The Importance of Provincial Budgets: Elbows Up and No Bracket Creep!

Some of the right things are happening in Nova Scotia, from the perspective of improving standards of living in that province.  And that’s important news because according to the Fraser Institute, Canadians have suffered the worst five-year decline in their standard of living over the 2020-to-2024 period since the Great Depression.  It notes, our Gross Domestic Product (GDP) per person decreased by 2.0% (0.4% annually) ; this despite aggregate GDP growth of 1.5% over the period.  Further, all ten provinces are experiencing stagnation, which is unique in our history.  So what’s the good news in Nova Scotia, at this critical juncture?

The Backdrop:  Finance Minister John Lohr delivered the province’s 2026–27 budget on February 23, opting to avoid hidden personal taxes or personal tax hikes.  Neither did corporate taxes go up despite a projected deficit. Instead, the budget focuses on spending reductions, support for consumers with sales tax relief and continued great news for business:  the highest small business deduction in Canada remains intact.  

Here’s what other provinces need to compete against.  Manitoba, which has gone the other way and de-indexed tax brackets and the basic personal amount in 2025, will deliver its budget March 24, 2026.

No New Personal Taxes: Key measures in Nova Scotia include maintaining income tax indexation, enhancements to several personal tax credits, a reduction in the provincial portion of the HST, and previously announced improvements to the small business tax threshold and rate.

Low Indexation Rate Better than None.  There was a re-announcement of some personal tax cuts which were already in place. Unlike British Columbia, and as mentioned, Manitoba, Nova Scotia is keeping income tax indexation in place for the 2026 tax year. The indexation rate is 1.6%, which may be below the rate of inflation, but it avoids the hidden tax that eliminating indexation creates. This indexation covers all income brackets as well as the Basic Personal Amount, Spousal and Eligible Dependant amounts, and the Age Amount.

Intact Tax Credits.  There’s some good news for all Nova Scotia taxpayers in that enhancements to the Basic Personal Amount, Age Amount, Spousal Amount, and Eligible Dependant Amount are provided to all tax filers. Previously there was a phase-out for those with taxable income over $25,000.

HST Drops.  Consumers will also get a small break at the checkout. The Nova Scotia portion of the HST will drop from 10% to 9%, bringing the province’s overall HST rate to 14%.

Great News for Small Business: Nova Scotia can boast the highest small business deduction threshold in Canada among provinces or the federal government. The threshold was increased from $500,000 to $700,000 in April 2025. The small business corporate tax rate was also reduced from 2.5% to 1.5%, welcome news for the province’s small business community.

The News is Not so Great for Financial Institutions.  Banks, loan and trust companies will see a significant increase in one area. Beginning November 1, 2026, the tax rate on taxable capital for those institutions will rise from 2% to 6%.

On a positive note, the Capital Investment Tax Credit has been extended until the end of 2035, providing a measure of certainty in that area.

Lohr has eliminated the vaping product tax, but vapers will not be getting off without being taxed. To replace the provincial tax, Nova Scotia is partnering with the federal government to collect a duty. Nova Scotia’s portion will be equal to that of the federal assessment.

A New Levy on EVs: While incentives for purchasing electric or hybrid vehicles are popular these days, Nova Scotia is introducing a levy effective October 1, 2026 on electric and hybrid vehicle owners. Fully electric vehicle owners will pay a levy of $500 every two years and hybrid owners will pay $250 every two years. The levies are designed to ensure owners of those vehicles contribute to road construction and maintenance.

The Bottom Line:  Provincial Budgets matter more these days.  The Fraser Institute has three suggestions for provincial finance ministers: 

“Canada’s recent record-high levels of immigration and population growth have helped mask the country’s economic weakness. With more people to buy and sell goods and services, the overall economy is growing but living standards have barely budged.

To craft policies to help raise living standards for Canadian families, policymakers in Ottawa and every provincial capital should remove regulatory barriers, reduce taxes and responsibly manage government finances. This is the great policy challenge for governments across the country in 2026 and beyond.”

Nova Scotia’s Finance Minister Lohr is on track for delivering at least some relief in raising standards of living for Nova Scotians.

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