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BC Gov't Brags Budget Keeps Taxes Low, but for Whom?

Not many families at all, when MSP premiums and other fees are included.

By Andrew MacLeod 18 Feb 2014 | TheTyee.ca

Andrew MacLeod is The Tyee's Legislative Bureau Chief in Victoria. Find him on Twitter or reach him here.

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Finance Minister Mike de Jong introducing the budget today: 'We continue to balance essentially on a razor's edge.' Photo: BC Gov Flickr.

British Columbia Finance Minister Mike de Jong today presented what he characterized as a "boring balanced budget" while forecasting more spending in coming years and setting out a framework for taxing the promised liquefied natural gas industry.

He boasted of B.C. having the lowest income taxes in Canada, though budget documents show the total provincial tax burden goes up significantly when Medical Services Plan premiums and other fees are included.

"We continue to balance essentially on a razor's edge," de Jong told reporters and observers at the Victoria conference centre.

In the current fiscal year the government predicts a $175 million surplus on $44 billion in revenue. Next year's projected surplus is $184 million, growing over the following two years. "If we're only 99 per cent correct, we don't get to balance," said de Jong. "[We've] got to be 99.5 per cent correct."

The budget includes contingencies rising from $300 million a year to $575 million in three years, which de Jong said could be used to fund things like negotiated wage increases with public sector unions.

Total tax burden

A slide titled "Keeping taxes low for BC families" bragged B.C. has the "Lowest Provincial Personal Income Taxes for Individuals Earning up to $121,000" in the 2014 tax year.

Tables deep in the appendices of the budget and fiscal plan that compare the total tax burden to various kinds of families in each province tell a different story. They add in other provincial taxes, including those on sales, fuel, property and carbon, as well as net child benefits, health care premiums and payroll taxes.

A two-income family of four earning $90,000, for example, pays total provincial tax of $9,922 in B.C., slightly higher than a comparable family in Saskatchewan and nearly $2,300 more than the $7,625 that family would pay in Alberta.

And a lower-income B.C. family of four earning $30,000 would pay $3,081 in total provincial tax, significantly more than in Ontario ($2,424), Alberta ($1,324) or Quebec ($590).

Of the six scenarios included in the appendix, the only one where B.C. comes out with the lowest total provincial tax is for unattached individuals earning $80,000 per year.

The taxes outlined in the table don't include other significant costs that depend on the government's policies, including fees for BC Hydro, ICBC and BC Ferries.

The province's revenue from MSP premiums is budgeted to increase by about 5.4 per cent in each of the next three years. Revenue from BC Hydro, which is planning a rate hike, is to go up by 6.7 per cent next year, then 12 per cent and 7.5 per cent.

Health, which takes up the majority of expenditures, is set to continue growing, and de Jong said there would be increases to help vulnerable people through income assistance, Community Living B.C., funding for children and youth with special needs, and legal aid.

Elementary and post-secondary education see flat budgets for the next few years, despite the government's throne speech promise to focus on skills training.

Exclusive clubs

Jordan Bateman, B.C. director of the Canadian Taxpayers Federation, noted MSP premiums have risen steadily in recent years. "It's the invisible tax nobody ever talks about," he said. "It's a tax we need to start talking about.”

It would make sense to eliminate all the "boutique" tax cuts that affect a very small number of people, and instead freeze MSP premium hikes, he said.

The government's claim to balance the budget depends on taking more money from Crown corporations like BC Hydro, said David Black, the president of COPE 378 which represents workers at BC Hydro and ICBC.

The government is increasing electricity bills and using it to balance the budget, he said. "They're transferring that debt onto the backs of ordinary British Columbians."

Or as Jim Sinclair, the president of the BC Federation of Labour put it: "For average British Columbians, they're struggling to have a balanced budget and that's still the case."

Sinclair noted that despite the increase in spending on health care and education, they are not keeping up as a share of the province's total economic activity, or GDP.

Mike Old, a spokesperson for the Hospital Employees Union, said the health spending doesn't keep up with pressures on the system. "This is a recipe for more hallway medicine," he said.

Iglika Ivanova, an economist in the Canadian Centre for Policy Alternatives B.C. office, said B.C.'s legacy of tax cuts have created fiscal problems for the province and led to cuts to services. "We've shrunk our fiscal capacity," she said. "It's made it harder to balance the budget."

The minister made a big deal of being in an "exclusive club" of provinces with balanced budgets, she said. "I think most people would be glad if we weren't in the exclusive club of having the worst child poverty."

LNG dreams

Much of the budget presentation was given over to explaining how the province plans to tax the nascent liquefied natural gas industry, which Premier Christy Clark has said will fill a prosperity fund that can be used to eliminate the province's debt and sales tax.

The LNG income tax would apply to the sale of LNG and the plants themselves, and would be set in two tiers. The first tier would apply at 1.5 per cent after commercial production begins.

The second tier will kick in at up to seven per cent, but only after the company has recouped 100 per cent of its investment. The companies will also be able to use tax collected under the first tier as a credit against the second tier tax.

A chart included with the budget documents suggested the lower tax rate might apply for the first three years, with the full amount being collected in the sixth year after a plant starts operation. The government plans to introduce the necessary legislation in the fall of 2014.

Minister de Jong said he's not expecting LNG revenue in the next three years and said many factors affect when that money is likely to begin flowing.

The B.C. Jobs Plan based on LNG isn't working, and the budget documents suggest even the government doesn't think it will, said Ivanova. "It's working politically, but it's not working economically."

The government's projections show the unemployment rate staying the same and the labour force participation rate stuck at 64.1 per cent. The rate of new job growth is matched by the growth in population.

Said Ivanova: "That shows me they don't believe the Jobs Plan is working."

The executive director of the Confederation of University Faculty Associations of B.C., Robert Clift, said the lack of investment in education shows the provincial government is too narrowly focused.

"You've got to look at diversifying the economy too," he said. "Frankly, Gordon Campbell did a way better job on this."  [Tyee]

Read more: BC Politics

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