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Taxes, fees and bankruptcies up as Newfoundland and Labrador budget reverberates

Last Updated Aug 23, 2016 at 5:28 pm EDT

ST. JOHN’S, N.L. – Newfoundland and Labrador is now leading all provinces for inflation — but the full impact of its tax-hiking spring budget still hasn’t kicked in, say critics and bankruptcy specialists.

The latest consumer price index report from Statistics Canada confirmed those cost-of-living increases, including a 26 per cent jump in July for home insurance.

That’s mostly because the province reapplied, as of July 1, a 15 per cent tax for those policies that had previously been scrapped.

Richard Alexander of the Newfoundland and Labrador Employers’ Council says the Liberal government should have cut expenses as it fights a projected deficit of almost $2 billion.

Instead, its April budget slightly increased spending and imposed what he called one of the largest revenue grabs in provincial history — hundreds of new tax and fee increases totalling about $900 million once fully implemented.

“It’s bad for business, it’s bad for the economy, it’s bad for the future of our province,” he said Tuesday in an interview.

“Nobody disputes that we need a tax system that’s fair and balanced … but we’ve had unsustainable spending for more than a decade now.

“Our auditor general has been sounding the alarm bells for many years about excessive spending, and unfortunately this government has chosen to just look at the tax route and not look at the cost savings route. We believe that’s a mistake.”

Finance Minister Cathy Bennett declined through a spokeswoman to comment. Her officials said in April the budget would cost average families about $3,000 a year or more, depending on circumstances.

For example, the gas tax of 16.5 cents per litre was doubled as of June 2, adding about $8 to fill a mid-size vehicle — far more for larger tanks and longer commutes.

Consumer insolvencies in the province were up 51 per cent to 230 cases in May from 152 the year before, according to the federal Office of the Superintendent of Bankruptcy.

Sean Stack, a licensed insolvency trustee in St. John’s, expects those numbers to get worse. The sheer range of higher expenses — from car registration to ferry rides — adds up, he said in an interview.

“Not many people had the room in their budget to absorb the range of increases in taxes and fees that took place in that April budget. It’s going to creep into their credit lines and their credit cards over time. And it will result in people filing for bankruptcy, it’s just not going to have such an immediate effect.”

Many are watching to see if the government, during a fiscal update this fall, will cut a public service that ballooned over the last decade during unprecedented but fleeting offshore oil wealth. Slumping oil prices since 2014 have gutted provincial revenues.

Much of that public sector expansion came under 12 years of Progressive Conservative rule which ended when the Liberals won power last fall. Previous Tory ministers have argued they were responding to pent up demand for improved hospitals, schools, roads and social services.

NDP member Gerry Rogers said Tuesday that fallout from the budget is undeniable.

“I’m hearing from people constantly about the costs per household.”

Seniors are especially feeling the brunt of cuts to funding for over-the-counter drugs and dental care, she added.

Rogers said some of those measures are backfiring through emergency room visits that likely obliterate any savings.

She blames a lack of government planning for how the budget would play out.

“It’s really, really, really tough for people right now.”