(Vancouver) The BC government likes to boast that our province has the lowest personal and corporate income taxes in Canada, but a new report says that’s nothing to be proud of.
“A decade-plus of tax cuts has left us in a budget crunch and failed to deliver on promised economic benefits, “ says Seth Klein, co-author of the study and BC Director of the Canadian Centre for Policy Alternatives. “In recent years, BC’s economic performance, business investment and job creation have all been fairly average in Canada. What BC’s tax policies have delivered, however, is a much less fair system. Taxes have been shifted from corporations to households, and from upper-income households to middle and modest-income ones.”
Among the study’s key findings:
- If BC collected today the same amount in tax revenues as a share of the economy (GDP) as it did in 2000, we would have $3.5 billion more in public funds; meaning, no deficit, and the ability to invest in enhanced or even new public services like early learning and childcare programs for all children.
- If BC collected the same amount of personal income tax as the average for other provinces, we’d have an additional $2.4 billion in revenues.
The study models a series of possible tax reform options that would increase the province’s fiscal capacity and spread the tax bill more fairly. It focuses primarily on personal income taxes, but also considers changes to property taxes, corporate taxes and resource royalties. The options presented in the report are not meant to be adopted as a whole package, but highlight the range of possibilities and the amount of new revenues that can be raised.
The modeling shows that if the top 6% of British Columbians paid more income taxes (via an increase to the current top tax bracket and the creation of new brackets for income over $150,000 and $200,000), it would raise $930 million. This is enough to fund, for example, 2,000 units of new social housing per year, much-needed increases to welfare rates (frozen since 2007) and a significant reduction in K-12 class sizes.
If most other British Columbians paid a little more income tax (about the cost of a cup of coffee per day), BC could raise up to $2.3 billion, and support other priorities such as better access to home and community care for seniors, and stronger environmental protections.
Other options modeled include:
- Continuing $5 annual increases in the carbon tax, and expanding the tax to capture industries currently excluded (such as gas production), would raise $2.2 billion within four years (twice what it raises today). This could pay for environmental protection and climate action initiatives, as well as for an enhanced carbon credit to make the carbon tax fair. The bottom half of BC households would be net beneficiaries (receiving more from the credit than they pay in the tax).
- Rolling back corporate income tax cuts to 2005 levels, reducing overly generous corporate tax deductions and ensuring that BC is getting a fair return from our resources (water and natural gas in particular) could raise over $1 billion – which can pay for green industry investments and the establishment of a Heritage Fund for future job-retraining for energy workers and alternative energy development.
Today’s study comes on the heels of recent opinion research that shows most British Columbians are ready to consider tax increases. "People are well aware that we face a budget crunch," says co-author Iglika Ivanova, Economist with the CCPA. "They understand that without more revenues, we can’t sustain key services we rely on like health care, education — let alone address challenges like inequality, poverty, climate change, and the affordability crisis in housing and childcare.”
"British Columbians deserve a thoughtful and open conversation about the need for tax reform," says Klein. "They core questions we need to consider are: What programs should we pay for together through taxes, and how can we raise the money needed in a way that ensures everyone pays a fair share? We hope this report can help kick-start that conversation."
For more information or interviews with the authors, contact Sarah Leavitt at 604-801-5121 x233 or [email protected]
Progressive Tax Options for BC: Reform Ideas for Raising New Revenues and Enhancing Fairness can be downloaded at policyalternatives.ca/bc-tax-options