Les Leyne: B.C.'s tax rates need to be re-examined
Sep 15 2012
Tax increases are "not our preference," Finance Minister Mike de Jong said this week, releasing a quarterly report showing the climb back to balanced budgets in B.C. just got steeper.
After the scorching experience with the harmonized sales tax - which amounted to a tax increase on consumers - it's no wonder the B.C. Liberals are a little phobic on the topic.
Their only other big tax adventure was the carbon tax. It arrived wearing a green halo, dressed up as an environmental measure designed to save the planet. And it wasn't really a tax increase - it's more than offset by income-tax reductions.
They have chiselled more money out of taxpayers by way of fee and premium hikes. Until recently, they've averted their eyes while ferry fares steadily leaped up. But across the main streams of revenue - corporate and personal income taxes and resource revenue - Liberals have held the line wherever possible.
Budget documents show significant declines. A senior couple with $40,000 income paid $828 in income tax in 2001. This year it is zero.
A low-income single paid $765 in 2001. The rate today is $41. A $70,000 family of four paid $4,339 in 2001. It's half that - $2,181 - today.
The paradoxical result is that the Liberals have created a lot of theoretical room for increases - if anyone had the guts to try.
No one will broach the topic in the remaining eight months of this government's term. You simply don't go into election campaigns talking tax hikes. New Democrats have promised one tax hike. But it's on banks, which is always a crowd-pleaser.
Premier Christy Clark has no fewer than two cabinet committees working on ways to reduce the government's bite on family incomes even further.
So the big hole that emerged in the budget plan this week, when the full extent of the natural-gas price slump became known, will have to be filled some other way.
The price has dropped 44 per cent and production has dropped nine per cent because of a North American glut. The fallout from that development includes a 78 per cent drop in revenue from exploration tenures.
There's a billion-dollar hole over the three-year economic plan period. But a three-year plan during an election cycle is wishful thinking.
The more relevant figure is the almost $400-million gap next year that has to be filled if the budget is to be balanced.
It's a curious development, given the finance ministry's long-standing habit of pessimistic forecasting. It always underestimates revenue and takes the gloomiest possible outlook on future developments.
But for natural gas prices, it relied on independent forecasts from assorted experts, and they all turned out to be wrong.
As for making up the shortfall, De Jong listed the usual measures, like discretionary spending and travel budgets. Those have been on every list of austerity measures since the economic meltdown in 2008, but those line items will be squeezed again.
Salary and hiring freezes were announced this week as well, which will accelerate the ratcheting down of payroll costs.
He made an ominous reference to "reviewing the bargaining mandate" as part of the make-up effort. But it's too vague to make much sense of the potential savings.
The government is already more or less at zero in its offer to restive employees. Any more cutbacks will cost more in terms of escalating strikes and unrest that would be gained by the savings.
There's a theory the Liberals would be willing to turn a public-sector strike into an election issue - pampered public servants versus hardpressed wage earners in the real world. But de Jong went out of his way to praise the civil service and didn't sound much like a warrior.
They'll make up this year's shortfall somehow or other. And there's room when drafting a $40-billion budget next February to plug the $389-million gap in that year.
But whoever wins the 2013 election will be taking a hard look at B.C.'s tax rates. Affluent B.C. singles making $70,000 pay the lowest taxes in Canada, according to the budget. The B.C. Liberals' devotion to keeping taxes low has created room for talk on that point.
But only after the election.