British Columbia and Washington State

How do we compare?
June 1, 2001

British Columbians frequently hear Washington State (WA) held up as an example to follow. We are told we must lower taxes if we hope to remain "competitive" with WA, particularly with respect to the burgeoning high tech sector. But is BC really at a disadvantage in comparison with WA?

The business lobby defines "competitiveness" in a very narrow way, focusing only on tax rates and government regulations, but this approach tells us very little about the quality of life for most people. BC and WA have important differences in their systems of taxation, public services and employment standards that have direct implications for people's well-being and standard of living.

BC relies primarily on a progressive income tax, and this makes the tax system here much more fair than in WA, where regressive sales and property taxes provide the bulk of state revenue. In BC, a family earning $90,000 a year pays 10.5% of their total income in provincial taxes, while a family earning $25, 000 pays 9.3%. In WA, a family earning $150,000 a year pays only 5.6% of their annual income in state taxes, while a family earning just $15,000 a year pays 15.5%, almost three times as much--an imbalance that distinguishes WA as having the most regressive tax system in the US.

An average BC family pays $1,663 more a year in provincial taxes than a WA family pays in state taxes. But WA spends more than a $1,118 less per person on public programs. The effects of "smaller government" are evident in higher private spending by WA families for important goods and services. For example, university students in WA pay $1,650 a year more in tuition than students in BC. Families in WA pay an average of $540 more per year for the water, electricity, and fuel they use in their homes. At $768 a year, the difference in private spending on health care wipes out much of WA's tax "advantage." Families in WA also spend an average of $2,300 more per year on life insurance, public and workplace pensions (excluding RRSPs), and unemployment insurance than families in BC.

Higher private spending makes WA a far more polarized society than BC. WA offers far less protection to people who are unable to earn a living in the job market. Only adults caring for a dependent child are eligible for public assistance--for a maximum of five years over the course of their lifetime. More than 900,000 adults and children in WA--almost 16% of the population--have no health insurance. Income inequality is far greater in WA than in BC and, while the gap between rich and poor has been growing in both places, it has widened more rapidly in WA than in BC.

Many of the employment standards British Columbians take for granted are virtually non-existent in WA. In BC, workers are entitled to 9 statutory paid holidays a year and at least two weeks annual vacation. In WA, there are no laws providing for either paid holidays or annual vacations. In BC, women are entitled to 52 weeks of unpaid maternity leave and, if eligible, can collect employment insurance while they are off work. In WA, only women working in the public sector or for private companies with more than 50 employees (just 55% of the workforce) are entitled to a mere 12 weeks of unpaid leave following the birth of a child, and no comparable system of unemployment benefits for maternity leave exists.

Social and economic conditions in WA have worsened over the past decade, the longest period of economic growth in US history. Moreover, seven years of tax cuts have forced WA into a major fiscal crisis. If "competitiveness" means higher out-of-pocket costs for essential services, more inequality and lower employment standards, it is time to ask "what are we competing for?" Rather than competing in a race to the bottom, British Columbians would be better served by a realistic assessment of our advantages and public policies designed to improve on what we have.