Stephen Rees's blog

Thoughts about the relationships between transport and the urban area it serves

BC’s Regressive Tax Shift

with 13 comments

This post is not about a new report. In fact the data comes from something published in June 2011. It was drawn to my attention by a Green Party of BC tweet. So it is timely in the sense that the BC Liberal government is using your money to buy air time for adverts that tell you how well off you are thanks to their taxation policies. And what they say is a Lie. Since the BC Liberals came to power what had been a slightly progressive taxation system has become regressive. Poor people in BC pay more tax than rich people.

The Report is subtitled “A Decade of Diminishing Tax Fairness, 2000 to 2010″ and is available as pdf from The Canadian Centre for Policy Alternatives. It was written by Marc Lee, Iglika Ivanova and Seth Klein.

This report examines changes to the provincial tax system over the last decade.
We look at the total provincial tax rate for households at different income levels
(the actual tax bill as a share of household income for all personal provincial taxes
combined—income, sales, carbon and property taxes, and MSP premiums).

We find that together these changes have created a tax system where the rich now
pay a lower total provincial tax rate than the rest of us.
• In 2000, most BC households paid about the same total tax rate, with
households in the top 10% and top 1% paying a little more.
• By 2010, however, the tax system had become regressive, with the richest
20% of households paying a lower total tax rate than the rest of us.

This regressive tax shift was driven by the following:
• Large income tax cuts primarily benefited upper-income earners, both in
dollar terms and as a share of income.
• Combined, tax cuts delivered an average of over $9,200 per year to the
richest 10% of BC households, and more than $41,000 to the top 1%. In
contrast, lower income households received an average tax cut of $200 per
year, and those in middle got just over $1,200.

• Between 2000 and 2010, the share of provincial government revenues coming from personal income taxes dropped by nearly one third.
• The province now collects more revenues from sales taxes (28% of revenues) than from personal income taxes (27% of revenues).
• BC families now contribute more in MSP premiums than businesses contribute in corporate income taxes.

Screen Shot 2013-01-16 at 2.06.13 PMScreen Shot 2013-01-16 at 2.08.35 PM

This morning the Premier held a press conference where she defended the government ads as means of building consumer confidence in the economy against BC NDP cynicism (according to Ian A Bailey of the Globe and Mail).

I know that I have been accused of cynicism more than once, but in the face of the current pre-election propaganda assault – which we are paying for – I cannot think of a more appropriate response. Except mine is not NDP cynicism.

MSP premiums went up again this month. At one time those were paid by the BC Government to those of us who drew Public Service (and teachers’) Pensions. No longer. We also have to pay for the Blue Cross premiums: the so called “Fair Pharmacare” programme does not actually pay out anything at all for the four figure annual prescription cost I have to pick up  that neither Blue Cross nor the public sector covers. The same government of course sent me a letter reassuring me that the value of my pension had not been reduced. They were just not letting me keep as much of it but were clawing it back through fees. And the sort legal gymnastics that the healthcare insurance industry has perfected in the US to avoid paying out much of the claims made against policies they write.

So no I do not have more disposable income, which as far as I know is about the only thing that “promotes consumer confidence”. I suppose she means that it is necessary to get more consumer spending going to increase the size of the economy . But the only way that can now happen, given the most of us now have less in our pockets, is that we borrow more to boost our consumption. I cannot see that has helped to build a sustainable economy – and was a contributing factor to the 2008 crash. It also seems to me that the increased reliance on sales taxes must have had some influence on the growth of cross-border shopping which has been so helpful to Whatcom County.

On the whole the idea that the BC Liberals are a party that can be trusted to run the economy properly does not seem to have been borne out by experience. Yet they will still have a very significant number of people who will vote for them. Hopefully, not enough to get them re-elected.

 

Written by Stephen Rees

January 16, 2013 at 2:33 pm

Posted in Economics, politics

Tagged with ,

13 Responses

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  1. I see so, the way the NDP was running the economy in the late 1990s was better? We had 9.7% unemployment in the lower mainland at a time when the rest of North America was booming. Today we have 7.1% and that’s with the global economy in the dumpster. I think that’s a pretty good vindication, actually, of Liberal economic policy. I’m prepared to let the rich take more home if it means more people have jobs. Definitely will not vote NDP.

