Nova Scotia’s new majority government should reduce taxes to help kickstart provincial economy

Fresh off his resounding election win, Premier Tim Houston and his majority Progressive Conservative government should act fast to help improve living standards for Nova Scotians. Here’s a roadmap to achieve that objective.

For starters, the premier should acknowledge the elephant in the room—employment earnings for Nova Scotian workers are among the lowest in North America. According to our recent study, Nova Scotia had the third-lowest employment earnings among all Canadian provinces and U.S. states in 2022 (the latest year of available data). And the province’s employment earnings ranked lower in 2022 than they did in 2010 among the 60 Canadian and U.S. jurisdictions. Clearly, living standards are stagnating and Nova Scotians are struggling to get ahead.

To address this problem, the Houston government should immediately reduce the tax burden on Nova Scotian families and businesses. Nova Scotians face some of the highest tax rates on income, purchases and business profits in Canada and the U.S. While the Houston government plans to reduce the HST from 15 per cent to 14 per cent in April and has promised to reduce small business taxes, it should to go much further in reducing the overall tax burden to improve incentives to save, work, invest and create jobs. Lower tax rates on personal income and broad-based business tax relief are sorely needed.

Secondly, the government should stop providing subsidies (a.k.a. corporate welfare) to favoured business or industries. The Nova Scotia government spent $3.4 billion (inflation-adjusted) from 2007 to 2019 on business subsidies. Doubling down and repeating those mistakes would be another huge step backwards for the province. There’s little to no empirical evidence that business subsidies create jobs (on net) or produce widespread economic benefits. Instead, governments simply pick winners and losers, shift jobs and investment away from other firms and industries, and circumvent the preferences of consumers and investors. Moreover, the Houston government should reduce the province’s excessive regulatory burden, which inhibits job and wealth creation. Here, Nova Scotia could take a page from the Campbell government in British Columbia during the 2000s, which appointed a minister of deregulation to help reduce the number of regulations by 30 per cent.

Last but not least, the Houston government should get provincial finances under control. Houston became premier in 2021; annual provincial program spending has grown by an average of 10 per cent from 2021/22 to 2023/24—significantly higher than the rate required to keep pace with population growth and inflation. The size of government in Nova Scotia—already consistently among the largest in the country—is growing. The government sector now represents more than one-quarter of all employment in Nova Scotia, making it more difficult for the private sector to compete for skilled workers. While the province has recorded budget surpluses three years in a row thanks to an influx of unexpected revenue, it’s on track to record a $654 million deficit this fiscal year and to run deficits for three subsequent years.

By bringing spending in line with revenue, the government can return to balanced budgets and halt debt accumulation that would burden future generations of Nova Scotians. Reducing spending and avoiding debt will also reduce the government’s footprint and help spur private-sector job creation and overall economic growth.

Voters have given the Houston government a new majority mandate in Nova Scotia. It’s time to help meaningfully improve living standards for Nova Scotians through pro-growth reforms.