Yahoo Finance Jack Mintz: B.C.’s real affordability problem is taxes
B.C. Premier David Eby, concerned about the cost of living, recently asked the Bank of Canada to hold off any further interest rate hikes. As William Watson argued on this page, Eby, Ontario Premier Doug Ford and Newfoundland and Labrador Premier Andrew Furey should keep to their knitting, especially if their advice could have the contrary result of leading to more inflation.
Besides, the B.C. government is hardly innocent when it comes to affordability. Since taking power in 2017, the NDP has been relentless in raising one tax after another to feed its spending appetite. Many of these tax increases have hit job-creating businesses and high-skilled workers most, but many others have made life less affordable for ordinary B.C. residents by taxing basic services. In some cases, taxes on businesses and products have contributed to more inflation, making the Bank of Canada’s job even harder.
The B.C. NDP is not the first government to pick taxpayers’ pockets persistently. Between 2014 and 2018 the Liberal government of Brian Gallant in New Brunswick carried out a similar agenda of raising almost every conceivable tax. Eventually New Brunswickers had enough and turfed out Gallant in 2018 in favour of Blaine Higgs’ Progressive Conservatives, who promised to reduce property taxes.
Here is list of B.C. tax hikes under the NDP. Warning: B.C. residents may find it upsetting.
• Personal Income taxes: In a province that once had one of the most competitive personal tax systems, the NDP hiked top rates from 14.7 per cent to 16.8 per cent on income between roughly $173,000 and $240,000 and to 20.5 per cent on income of more than $240,000. Add federal taxes and the top rate has climbed 8.5 percentage points since 2014, which makes B.C. less competitive for skilled labour than Alberta, Saskatchewan and many U.S. states. An income of $175,000 sounds like a lot but for a single-earner family living in high-cost Vancouver, it is salt rubbed into the wound.
• Corporate income taxes: The NDP raised the provincial corporate rate from 11 to 12 per cent, which today is four points higher than Alberta, which attracts much more business investment per worker. B.C. companies also pay retail sales taxes on business inputs, making many projects uncompetitive unless subsidies, accelerated depreciation or tax credits are offered to attract hi-tech, forestry and LNG investments.
• Sales taxes: The general sales tax rate is still seven per cent, but the NDP have added new taxes on digital services as well as on automobiles costing more than $55,000, taxes that fall more heavily on the middle class.
• Energy taxes: Consumers have been pummelled by higher taxes on gasoline, diesel and heating oil. Provincial gas taxes have risen from 21.17 cents per liter in 2017 to 25.5 cent per liter in 2023. The carbon tax, now aligned with federal rates and no longer offset by reductions in other taxes, has more than doubled, from $30 per tonne in 2017 to $65 in 2018. The net effect has been to hit lower-income and rural households hardest.
• Property taxes: Since 2017, the province has: jacked up land transfer taxes (from three to five per cent on residential property above $3 million); introduced the Speculation and Vacancy Tax, which for residents is 0.5 per cent of the value of a vacant home and for non-residents, two per cent; imposed a new school tax; and raised property transfer taxes on foreign purchasers of housing from 15 to 20 per cent. For home-owners who are house-rich and income poor, the onslaught of new property taxes creates real hardship.
• Payroll taxes: The NDP replaced medical premiums with a job-killing payroll tax. The ultimate net impact has been to raise taxes by over $500 million dollars in the first year alone.
• Tobacco taxes: Tobacco taxes have soared, from $47.80 to $65 for a carton of 200 cigarettes. Tax evasion is rampant, with Abacus estimating 34 per cent of the market is illegal. Not surprisingly, tobacco tax revenues fell $275 million this past year.
Overall, B.C.’s taxes and other own-source revenues (such as fees and royalties) have risen sharply under the NDP. As a share of GDP, they are up from 18 per cent in 2017 to 22.9 per cent this year, while real per capita own-source revenues have risen from $9,628 to $11,584 (in 2023 dollars). That’s more than 20 per cent in just five years. It’s clear that taxes are the real affordability problem in B.C.
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But while they have been rising sharply, spending has grown even faster, so provincial debt is up from 14.4 per cent of GDP when the NDP took office to 18.1 per cent last year. Higher debt means higher future taxes, so long as spending is not cut back.
If Premier Eby really wants to help people cope with affordability, his government should try fiscal Ozempic and curb its appetite for spending and taxes. Otherwise, the outcome will be a tax revolt as beleaguered voters look around for a fiscally prudent government.