    John

    January 16, 2013 at 4:41 pm

  2. Excellent analysis, the Big Liberal Lie can only be supported by massive advertising (which we all pay for), the lap dog MSM, and a lazy non-informed electorate. Thankfully the BC Liberals are done, there is no more spin room.

    Bill

    January 16, 2013 at 4:44 pm

  3. And for some more up to date information the Georgia Straight has an opinion piece by Dermod Travis ED of Integrity BC about how the BC government is picking our pockets while telling us we have the lowest personal income tax rates.

    In 2012, the B.C. government collected $17.6 billion in taxes—from income to HST to carbon—or $3,800 for every man, woman and child; a number that excludes corporate income taxes.

    Add on healthcare premiums and motor vehicle licenses and we’re talking another $2.34 billion or $505 per capita. That’s $700 million more than the province collected in corporate income tax.

    And if you had read what I wrote, John, you would have noted that I have no link to the NDP. I’m a Green.

    Stephen Rees

    January 17, 2013 at 2:32 pm

  4. Good post, Stephen. I am hestitant, though, about calling the carbon tax “regressive” when it’s meant to cause a shift on consumer habits for the betterment of the common good. Unfortunately, the other half of that policy hasn’t been enacted yet and likely won’t as long as the Socred retreads are in power: placing the revenue into a transparent account for funding transit and energy efficiency. Tying land use and development to transit and developing geothermal or tidal power in BC will arguably create thousands of new permanent jobs.

    John, your analysis missed a major economic calculation: commodity prices. Neither the NDP or Liberals have a micogram of sway over the international prices of oil and gas, nor their timing. The fact that extraction of gas and coal and metals from the BC landscape are so active (with a dip during the 2008/09 meltdown) have nothing to do with what party is in power.

    You’d better address specifics like provincial government policies to stimulate value-added local industry instead of regurgitating old saws about the Red Hordes. Given the Liberals penchant to export decent shipbuilding (new ferries) and sawmill jobs (and the resultant economic multipliers) to Germany and Asia your analysis seems as thin as January morning fog.

    MB

    January 18, 2013 at 2:47 pm

  5. “Regressive” is a technical term. It hits the poor much harder than the rich. It works like a sales tax. And BC’s carbon tax is all about being “revenue neutral” – or cutting progressive income tax. Another break for the rich and influential at the expense of the poor schmucks who do all the work.

    Stephen Rees

    January 19, 2013 at 8:09 pm

  6. Stephen, if there was a carbon tax rebate in place for those with lower incomes (similar to the GST rebate), would that make it less regressive? Of course, the finance department will have to define the rebate cutoff point, and that will likely be below lower middle income levels, therein the CT would on average affect the lower middle class to a greater proportion than upper middle income or rich people.

    The revenue “neutrality” of the CT is a sticking point for me, and it gets downright unethical when the poor, hospitals and schools are forced to pay the CT to cover escalating fuel costs for public transit and to heat/cool inefficient public buildings, and where the revenue is controlled in part by the Pacific Carbon Trust which doles it out according to the whimsy of a government bureaucrat under the direction of the cabinet.

    In principle I agree with progressive income taxes funding the brunt of programs, but with the now extremely important scientific motivation to do something realistic about climate change, I see a carbon tax as the simplest way to: 1) isolate carbon in policy terms; 2) attach a price to it to lower demand; 3) place the revenue in a completely transparent regularly audited account (i.e. away from general revenue where hidden political motives are rampant) managed by a board that is at arm’s length from government and that publishes updates on the accounts every month on line; and 4) distributes the funds under a clearly defined mandate toward intiatives that directly lower society’s dependence on fossil fuels (transit, alternative energy, conservation, energy efficiency …). “Revenue neutrality” affords the politicos a lot of sway to interfere with the revenue stream without public scrutiny.

    I feel the same about the national debt. That is, the existing measures to pay it down (alternating between slash/burn and overspending) have been cynically manipulated by politicians. One craves for a modest very long-term and completely visible tax separated from direct government interference to lower the national debt.

    In a way these “regressive” taxes, if done well and openly, will create the public visibility we currently don’t have where policy funding, such as it is, is hopelessly mired in the complex, overt political obfuscation of finance departments adminstering the tax system.

    MB

    January 21, 2013 at 9:13 am

  7. There is

    “BC low income climate action tax credit (BCLICATC)

    This credit is a non-taxable amount paid to help low‑income individuals and families with the carbon taxes they pay.

