54.2 billion this year for a province that was effectively debt-free 14 years ago. The debt is expected to hit $96 billion by 2024.

Says Ceci: “That’s what it will take to make sure we don’t do without the important services and programs Albertans have come to rely on.”

Alberta Party leader Stephen Mandel, disagrees, saying the long-term revenue forecasts are unrealistic and the government is making no effort to control some costs.

“It’s just going to eventually bankrupt the province,” he said.

Liberal legislature member David Swann said the budget represents a failure to diversify the economy.

“We need to start having an adult conversation about a harmonized sales tax,” said Swann.

Which province is next?

Next week both Quebec and Ontario will table their budgets, on March 27 and 28, respectively.

Looking ahead to Tuesday, the Montreal Economic Institute (MEI) says in a release, “The Quebec government must not squander the rigour of recent years by opening the floodgates and spending with abandon.”

It adds, “According to reports, the next budget will include among other things a considerable increase of 4.5% in health spending, or nearly $1.7 billion. Unlike in recent budgets, there will be no surplus.”

MEI points to a Leger survey from February, which found 71% of Quebec residents don’t believe the amounts “injected over the past ten years in health and education” have helped.

Items to watch for in the Ontario budget include healthcare changes, such as expansion of the OHIP Plus program, and measures to address the cost of childcare. There could also be commentary on the Ontario Ministry of Finance’s consultation on title reform for financial planners and advisors, which was released last week.

Read: