B.C. Budget 2020: High-income earners, pop drinkers to pay more taxes
Credit to Author: Rob Shaw| Date: Tue, 18 Feb 2020 22:55:19 +0000
VICTORIA – B.C.’s finance minister has unveiled a hold-the-course budget, with modest new money for electric vehicle rebates and post-secondary grants, funded by new taxes on high-income earners and sugary drinks.
People with taxable income of more than $220,000 will see a tax hike from 16.8 per cent to 20.5 per cent, in a move the government estimates will generate $216 million in new revenue next year, and $713 million over three years.
“We’re asking those at the top, who benefit the most from our economy, to contribute a little bit more,” said Finance Minister Carole James.
“Nearly half the revenue of this tax increase will come in from individuals with income above $1 million, and even with this tax rate B.C.’s personal income taxes remain very competitive.”
While the new income tax affects a relatively small number of people, a second new tax on sugary drinks will impact far more consumers.
The government will end a Provincial Sales Tax exemption on sugary drinks, like pop, starting July 1, said James. Adding the seven per cent PST to such beverages will generate more than $30 million annually.
“This is a health initiative to look at how we grow healthy young people,” said James.
“I think it’s interesting if you take a look at the largest consumption of pop, sweetened drinks, it is 14-18 year olds. We want to make sure we’re doing our part to set them on the stage of having a healthy life ahead.”
The revenue from the new taxes will help fund a new $24-million grant program to offer up to $4,000 a year for low-income college and university students in September. That grant program will be overhauled to include students taking diploma and certificate courses in trades, education and health-care programs, which were previously ineligible.
“Access to education creates opportunities that span generations,” said James. “It has the power to change a family forever.”
It will also help pay for another extension to existing electric vehicle rebates of up to $3,000, at a cost of $28 million next year.
Overall, the 2020/21 budget, which starts April 1, estimates a $227 million surplus on $60 billion in spending.
Spending is rising faster than revenue, at a 3.1 per cent expenditure increase compared to last year, on 2.6 per cent in new revenue.
Minister of Finance Carole James and Premier John Horgan share a word before she delivers the budget speech from the legislative assembly at B.C. Legislature in Victoria, B.C., on Tuesday, February 18, 2020.
The budget, which comes with $900 million in contingency and forecast allowances, is a far cry from the large-scale spending plans delivered by the NDP government since it formed power in 2017.
James continued to warn Tuesday of a softening economy, international economic risks and the need for prudence in spending. The province’s economic growth remains estimated at 1.8 per cent Gross Domestic Product (GDP).
“If you took a look at past governments, what would often happen at this time during a moderating economy is you’d see programs and services cut,” said James. “We’re not doing that.”
Business groups gave lukewarm reviews to the budget.
B.C. Business Council president Greg D’Avignon said he was “disappointed” in the budget.
“The budget is virtually silent on the agenda let alone the implementation of a sustainable economic plan,” he said.
Greater Vancouver Board of Trade gave the budget a “B-“ grade.
James said roughly $300 million in internal government cuts to discretionary spending have proven successful. However, government officials could not provide a breakdown of costs saved by ministry and James said no such list exists because the money is reinvested into programs and services.
While some revenue sources are up in the budget, such as the carbon tax and property transfer tax, other revenues are lagging, including personal and corporate income tax.
B.C.’s share of cannabis taxes from Ottawa sat at $6 million in 2019/20 due to the slow rollout of stores and what critics have said are more attractive prices and products in the black market. However, the budget projects a spike in cannabis revenue to $50 million next year, and $70 million annually after that.
James said $18 million is also being set aside on public health and enforcement for cannabis.
The budget largely holds the line for housing affordability and child care, two key election promises from the NDP government in the 2017 election.
Child care funding in particular is largely frozen for the next three years, and it was unclear Tuesday from budget documents how that impacts the 10-year plan to bring in $10-a-day child care.
The federal government recently renewed its child-care funding payments, which allow B.C. to continue to operate several $10-a-day pilot sites across the province.
