High taxes, red tape keeping entrepreneurs out of New Brunswick

The government needs to get out of the way

Renaud BrossardGetting more people to start up businesses doesn’t require an expensive and complex government plan. Government just needs to get out of the way.

Saint John, NB Telegraph-Journal columnist David Campbell recently made a strong case for attracting more entrepreneurs to New Brunswick.

As he puts it, entrepreneurship brings more and better choices for consumers and makes New Brunswick’s ingenuity shine on the world stage. It also generates good profits and creates jobs.

Premier Blaine Higgs’ government raised those issues in its Economic Recovery and Growth Action Plan. It focused on increasing private investment, productivity and growing the size of the economy.

We all agree entrepreneurship is a good thing, but what’s the best way to encourage people to take the plunge and start their own businesses?

One option is to attract entrepreneurs from elsewhere to come and set up shop. The second is to make sure would-be entrepreneurs in the province can make their ideas grow.

Either way, the best way to get new businesses started and growing is to get obstacles out of their way.

Unfortunately, many of those obstacles are government-based.

The more forms entrepreneurs have to fill out in triplicate and send to a cornucopia of government bodies, the less time they can spend running their businesses.

According to data from the Canadian Federation of Independent Business, those regulatory obstacles cost New Brunswick businesses $646 million last year. This is nearly twice as much as the provincial government expects to collect through corporate income taxes.

High taxes are the other big government obstacle to new businesses. The higher the taxes, the lower the after-tax income. That makes it harder for would-be entrepreneurs to come up with the cash they need to launch their projects.

“National savings rates are highly correlated with national investment rates,” according to Boston University economist Marianne Baxter and Vanderbilt University economist Mario J. Crucini.

The more money you have set aside, the easier it is for you to invest in starting or growing your business.

Even if you save money, chances are you’ll either put it in a bank account or invest it in some kind of fund. That makes more money available for loans at your bank. It’s also making more money available for investment funds.

And, of course, the more money people have left in their pockets after the government has taken its share, the more they can put into their savings.

After municipal, provincial and federal governments have taken their share, New Brunswickers are left with the country’s third-lowest disposable income. It sits about nine per cent lower than the national average.

The average income in New Brunswick is indeed lower than the national average, but high taxes obviously play a significant role.

New Brunswickers shoulder the fourth-highest tax burden in the country. All levels of government put together take about 34 per cent out of the economy through taxes.

A lighter tax burden would free up millions of dollars that people could invest in local businesses.

That’s how the government can best attract entrepreneurs to New Brunswick. It’s not by doing more, but rather by getting out of their way.

Renaud Brossard is the Interim Atlantic Director of the Canadian Taxpayers Federation.

Renaud is one of our Thought Leaders. For interview requests, click here.


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