Taxing times for B.C. government

Before the budget debate is drowned out by the shouting over the teachers’ dispute, here’s a look at the main points.

Before this week’s budget debate is drowned out by the shouting over the teachers’ dispute, here’s a look at the main points and the arguments unfolding around them.

The setting for Finance Minister Kevin Falcon’s first budget is what he dreaded when Premier Christy Clark handed him the job. Recovery is painfully slow, with mining and petroleum growing and forest products struggling to hold and build on gains made in Asia. This and the $3 billion dismantling of the harmonized sales tax moved Falcon to limit overall spending growth to an average of two per cent for the next three years. That means little or no increase to all areas except health care, education and social assistance.

Despite holding the line on public service pay and not replacing 2,000 positions over the next three years, Clark and Falcon had to postpone the elimination of the 2.5-per-cent small business income tax to get to a balanced budget by 2013. And Falcon has again dangled the prospect of raising general corporate income tax from 10 to 11 per cent, but not until 2014.

Business experts applauded the hard line on spending, noting the contrast with Alberta’s big spending and Ontario’s big spending hangover.

NDP finance critic Bruce Ralston says Falcon’s two-per-cent spending target is “unrealistic,” and the whole program is motivated mostly by two by-elections this year and a general election next year. He said the proposal to raise general business taxes is a repeat of his effort to save the HST, and it won’t happen if the B.C. Liberals win in 2013.

B.C. Conservative leader John Cummins made the bizarre claim that it’s an NDP-style “tax and spend” budget, and inaccurately accused Falcon of raising taxes on small business. He also joined the NDP chorus of outrage over ICBC, BC Hydro and medical premium increases.

Some other hot topics in the budget:

• Selling assets. The big one here is B.C.’s liquor wholesaling monopoly, run out of warehouses in Kamloops and Vancouver. Falcon insists the private sector does this kind of work more efficiently, and union contracts will be protected in a bidding process. The NDP argues that selling off a monopoly puts this government cash cow at risk, and points to private retail stores with higher prices and lower wages.

The proposed sale of 100 surplus Crown properties has raised cries of “selling the silverware to buy groceries.” But land sales are nothing new for governments, and Falcon prefers that to raising taxes.

• Carbon tax. The last scheduled increase goes ahead in July, adding another penny on a litre of gasoline, followed by a freeze and review of the whole climate program. Ralston says the climate plan is “in tatters,” along with dozens of other policy areas that are also under review after 11 years of B.C. Liberal rule.

NDP leader Adrian Dix vows to keep the carbon tax and its offsetting personal income tax cuts, direct carbon tax revenues to transit and rural energy-saving retrofits, and hike the general corporate tax rate from 10 to 12 per cent to pay for it.

• HST. Asked what he would have done as finance minister, Ralston suggested getting rid of the HST sooner. Dix continues to misrepresent the HST as solely a transfer to big business, ignoring the small and medium-sized businesses that have a year left to take advantage of input tax credits.

Simon Fraser University economist Jon Kesselman has estimated that poor people will be worse off when the HST ends, while the rest of us will see a very small net benefit.