Sharon Gregson, from the Coalition of Child Care Advocates, said government honoured its funding commitment for next year, but is concerned it is $200 million short for future years. She said she’s confident the government will revise the funding next year to help keep the $10-a-day plan on track.
On housing, James said government will continue it’s $7-billion 10-year plan to build more housing. Although home sales dropped 1.5 per cent last year, and average home prices fell 1.6 per cent, James said the housing market is nowhere near affordable and prices need to drop further.
“I don’t think there’s anyone who would say we’ve reached affordable housing in British Columbia,” she said.
The NDP government’s speculation tax continues to bring in roughly $185 million annually.
Tuesday’s budget also re-announced the Child Opportunity Benefit payment first made public in last year’s budget. The program, which starts this fall, will pay up to $1,600 per child based on a family’s income up to $114,000 annually.
The largest funding increase in the budget was 9.5 per cent to health authorities and hospitals. Total health care spending now accounts for $24.3 billion, or 40 per cent of the entire provincial budget.
The funding was mostly welcome by health groups, but both the B.C. Nurses Union and the Care Providers Association of B.C. said the missing ingredient was an expansion of the new post-secondary grant program to nursing and seniors care workers.
The second-largest increase was a 7.4 per cent jump to post-secondary education, expanding training spaces for in-demand jobs.
Education for K-12 schools received only a 2.2 per cent lift on almost $6.7 billion in spending, with no additional money set aside for a new contract with teachers above the previously-stated two per cent mandate held by James.
More than half the government ministries – 13 of 20 – will see their budgets frozen or reduced next year.
The government has set aside $11 million to fund a public inquiry into money-laundering over the next two years.
The province will also raise monthly earning exemptions for people on disability by $100, at a cost of $20 million over three years.
Other programs received funding just enough to cover caseload pressures, such as $131 million over three years for income assistance, disability and other social supports and $121 million for Community Living B.C.
The budget forecasts other small increases for children and youth, indigenous youth, community safety, wildfire management and legal aid.
Social groups said it was not nearly enough money, and government has failed to address the systemic challenges and wait lists for services such as sexual assault support, youth homelessness and legal aid.
“This budget is overly cautious,” said Iglika Ivanova, senior economist at the Canadian Centre for Policy Alternatives.
Government should be stepping up with increases to welfare rates and a coordinated plan for youth homelessness, she said.
Independent children’s representative Jennifer Charlesworth echoed the criticism, saying she’s concerned the government has yet to address major caps in youth who age out of government care but can’t get into post-secondary education.
The forestry sector continues to decline as it faces a softwood lumber dispute with the United States, slumping lumber prices, an eight-month coastal strike with Western Forest Products and a shortage of timber in the interior.
Forestry revenue is estimated to drop 12.5 per cent next year and the projected harvest of Crown timber lands is 20 per cent below last year’s expectations over the next four years.
James announced a new $13-million fund, spread over three years, to retrain forest workers, and revitalize the industry, on top of $69 million in aid previously-announced for the interior sector and $5 million in aid to contractors on the coast.
Forestry workers rallied on the lawn of the legislature Tuesday in protest at government inaction on the sector.
Wilderness Committee of B.C. spokeman Torrance Coste said the budget appears to make cutbacks to the forestry ministry that will make it harder to have the expertise and staff required to complete a review of old growth forests that his group hopes will boost protection for forests.
Capital spending was set to rise, at almost $1 billion next year and $3.1 billion over three years, for added hospitals, schools and health care facilities.
Total taxpayer-supported debt will jump $4.6 billion to $49.2 billion. Taxpayer supported debt-to-GDP will jump from 14.6 per cent to 15.5 per cent. Interest on the debt will eat up 3.9 cents of every dollar of revenue.
“We have an election in a year and a half now and I think we’re in good shape fiscally,” said James.
The budget also provided a third-quarter update to the current 2019/20 fiscal year, which ends March 31. The projected budget surplus has risen to $203 million, from $148 million last quarter.
James said that modest increase is mainly due to an increase in income tax revenue and lower spending on refundable tax credits for the film and TV sector.
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