Budget harbours tax increases, cuts under guise of ‘ tax policy changes’

Lower- income British Columbians hit hardest by loss of HST rebates; small businesses aren’t getting promised corporate tax reduction

The words “tax increase” appear not at all, and “tax cut” is uttered just three times, all in a historical context. But Finance Minister Kevin Falcon’s first full budget has plenty of both masquerading under the name “tax policy changes.”

The most significant are related to the switch from HST back to PST, which doesn’t take place until April 1, 2013, so they fall into the 2013- 14 fiscal year, not the 2012- 13 period that is the focus of this budget.

On the plus side for taxpayers is the fact that the PST will take from our pockets just $ 5.8 billion a year, or half a billion less than what the HST would have extracted from us. So this is a de facto tax cut, although it’s hard to say how much relief will be felt by any given taxpayer as the benefits will be unequally shared among businesses and people of varying income levels and spending habits.

And this cut is balanced — well, more than balanced — by HST/ PST related increases.

Hardest- hit will be lowerincome British Columbians. They lose the fairly generous HST rebates, valued at a total of $ 315 million a year. Only the poorest — those with annual incomes of less than $ 15,000 for individuals or $ 18,000 for couples — will be eligible for the reinstated B. C. Sales Tax Credit, which is worth just $ 53 million a year. So with this one change, this demographic takes a hit of $ 262 million a year.

Better- off British Columbians will feel the pinch at income tax time. As of next January, the basic income tax exemption, which was raised to $ 11,000 when the HST came in, will drop back down to $ 9,373 ( plus any routine adjustment for inflation.) And the income tax tab for B. C. taxpayers will consequently rise by $ 36 million in the 2012- 2013 fiscal year and by $ 195 million in the following year.

Small businesses are — not surprisingly — not going to get the reduction in their corporate tax rate from 2.5 per cent to zero that was rashly promised — without anyone in the finance department seeming to know a thing about it — by former premier Gordon Campbell not long before he was pushed from office.

And larger companies may or may not lose a little of the substantial improvement in the tax rate they pay. The B. C. Liberals have, since winning office in 2000, lowered the corporate rate from 16.5 per cent to 10, but the budget document calls for a “provisional” increase up to 11 in 2014. Falcon clarified, however, that this will happen only if the conservative assumptions for the province’s economic growth are not met.

As expected, the budget confirmed the transitional measures that Falcon announced last Friday for taxing new homes during the period while the HST/ PST shift is underway. Also related to housing, it implemented a temporary grant of up to $ 10,000 for first- time buyers of new homes, an increased threshold ( now $ 1,285,000) for property tax grants for homeowners, and a home renovation tax credit for seniors or their families.

On carbon tax, ( see sidebar) the budget confirmed the increase — planned since the tax was first introduced — to $ 30 a tonne as of July 1. But it said no further increases are planned “at this time” and it promised a thorough review, with public input, of the policy.

Other “tax policy changes” ranged from trivial boutique-style breaks of up to $ 25 a year for families with kids in arts or sports programs, to not- quitesotrivial increases of $ 2.50-$ 5 a month, depending on family size, for Medical Service Plan premiums.