(Vancouver) The Canadian Centre for Policy Alternatives released a major new study today called Cost Shift: How British Columbians are paying for their tax cut. The study examines a dynamic the Centre calls "cost shifting"--the transfer of costs off the government books and onto individuals, families, and in some cases employers. It reveals that while some individuals and families remain ahead financially after the tax and spending cuts, the gains of most are either precarious or have already been wiped out.
The study compares the size of British Columbians' income tax cuts, depending on their income, to the major new costs they are now facing, including: increased MSP premiums, de-listed health services, higher drug costs, higher post-secondary tuition fees, and higher childcare costs.
"Most people's tax cuts weren't very large to begin with, and as a result, they are quickly being whittled away by increased costs," says the study's author Sylvia Fuller, public interest researcher with the CCPA. Based on the income breakdown of British Columbians in 1999 (the most recent year for which detailed income data is available), almost half (47%) of British Columbians receive a tax cut of $425 or less, and about three quarters (77%) receive savings of $869 or less.
The study profiles 9 hypothetical individuals and families with different income and cost scenarios. In addition, the Centre has developed an on-line web calculator that allows individual British Columbians to calculate their own personal "bottom line," available by going to www.policyalternatives.ca. "What the profiles and the calculator show," says Fuller, " is that the gains of those with low and middle incomes are already non-existent or precarious. A course of physiotherapy, a child entering college, or a baby in daycare can mean the difference between breaking even and falling deeply into the red."
For example, a single individual earning $30,000 loses more than she gains if she requires a course of physiotherapy and an eye exam (net loss $31). A family of four with a household income of $35,000 loses more than the value of their tax cut just with the MSP premium increase (net loss $359)--if they have daycare expenses and a course of physiotherapy they are deep in the hole (net loss $780). A family of four with a combined income of $60,000 remains ahead even after the addition of MSP, eye exams, and a course of chiropractic treatment, but not by very much (net gain $130). A single individual earning $150,000 remains well ahead after the MSP increase, an eye exam, and a course of physiotherapy (net gain $4,529).
"Taken as a whole, the effect of the new tax and spending regime is to make BC much more unequal," says Fuller. The income tax cuts make BC's tax system more regressive (by giving upper-income earners a larger benefit), and the cost shifts magnify this trend by piling greater burdens on the shoulders of low-income earners and the sick.
"This dollars and cents analysis is only the tip of the iceberg. As cuts continue to be announced, and more and more British Columbians face higher personal costs, a general decline in environmental standards and the quality of government services, and a more unequal society, even those who still hold onto modest gains will ask: were the tax cuts worth the price?"