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Balanced budget will be built on the wages of sin

Smokers, drinkers and gamblers are paying a heavy price. Add the increased sales tax and MSP premiums and the Liberals income-tax break a distant memory for ordinary British Columbians.

By Barbara McLintock 16 Feb 2004 | TheTyee.ca

Barbara McLintock, a regular contributor to The Tyee, is a freelance writer and consultant based in Victoria and author of Anorexia’s Fallen Angel.

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For most British Columbians, the day that Gordon Campbell gave them a tax break seems a long, long time ago. It was less than 48 hours after the Liberal government had taken office with its whopping 77-2 majority in the House, when Campbell presented a series of tax breaks that averaged a 25 per cent cut over two years for every tax-paying British Columbian.

The tax breaks went far beyond anything Campbell had ever promised in the election campaign. On the hustings, he'd vowed an immediate and significant tax break for British Columbians in the lowest two income-tax brackets - roughly those earning less than $60,000 annually. He provided the tax breaks, however, to all British Columbians, no matter what their income - just about the same rate to the person making $40,000 as to the one making $400,000.

The irony is that it's pretty well only those high-income citizens who are still seeing any benefit from those tax cuts. They're still, over-all, giving less to their provincial government than they were when the Campbell government took office.

But for the rest of the populace, those tax cuts have long since been eaten up by a wide range of increases in taxes and fees. It's enough to make a lot of the citizenry very nervous as they head into another provincial budget, scheduled to be delivered by Finance Minister Gary Collins on Tuesday afternoon.

Most nervous of all should be those who engage in such despised pastimes as smoking, drinking and gambling. When a government needs to make up revenue, the "sin taxes" are usually the first to be raised-and for good political reason. Every government knows that it's hard for even the most vocal Loyal Opposition to criticize schemes that will increase the costs of tobacco, or alcohol, or casino or lottery gambling, none of which could remotely be considered as being essential (or even useful) to human health or development.

Increases quietly announced

And Collins has already made it clear that increases in those areas are coming up. In fact, he's already announced, in one way or another, what's going to happen in all three areas.

• On December 19-less than a week before Christmas and just three days after the legislature quit for the holiday break -  the minister announced an increase in tobacco taxes, which actually went into effect that same day. The 10-per-cent hike increased the provincial taxes on a carton of 200 cigarettes by $3.80 to $35.80. The Canadian Tobacco Manufacturers' Council said the hike boosted the average retail price of a carton in B.C. to $78.61.

• After the working day was over back on Jan 26-and at exactly the same time that reporters and opposition MLAs were busy examining Campbell's first cabinet shuffle - the solicitor general's ministry announced a three per cent increase in the price of booze, effective Feb. 1.

• Still to come after being very quietly announced back last fall is a doubling of the prices of some of British Columbians favourite lottery tickets-the 6/49 and the B.C. 49. Beginning on May 30, 6/49 tickets will sell for $2 instead of $1, with a proportional hike for the B.C. 49. And while the Liberals promised to "Stop the expansion of gaming that has increased gambling addiction and put new strains on families," existing casinos are growing through increased use of slot machines. One analysis pegs the potential gaming revenue increase at 60 per cent during the Liberals' term of office.

Cash grab 'not about budget'

As is perhaps to be expected, the ministers involved had explanations for all three increases that had nothing to do with struggles to balance the budget - a promise it seems clear Collins will meet when he rises in the Legislature on Tuesday.

But when Collins brought in the tobacco tax, he described it not as a cash grab, but rather as an attempt to keep B.C.'s prices in line with other provinces and discourage smuggling. That the tax increase is expected to raise $40 million a year for the government is apparently just an added bonus.

Lottery administrators think people won't mind paying extra for their lottery money because they're also promising larger and better prizes, paid for with some of the increase. It's not yet clear how much the government actually plans to increase its own revenues through the move.

It's a similar story with the liquor tax mark-up. Solicitor General Rich Coleman said it was necessary because the mark-up rate hadn't increased since 1996, implying this was a catch-up like, say, the increase in university tuition fees.

It should, however, be noted that the situations are not in fact identical. The liquor mark-up is based on a percentage of the price of liquor, not, like tuition fees, on an absolute number. Thus, the government's take from liquor mark-up has going up steadily over the past seven years, rising in lock-step with inflationary increases in the prices of booze. The change that was made on February 1 did not just increase the absolute amount of money the government would get from liquor sales; rather, it increased the proportion of the price that goes into the government coffers.

And that is basically what has been happening with the Campbell government ever since that first glorious announcement of the tax cuts for all. At the time, the premier promised that unprecedented economic growth would essentially "finance" those tax cuts, allowing the government to balance the budget this year without making up those tax-cuts through other tax increases.

Ordinary folks pay to benefit wealthy

It didn't happen. And what has basically occurred is redistribution of the tax burden-from the richer members of our province to the middle- and lower-classes. Although the income tax cuts have remained, other major tax increases, quite aside from the sin taxes, have included:

• A one-half percentage point raise in the sales tax;• A significant increase in Medicare premiums;• An increase in huge numbers of other fees and payments, such as driver's licenses or parking meter machines in provincial parks

All of those taxes and fees are considered by economists to be "regressive taxes," because they are based on absolute numbers of dollars. Except for the very poorest in society, everyone paid the same increase in Medicare premiums. Everyone pays the same rate of sales tax on their purchases. Everyone puts the same coins in the parking meters.

By contrast, economists call income taxes "progressive taxes" because the amount you pay depends on your income. Thus, the upper-income British Columbians have benefitted the most from the income tax cuts-but they have not been hit any harder by the other tax and fee increases than have those who make only 10 per cent of their income. The end result is that the upper-income is still saving money because of those first tax cuts-but nearly all the middle- and lower-income citizenry have had their income savings eaten up and more by the many other taxes and fees they are now paying.

There are fears this effect will only get worse with Tuesday's budget. The past year's troubles - everything from SARS to mad-cow disease, from forest fires to floods - are going to make it harder than planned for Collins to produce his much-vaunted balanced budget.

And there aren't a lot of British Columbians who'd like to risk much on a bet that it'll be the rich who'll be expected to make up the difference.  [Tyee]

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