Vaughn Palmer: James delivers budget surplus via tax hikes, trimming program spending
Credit to Author: Stephen Snelgrove| Date: Wed, 19 Feb 2020 02:20:06 +0000
VICTORIA — Though Finance Minister Carole James managed Tuesday to keep the B.C. budget in surplus, it was mainly thanks to new taxes.
A new bracket for high-income earners — folks with taxable incomes greater than $220,000 — was chosen so as to capture the top one per cent of income earners.
But this was also the first year the New Democrats have provided additional detail about who was being targeted in terms of such factors as gender, marriage status and age demographics.
Reading through the budget documents, one discovered that 70 per cent of those high income earners are men and 75 per cent are married or living in a common law relationship.
For the women who have to pay the tax, about half of their number (45 per cent) are married or in a common law relationship with someone who is also earning enough to be subjected to the tax. Double incomes, double tax.
Whereas with the men, relatively few (15 per cent) are in a relationship with another high income earner.
James also announced that come July 1, carbonated beverages containing sugar or other sweeteners will lose their exemption from the seven per cent provincial sales tax.
The change will also hit men more than women because “males consume more soft drinks than females.” Soft drink consumers also tend to be younger: “highest among individuals aged 14-18 and declines with age.”
According to James, “Budget 2020 is the first to include tax measures that have been specifically analyzed through a gender-based analysis-plus lens.”
The analysis is intended to help budget-makers “assess, the effect of tax changes on different groups of citizens including people of different genders, incomes, geographic areas, age and mental or physical (dis)ability.”
Make of it what you will. But in political terms, when Carole James said she was asking some people to “pay a bit more,” she was mostly targeting rich men in the first instance, and young men in the second.
The budget also included a third tax increase that appears to be targeted at consumers of Netflix and other digital services. But it was neither explained in detail nor subjected to gender analysis.
James needed the three taxes to maintain the NDP’s commitment to keep provincial finances in balance over a three-year budget and fiscal plan starting April 1.
Together the taxes are projected to raise about $850 million over the three years, with most of that ($714 million) coming from the new income tax.
The government is projecting cumulative surpluses of $780 million over the same three years. Without the taxes, there would be no surpluses.
James needed the fiscal insurance provided by the tax increases because of faltering results from some corners of the economy and some revenue sources.
Most notable was the decline in timber harvesting. In Budget 2019, James projected 58 cubic metres of wood would be harvested from crown land in the year ahead.
Instead, the harvest was down by more than one-quarter, to 42 million cubic metres. Granted, part of the problem was the lengthy strike on the coast. But the Interior harvest was down 27 per cent as well.
The contributing factors, all well known, include not enough wood to feed all the mills, slumping wood prices, high production costs and declining markets.
It all adds up to discouraging returns from stumpage, as well as reduced revenues from income, sales and corporate taxes in hard hit communities.
Other indicators that are headed in the wrong direction when compared to last year’s budget: housing starts, business investment and the property transfer tax.
Still, as a testament to the diversification of the B.C. economy, other revenues were up and the province is poised to again deliver some of the best growth, jobs and fiscal results in the country.
As well, some of the debt measures, like the share of revenues going to pay interest, are lower than they were the last few years under the B.C. Liberals.
But to keep the budget in balance, James had to do something that was tough for an activist government like hers, namely rein in program spending.
In their first three years in office, the New Democrats increased spending by $10 billion or about seven per cent a year. For the three years covered by the plan tabled in the legislature Tuesday, the increase is $5 billion or less than three per cent annually.
In order to bend the curve downward, James had to limit funding for some big ticket programs — most notably child care where funding is capped at about $675 million for each of three years.
That will be enough to fund 22,000 spaces but well short of the election promise of universal child care at $10 a day.
“Significant progress has been made, but there is no shortage of work still to do,” said James, nearing the end of the budget speech.
That was not enough to quell the expressions of disappointment from advocates and interest groups expecting much more from the NDP.
The dismay cemented impressions that with this year’s underwhelming budget and throne speech, Premier John Horgan has given up all thought of calling an early election.
James, for her part, dismissed the prospect, saying she expects the election will take place at the date already on the schedule — Oct 16, 2021.
On that expectation, look for her to present an election budget about this time next year.
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