Budget got the problems right but the solutions wrong

When times are tough, governments like to spin badnews budgets as a call for every segment of society to share in the pain.

Rarely, when times are good, do they set out a blueprint to share the gain — something the last government paid dearly for.

B.C. Finance Minister Carole James rightly recognized the province’s social fabric is a little frayed and some mending might be the order of the day. While her budgetary themes were dead on, the devil is still in the detail.

Governments can hike revenue by sneaking it in through the back door as the former government preferred to do, or through the front as James chose to do but without sufficient context.

To paraphrase the Elizabethan period poet John Donne: B.C. is not an island entire of itself; every province is a piece of the country.

So, off the top, some inter-provincial context :

Looking at the principal cities of each province — and relying on 2017 numbers from the Saskatchewan government — a family earning $75,000 in Vancouver had the fourth-lowest provincial tax bill ($6,642) of the 10 cities. Calgary was lowest at $2,766 and Charlottetown highest at $9,502.

Add in utilities (heating, electricity, telephone and car insurance) plus the average rent for a two-bedroom apartment in Vancouver (Canada Mortgage and Housing Corporation data) and suddenly that family has the second-highest costs of the 10, just behind Toronto.

Vancouver was in sixth spot in 2015 for median family income, though.

The government may see room to raise taxes and be right, but British Columbians don’t have much in the way of room when it comes to disposable income. All the more reason for the finance minister to have proceeded with caution.

The budget’s big blooper goes to the ill-thought-out employer health tax, which simply shifts a regressive tax from one group to another.

One can’t call it ill-advised, because it runs counter to the advice the ministry was receiving from the task force it appointed last November.

University of Victoria economist Lindsay Tedds, the panel’s chairman, tweeted following the budget : “This is not the direction we were going.” They were leaning toward a combination of a personal incometax surcharge and a small payroll tax. It is customary to wait for the advice before charting a contradictory course.

James has the MSP generating $1 billion in 2019-20, with the payroll tax bringing in $1.85 billion more. Some call that double-dipping.

It’s also a difference of $1.1 billion over what former finance minister Mike de Jong estimated in his final budget.

The great unknown: How much of it is a tax grab? For some employers who paid their employees’ premiums, it may be six of one, half a dozen of another. For others, it’s a new cost of doing business.

The switch from regressive to progressive should be as revenue neutral as possible. The government still has nine months to work it out.

On paper, B.C. may be one of the wealthiest provinces, but wealth tied up in home equity doesn’t mean gobs of cash in the bank.

Back in 1993, economics instructor David Tha was the poster boy for opposition to then-finance minister Glen Clark’s surtax on homes valued at more than $500,000. He’s back, but his circumstances have changed.

The Point Grey home he purchased 31 years ago for $370,000 is now valued at $6.5 million, a 1,658 per cent increase during a period when the cost of living rose 96.6 per cent. His salary — before he retired — likely rose at pretty well the same rate.

Tha may only have three options to pay an extra $12,000 in taxes per year: cash in, borrow against equity, or borrow from the province at 0.7 per cent.

While the public’s mood has changed — lessening the risk of pitchforks at the legislature — James is already signalling tweaks to the speculation taxes. Smart move: Budgets are as much about balance as they are about being balanced.

Hoping to escape the 20 per cent luxury car surtax by dashing off to Alberta to buy your next Ferrari? Wait until you try to register it in B.C. (For context, the rate in Australia is 33 per cent and the threshold is $75,526 in the local currency for a fuel-efficient car.)

As they say, you can’t escape death and taxes — even in a fast car. Dermod Travis is executive director of IntegrityBC.