Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: Higher tax bracket ‘a risky game’ in the 2020 B.C. budget

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

Finance Minister Carole James delivered the NDP government’s 2020 budget on Feb. 18.

The government continues to aim for small annual operating surpluses and hopes to avoid getting into a deficit position. In addition, the NDP remains committed to a handful of signature initiatives, including incrementally advancing its plan to expand child care spaces and ramping up capital investment in the transportation, health care and education sectors. It’s also worth noting that the new budget is built on a relatively conservative macro-economic forecast, as was also the case with the 2018 and 2019 budgets.

READ MORE: Budget 2020: B.C. NDP taps top tax bracket for more revenue

Despite this, Budget 2020 does contain a few surprises that warrant a closer look.

The first is the absence of any clear strategy to diversify and strengthen the foundations of the province’s economy over the medium- and longer-term, beyond investing in infrastructure and other public sector capital assets. There is very little in Budget 2020 that will benefit the high technology, advanced manufacturing, or tradable service industries that occupy important places in B.C.’s increasingly diverse economy. Nor does the budget do much for the natural resource industries that supply the lion’s share of the province’s exports and underpin regional economies across most of B.C. And the NDP government is missing in action when it comes to new measures to spur the business innovation and productivity growth that are essential to support and sustain a high-wage economy.

A second surprise is the budget’s assumption that housing starts are set to decline steeply over the next few years. After reaching a record 45,000 in 2019, starts are expected to fall to 35,000 this year, before dropping further to 31,000 by 2022. A slump in residential construction is projected to occur even though B.C.’s population will continue growing at a steady clip and the government itself is allocating more money to develop social and other types of non-market housing. Dwindling starts will crimp new supply – and likely lead to higher housing prices — at a time when the government is rightly concerned about affordability.

KEEP READING: Budget 2020: ICBC ‘dumpster fire’ to turn into $86M surplus, NDP say

A particularly ill-conceived surprise in Budget 2020 is the NDP’s new higher tax bracket for upper-income individuals (those earning at least $220,000 a year). This follows an earlier NDP tax hike imposed on people earning $150,000 and up.

For a left-leaning government, the politics around “taxing the rich” may appear attractive. But on economic policy grounds, the government is playing a risky game. Combined with federal income taxes, the top marginal tax rate in B.C. will now be just shy of 54 per cent, fully 17 points higher than in Washington State and almost six points higher than the top marginal rate in Alberta. As individuals exposed to the new, higher income tax rate adjust their behaviour to minimize tax liabilities, the government will likely collect less extra revenue than it is expecting.

By treating the most productive slice of the population as an ATM machine for government, B.C. will make it harder to recruit talent, discourage entrepreneurial activity, and lead to the loss of high-paying managerial, professional, and technical jobs across a mix of industries. In embracing a high tax path, the NDP government, perhaps inadvertently, seems intent on turning British Columbia into a graveyard for professional and business ambition.

READ MORE: Budget 2020: Weaver ‘delighted,’ minority B.C. NDP stable

All in all, Budget 2020 counts as a disappointment to the business community. It reflects an unwarranted complacency about the underlying health of the economy. It provides very few reasons for companies, entrepreneurs or investors to direct their capital and attention to advancing economic development opportunities in B.C. And it sends a signal to highly skilled people that they would be wise to at least consider taking their talents elsewhere.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

B.C. Budget 2020

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The Nechako Centre building was a retail space built in 1955. The building is now vacant and is listed for sale for $4.4Million. Sitting on 0.72 acres, the building is currently under a redevelopment/revitalization process. (Jacob Lubberts Photo)
Nechako Centre teardown in Kitimat for sale at $4.4 million

B.C. assessments valued the property at $843,000 with a land value of only $492,000

B.C. Finance Minister Selina Robinson outlines the province’s three-year budget in Victoria, April 20, 2021. (B.C. government video)
B.C. deficit to grow by $19 billion for COVID-19 recovery spending

Pandemic-year deficit $5 billion lower than forecast

Raising more than $1,300 for the KVHS’s dementia home project, Dennis and Brenda Horwood leave Kitimat with a bang and start their new retirement journey together. (Photo supplied)
KVHS thanks local Kitimat couple for their contributions to the dementia home project

Dennis and Brenda Horwood raise $1,360 during a retirement garage sale

No increase in fees will be made by the leisure services department in the summer months. Reviews will be made again in May/June for any recommended fee adjustments in the fall. (District of Kitimat photo)
District of Kitimat halt leisure fee increases until the fall

The Leisure Services Advisory Commission recommended no increase take place at this time

Mount Elizabeth Theatre have been approved for a provision of funding by city council for up to $42,000. (Jacob Lubberts photo)
Kitimat’s multi-use theatre grant request approved for live streaming equipment

A funding commitment of up to $42,000 was granted from council to the Mount Elizabeth Theatre

A large crowd protested against COVID-19 measures at Sunset Beach in Vancouver on Tuesday, April 20, 2021. (Snapchat)
VIDEO: Large, police-patrolled crowds gather at Vancouver beach for COVID protests

Vancouver police said they patrolled the area and monitored all gatherings

(Bandstra Transportation photo)
Smithers family-owned business institution sold to publicly-traded company

Bandstra Transportation and Babine Trucking acquired by Mullen Group

FILE – The Instagram app is shown on an iPhone in Toronto on Monday, March 19, 2018. THE CANADIAN PRESS/Graeme Roy
Judge acquits B.C. teen boy ‘set up’ on sex assault charge based on Instagram messages

The girl and her friends did not have ‘good intentions’ towards the accused, judge says

Kai Palkeinen recently helped a car stuck on the riverbed near the Big Eddy Bridge. While the car could not be saved, some of the driver’s belongings were. It’s common for vehicles to get stuck in the area due to significantly changing river levels from Revelstoke Dam. (Photo by Kai Palkeinen)
“I just sank a car’: Revelstoke resident tries to save vehicle from the Columbia River

Although it’s not permitted, the riverbed near the city is popular for off roading

Meng Wanzhou, chief financial officer of Huawei, walks down the street with an acquaintance after leaving B.C. Supreme Court during a lunch break at her extradition hearing, in Vancouver, B.C., Thursday, April 1, 2021. A judge is scheduled to release her decision today on a request to delay the final leg of hearings in Meng Wanzhou’s extradition case. THE CANADIAN PRESS/Rich Lam
B.C. judge grants Meng Wanzhou’s request to delay extradition hearings

Lawyers for Canada’s attorney general had argued there is no justification to delay proceedings in the case

B.C. Premier John Horgan announces travel restrictions between the province’s regional health authorities at the legislature, April 19, 2021. (B.C. government photo)
B.C. sees 862 more COVID-19 cases Wednesday, seven deaths

Recreational travel restrictions set to begin Friday

B.C. Finance Minister Selina Robinson is photographed following her budget speech in the legislative assembly at the provincial legislature in Victoria, Tuesday, April 20, 2021. THE CANADIAN PRESS/Chad Hipolito
B.C. budget lacks innovative drive, vision during uncertain times, say experts

Finance Minister Selina Robinson’s budget sets out to spend $8.7 billion over three years on infrastructure

Using panels kept cold by water circulating within them, B.C. researchers compared thermal comfort in 60 of the world’s most populous cities, including Toronto. (Lea Ruefenacht)
B.C. researchers use air conditioning to combat spread of COVID particles

Dr. Adam Rysanek and his team have proven a new worthwhile system – a mixture of cooling panels and natural ventilation

Most Read