    For July 2012 to June 2013, the program provides a credit of up to $115.50 for an individual, $115.50 for a spouse or common-law partner and $34.50 per child ($115.50 for the first child in a single parent family). For single individuals with no children, the credit is reduced by 2% of his or her adjusted net income over $30,968. For families, the credit is reduced by 2% of their adjusted family net income over $36,997.

    The payment is combined with the quarterly payment of the BC HST credit and the federal GST/HST credit

    The BC low income climate action tax credit and the BC HST credit programs are fully funded by the British Columbia provincial government.”

    source: http://www.cra-arc.gc.ca/bnfts/rltd_prgrms/bc-eng.html

    Stephen Rees

    January 22, 2013 at 8:54 am

  8. IMO I prefer higher consumption-type taxes and less income taxes. It is an an incentive for things like earning and saving and a disincentive for things we want to discourage (spending more on goods and services, spending more on fossil fuels). You can argue how much rebate to provide to lower-income groups, but i agree with their principles.

    And other changes I can agree and are important for the long-term, like means-tested pharmacare for seniors. You can argue at what income level the cut off should be, but there many other demands on the pharmacare system also need funding and where BC shows more generosity (eg, ‘search, test and treat’ of HIV cases and expanded coverage of anti-cancer drugs, which is 100% covered, no means testing needed.)

    http://www.longwoods.com/content/22177

    Also of note,road pricing, which IMO is an important tool that can be used to fund infrastructure and control demand is completely regressive if you do not provide a means-tested rebate.

    mezzanine

    January 22, 2013 at 10:08 pm

  9. @MB

    [i]You’d better address specifics like provincial government policies to stimulate value-added local industry instead of regurgitating old saws about the Red Hordes. Given the Liberals penchant to export decent shipbuilding (new ferries) and sawmill jobs (and the resultant economic multipliers) to Germany and Asia your analysis seems as thin as January morning fog. [/i]

    What’s wrong with the HST? It promotes local production by deferring taxes on to the end consumer (in BC). Low income families also get a tax credit. still too regressive? increase income limits for the tax credit.

    If anything, I am unsure of the Green Party’s position on the HST, even after looking at the BC Green’s Green Book. .Certain, job creation and green industry support seems to be key, but I am unsure where they stand on the HST.

    mezzanine

    January 22, 2013 at 10:21 pm

  10. On reading the study again an important point the CCPA study neglects is the break down of who pays the consumption tax. Richer people in general consume more, and pay more VAT/HST/Consumption tax. Services are also taxed, unlike the PST.

    mezzanine

    January 23, 2013 at 8:37 am

  11. @MB

    “The revenue “neutrality” of the CT is a sticking point for me, and it gets downright unethical when the poor, hospitals and schools are forced to pay the CT to cover escalating fuel costs for public transit and to heat/cool inefficient public buildings, ”

    But IMO an important concept is that the carbon tax will change behaviours and make switches to more green imitatives economically feasible. I would like to think my Hospital and civic government can feel the same pressure to make a change to improve their footprint.

    Lower income groups, as stephen rees pointed out, get a directed tax credit.

    ——

    “But in another part of the province, in the Resort Municipality of Whistler, community manager Ted Battiston says the tax played a role in switching out propane tanks for solar panels and geothermal pumps in the heating unit of the local swimming pool. The tax allowed for economic modeling showing that the renewable sources would get about a 3 percent better return on a C$900,000 investment than without the levy, he said.

    “The tax should go higher,” he said.”

    http://www.nytimes.com/cwire/2011/03/22/22climatewire-british-columbia-survives-3-years-and-848-mi-40489.html?pagewanted=all

    mezzanine

    January 23, 2013 at 8:50 am

  12. One important distinction Mezz is that, unlike municipal buildings, hospitals and schools are funded by the province which not only initiated the carbon tax, but historically played devil’s advocate with the funding for health regions and school boards. Remember Christy when she was Minister of Education? Are there programs in place to make their own buildings more energy efficient?

    On the other hand we did receive a nice rebate from the province (and the feds and manufacturer) when we replaced our 48-year old gas furnace with a new energy efficient furnace.

    MB

    February 4, 2013 at 10:17 am

  13. @MB, I would argue that the carbon tax is a program to make future construction of provincial buildings more energy efficient. :-)

    mezzanine

    February 16, 2013 at 12:25 am


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