Flat tax for Nova Scotia

I'm working on this.  When the Minister of Finance gets his website going again, I'll check my math.

This is stuff you know in theory, but until you see it on paper it may not be so obvious.  I got to wondering where the money comes from and where the money goes in the Nova Scotia provincial government, and this is what I found out.  This is the where-it-comes-from part.  None of this has to do with the arithmetic of individual tax returns - it just looks at the overall result.  It doesn't account for Poverty Reduction and Affordable Living Tax Credits, standard deductions of any kind, graduate retention credits, or the firefighter's credit, among other adjustments.

The Province of Nova Scotia has a budget of $9.3 Billion
About $3.3 Billion comes from the Feds
So Nova Scotia has to find $6 Billion
Which it does like so:


There are 15 sources of revenue, which seems like a lot.  Some of them are mysterious.  The 3 beginning with "Other", for example.  "Ordinary Recoveries".  Do you have 15 sources of cash?  Anyway.

In Nova Scotia, there are about 450,000 people in the workforce (clicking this link will lead you to the former location of the data, now somewhere else in the cloud)
If you sort them in order of income and divide them in 5 equal groups of 90,000, the income ranges for each quintile are:
  • below $19,400
  • $19,400 - $34,000
  • $34,000 - $48,400
  • $48,400 - $71,500
  • above $71,500 (I used $125,000 as a working estimate so the numbers add up)
Let's assume 5 is a good number of groups and that we want to raise the $2.2 billion in income taxes as specified in the pie chart above.  We could use:
  • the current system, where higher incomes pay at a higher rate - a progressive tax
  • A flat percentage of 8.17% where everyone pays at the same rate - a proportional tax
  • A flat amount, where everyone pays the same dollar figure ($4878) - a regressive tax
In all the following charts, the bars are dollars and the line are rates.  Colors of lines and bars correspond where possible:

So the rich currently pay more.  Under the same-amount scheme, a heavy burden falls on the lowest quintile - their rate is 25%.  The nice thing about the flat rate is that it's unarguably fair.  How the different rates in the current scheme are arrived at is anyone's guess.  The rich pay 60% of all taxes.  Why not 70%?  Why not 55%?

Going back to the pie, consumer taxes are in shades of yellow.  Sin taxes on tobacco, liquor and gambling are avoidable, but HST, gas and licensing your car really aren't.  Consumer taxes are a disincentive to buy stuff and keep the economy going.  They fall most heavily on those who can least afford them. While the rich may buy more expensive booze and clothes, the Lexus is still just a car.  I think it's roughly fair to allocate these consumer taxes equally among the 5 piles.

This might be easier to think about as a table:


So when you account for consumer taxes, the burden shifts rather dramatically to lower incomes.  The tax rate of the lowest income Nova Scotians is now the highest.

Let's try to eliminate consumer taxes by adjusting income tax rates so everyone pays the same dollar proportions as in the current income tax scheme.



Or we could have a flat rate of 17.7% and no consumer taxes.

Either way, gas is cheaper, booze is cheaper, the government is out of the sin business.  Cross-border shopping works in reverse.  The lowest incomes pay less overall, otherwise 17.7% is not far from what people pay now in the aggregate.

Seems uncomplicated and fair.

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