BC United Basically Claims ‘the Budget Will Balance Itself’

[Editor’s note: This is the first of an occasional election-tracking column by Mo Amir called Logic Check, whose focus is explained in a sidebar to this article.]

“The commitment needs to be a commitment to grow the economy, and the budget will balance itself,” the leader of the Liberal Party of Canada, Justin Trudeau said, unknowingly producing one of his most enduring self-owns in 2014.

Trudeau was sworn in as prime minister in 2015 and the prophecy of a budget balancing itself has yet to be fulfilled under his federal government.

But there’s hope in British Columbia!

From the bottom of the provincial polls, B.C.’s official Opposition emerged to resuscitate the lore of the self-balancing budget.

Earlier this month, BC United (the party formerly known as the BC Liberals) conjured its former namesake, both on ballot and in spirit.

BC United Leader Kevin Falcon announced that — if, by some miracle, his party were to win October’s provincial election — his government would eliminate the provincial income tax on the first $50,000 of income earned by every British Columbian. As a result, 60 per cent of British Columbians would not pay the provincial income tax at all, as every taxpayer — even the rich ones! — could save up to $2,050 per year.

It’s a classic political gambit. See: Mary, Hail.

Who doesn’t want a $2,000 annual bonus? Sixty of those and you can gift one of your grandchildren a down payment on a B.C. condo!

There is just one problem: BC United also pinky-swore to balance the provincial budget within its first term, without new taxes or cuts to social services.

Now, it’s unclear if this means that BC United won’t increase existing taxes. Recall the BC Liberals shifted the tax burden from income tax to sales tax in 2004.

But the swagger of BC United’s campaign — which focuses on all the taxes that the BC NDP “introduced and increased” — gives the vibe that a Premier Kevin Falcon will not increase taxes.

B.C.’s 2025-26 budget is projecting a deficit of approximately $7.8 billion. The cost of BC United’s income tax cut is about $5.4 billion, which would increase B.C.’s 2025-26 budget deficit to over $13 billion.

So how can BC United pledge to hack the tax and balance the budget?

“Actually, we will focus on growing the economy instead of using the taxpayer’s pocket,” tweeted BC United MLA Shirley Bond from the campaign trail.

Of course! Grow the economy and the budget will balance itself — just like Trudeau promised!

Swinging for the growth spurt fences

So then how much does British Columbia’s economy need to grow in order to generate the type of tax revenue that would even-steven the spending?

BC United MLAs didn’t have an answer, although some back-of-the-napkin math can ballpark it.

The 2024 projection for B.C.’s gross domestic product, or GDP, is about $305 billion. The province will collect an estimated $82 billion in revenue in the 2024-25 fiscal year. From that, we can estimate that 27 per cent of British Columbia’s economy is collected in taxes. (Although it’s unclear how much of that is repurposed into cheap financing for real estate developers.)

Once BC United’s $5.4-billion tax cut is factored in as a revenue loss, it will be more like 25 per cent of B.C.’s economy is collected in provincial taxes.

So to increase the province’s total tax revenues by $13 billion via economic growth only (all else equal) in order to balance the budget, B.C.’s economy would need a growth spurt of about $52 billion. This means that B.C. would need its best four consecutive economic growth years since 2004-07, recording 16 to 17 per cent GDP growth over four years.

It’s no coincidence that BC United Leader Kevin Falcon was B.C.’s minister of transportation and infrastructure in those boom years where he left a legacy of highways, a SkyTrain line and toll bridges.

There is just one (more) problem: B.C.’s GDP isn’t a self-contained machine like the hubris of a politician who rejects polling data because he believes himself to be a “walking pollster.”

From 2000 onwards, B.C.’s two GDP contractions (i.e., recessions) were in 2009 after the Great Bank Bailout and in 2020 after the whole world learned about a place called Wuhan. Even B.C.’s strong GDP growth from 2004 to 2007 could be partially attributed to the United States’ economic (and military) expansion from 2001 to 2007.

Clearly, the promise of record GDP growth requires the stars to align — not just within the province, but nationally and globally. Mercury definitely cannot be in retrograde.

There is just one (more) problem: This rough analysis assumes that government spending holds at about $90.5 billion annually. Consumer price index and inflation spending growth, which BC United has promised to hold, has not been factored into this napkin math. The economy may need to grow more than 17 per cent over four years for the budget to balance itself.

Moreover, none of this accounts for BC United’s promise to eliminate the provincial fuel tax and carbon tax, which would deepen the budget deficit by a few more billion bucks.

But digging out of an ever-deepening hole is BC United’s whole campaign strategy!

Bye-bye, bureaucrats?

In fact, BC United promises that those tax-cut costs could be offset by a reduction in bureaucracy. While he hasn’t explained how much “government waste” can be flushed without a reduction in services, this is former minister of state for deregulation Kevin Falcon: he cut social housing investment by 75 per cent one year. If anyone can rein in government spending with a vengeance while the province suffers from health-care worker shortages and overcrowded classrooms, it’s Kevin Falcon.

In fact, Falcon promised to raid the province’s contingency fund to offset the cost of this tax cut. Although, even if the government spent the entire $3.9-billion contingency fund, that would cover 72 per cent of one year of the tax cut. The revenue shortfalls in subsequent years would still have to be addressed, again, with neither service cuts nor new taxes.

It’s understandable if BC United’s promise to deliver the “largest tax cut in B.C.’s history” feels inconsistent with the party’s promise to balance the budget without new taxes or service cuts. But, please, take solace in the wisdom of that other, unaffiliated Liberal: “The budget will balance itself.”

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