Storm clouds on the horizon
by Dan Davies
September 17, 2019
It was not a sunny and optimistic finance minister, Carole James, who provided an update on the state of the province’s finance last week.
Up till now, the NDP had been riding on the coattails of a $2.7 billion budget surplus and the best performing provincial economy that they inherited back in 2017. It seemed like a fresh start for the NDP, but now reality is setting in. Over the last two years the NDP have brought in 19 new and increased taxes to pay for an additional $10 billion worth of spending on election promises.
The cumulative tax burden has worn down B.C.’s competitive edge and now companies are looking to Alberta, where Premier Jason Kenny has pledged deep tax acts, and south of the border where federal tax cuts are now luring companies away. We are seeing this firsthand in the forest industry right now. In fact, James had to revise her budget surplus forecast to just $179 million. Although that may sound like a lot of money, it’s a pretty thin margin compared to the province’s total spending of $58 billion in Budget 2019.
Perhaps most worrying of all is the fact that James had to dip into her contingency budget of $300 million to come up with a surplus. This will be much more of a challenge next year when the government stops double-dipping by charging MSP premiums at the same time as the new Employer Health Tax. Double-dipping on both taxes netted the NDP an extra $1 billion in revenue, and declining revenues could force the hand of government to either raise taxes or fall back into deficit financing.
We’ve seen this pattern before in the 1990s when the NDP turned B.C. into a have-not province dependent on Ottawa for handouts, while workers fled the province in droves. We are now in our third straight month of jobs losses amounting to 16,000 people looking for work. Things are not looking good for British Columbia.
It looks like history is about to repeat itself.