Monday, February 23, 2004

Tax cuts for rich in budget, but rest will pay more

By Paul Willcocks
VICTORIA - Add to your list of regional grievances the news that taxes are going up for middle-income and lower-income British Columbians this year, while their better-off neighbours get another tax break.
Since their first day in office, when Premier Gordon Campbell cut income taxes by 25 per cent, the Liberals have been accused of favouring higher-income British Columbians with their policies.
So far, they've been able to point out that while the rich may have done the best from the changes, all British Columbians have seen their taxes go down.
Until this year. The budget documents reveal that while total provincial taxes were reduced for people with big incomes, low and middle-income British Columbians will pay more as a result of this bydget.
The New Democrats raised the issue. But there's no spin. The numbers are straight from the budget, which always includes tables showing the taxes that will be paid by half-a-dozen typical households. The report pulls in all taxes - income tax, sales tax, MSP premiums.
It provides a review for three typical families, each with both parents working and two children.
A family with a household income of $90,000 will get another tax cut, worth about $150. But a family with income of $60,000 will pay $130 more than they did last year. A family with $30,000 will pay $435 more.
That's a big hit for a family that's already on the edge, almost an entire week's income gone to pay higher taxes.
It's not just families. A single person making $80,000 a year got another tax cut this year, but two seniors living together on combined pensions of $30,000 will pay more in taxes.
Yes, says Revenue Minister Rick Thorpe, but everyone is still paying lower taxes than they did before the 2001 tax cuts.
But the benefits aren't evenly distributed. The family raising two children on $90,000 have seen their tax bill fall by 15-per-cent under the Liberals - about $1,600. The family attempting the same feat on $30,000 has had a five-per-cent tax reduction, or about $200.
The Liberals have reduced taxes across the board. But they have also shifted the burden of paying for government services from high-income British Columbians to the rest of us by bumping fees and flat taxes.
Economically, this may make sense. There is no significant economic benefit to cutting tax rates for middle-income earners. Cutting taxes for them means they'll spend the money, not the government, but that doesn't generate increased economic activity. They're not going to move here to save a few hundred dollars in taxes.
But you can make a sound case that targeted tax cuts aimed at the top end can help attract investment and the kind of people who create jobs. The theory is that a competitive tax structure may make it worthwhile for those people to set up shop here, not in Alberta.
There's no right answer about how much each person should pay. But B.C. does appear to be out of step with other provinces. A single person in B.C. being paid $80,000 a year will pay slightly less in provincial taxes this year here than he would in Alberta. But that family of four earning $30,000 would pay twice as much in B.C. as they would on the other side of the Rockies.
Take average taxes for Alberta, Ontario and Quebec and the story is the same. Seniors living on $30,000 pays six per cent less in B.C. than the average rate for the other provinces. The $90,000 family pays 29 per cent less.
Why is it a regional issue? Because the people paying more tend to live outside Greater Vancouver, which has a higher household income. The effect has been to leave more dollars in their hands, while this year taking dollars away from B.C.'s regional communities.
The government can take a shot at making its case for shifting more of the tax dollars onto the middle class.
But it's not something I'd be happy to campaign on, heading into an increasingly difficult election.
Footnote: Thorpe was also not eager to defend the tax increases. He dodged the issue in the legislature, than ducked reporters waiting to hear the government's position by scooting out a side door of the chamber. The Liberals need a better response than a vanishing act.

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