Budget Plan for 2008-09

Revenue Plan

Mr. Speaker, I am optimistic over the prospects for the future of Newfoundland and Labrador. At the same time, the fact that over 37 per cent of our revenues accrue directly from non-renewable resources in an environment of historically high prices gives me cause for concern over the volatility inherent in these revenue sources. Last year, we saw oil prices range from as high as $104 US to as low as $67 US. Nickel prices ranged from as high as $24.50 US to as low as $11.50 US. The Canadian dollar, relative to the US dollar, was as high as $1.10 and as low as $0.86. Much of the volatility was driven by economic events in the United States, as well as other events around the world. As we entered the current fiscal year, many analysts were saying that the US economy was in, or is headed for, a recession.

We are forecasting oil royalties at $1.7 billion this year, an increase of $47 million over last year, based on oil prices averaging approximately $87 US and an exchange rate of $0.99. Mr. Speaker, while this forecast appears conservative given today’s price, it is prudent to be conservative given the volatility of prices. There is no guarantee that prices will stay at current levels. Five provinces have released oil price forecasts with their recent budgets, and the average is $83.28 US for West Texas Intermediate (WTI), which on any given day can be $3.00 to $8.00 higher than oil from our offshore area. Alberta, the province with the greatest oil and gas resources, has used a WTI price of $78 US in its recent budget, so we feel our forecast of $87 US to be very reasonable.

Mineral prices this year are expected to be less than last year. We expect mining royalties to be about $259 million, a decline of $53 million reflecting lower nickel prices this year.

Mr. Speaker, we are also on the threshold of another great milestone in the history of this great province. We are forecasting that this year, Equalization entitlements will be a mere $18 million, and we anticipate we could be off Equalization in the following year. This will mark a significant turning point in the long history of this province. No longer will Newfoundland and Labrador be looked at as the poor cousin of Confederation, but we will begin to take our place as an economic driver of Canada. It will be a day for great celebration.

Taxation

Mr. Speaker, in Budget 2007, I was pleased to announce the largest Personal Income Tax cut in the province’s history – a reduction that put over $155 million back into the hands of Newfoundlanders and Labradorians, setting our personal income tax rates at the lowest levels in Atlantic Canada. Mr. Speaker, we are continuing this momentum. I am pleased to announce that, effective July 1, 2008, the tax rate on each of our three tax brackets will be further reduced by one percentage point. This reduction in our Personal Income Tax rates will continue to move the province to a more competitive tax system that will encourage investment and increased employment in Newfoundland and Labrador. It will put another $75 million back into the hands of the people of the province and bring the total annualized reduction in the Personal Income Tax burden over the past two budgets to $230 million.

As the Premier announced on April 22, the province is also eliminating the 15 per cent Retail Sales Tax on insurance premiums effective January 1, 2008. This will put $94 million back into the hands of taxpayers this year, and $75 million annually thereafter, and will benefit each and every household, corporation, small business, community, municipality and volunteer organization in this province.

Also, effective January 1, 2008, the province will increase the payroll exemption threshold related to the Payroll Tax to $1,000,000. This will take an additional 308 small and medium sized businesses off the tax roll and reduce the tax burden for 578 others. This measure will put $6.5 million back into the hands of employers, money that can be used to create new jobs.

Mr. Speaker, I am also pleased to announce the fulfillment of a commitment in our 2007 Blueprint to reduce motor registration fees for vehicles in the province. Effective May 1, 2008, fees charged to register passenger vehicles, light trucks, vans and light commercial vehicles in Newfoundland and Labrador will be reduced from $180 to $140 per year - a $10 million annual benefit for the people of the province.

Mr. Speaker, a year ago in Budget 2007, we enhanced the Seniors’ Benefit for married seniors, benefiting 5,900 senior couples. In this Budget, we are enhancing the Seniors’ Benefit for single seniors. The change is designed to reflect the fact that the cost of living for a single senior is not substantially different from the cost of living for a married senior couple. Effective for 2008, single seniors will be entitled to the same level of benefit as married seniors. A single senior will receive a maximum benefit of $776, double the maximum amount available in 2007. The full benefit is available to single seniors with net incomes up to $25,275 while a single senior with net income between $25,275 and $31,930 can receive a partial benefit. A total of 31,500 seniors will benefit from these changes.

The value of the tax and other revenue reductions announced today is $179 million annually. When combined with the tax measures implemented in 2007, this government has reduced the financial burden on individuals, families and businesses by $342 million annually. This is a very competitive tax regime that will bolster our efforts to recruit and retain workers and promote net in-migration to Newfoundland and Labrador. Mr. Speaker, through these initiatives, people throughout our province will benefit tangibly from the new prosperity that we are enjoying in Newfoundland and Labrador.