Nova Scotia’s Tax System Remains Uncompetitive
At an income level of $50,000, Nova Scotia’s provincial income tax rate is 14.95%, the highest among Canadian provinces. Although the government has recently made minor efforts to ease the provincial tax burden, the tax system continues to be a significant obstacle for residents and investors alike.
Recent Measures Taken
- The province cut the provincial portion of the Harmonized Sales Tax (HST) by one percentage point.
- It raised the basic personal exemption, allowing residents to earn more before provincial income tax applies.
- Nova Scotia began indexing personal income tax brackets to inflation—a welcome but delayed reform.
While these steps provide some relief, the overall tax framework remains heavy and uncompetitive in crucial areas.
Challenges with Personal Income Taxes
Nova Scotians experience some of the highest marginal income tax rates in Canada across various income levels. The marginal tax rate refers to the tax paid on the next dollar earned, which affects decisions related to work, savings, and investments.
“Economists pay careful attention to marginal tax rates because these influence people’s decisions surrounding work, savings, investment, and other productive activity.”
Need for Ambitious Tax Reform
For Nova Scotia to leverage tax policy as a tool for substantial economic growth, far-reaching reforms are necessary beyond the current small adjustments. Without restructuring, attracting investment and human capital will remain challenging.
Author's summary: Nova Scotia's modest tax reforms have not resolved its high and uncompetitive tax environment, requiring bold changes to stimulate growth and investment.