B.C. is expected to be an economic engine for the country in 2011, but some of that growth may be lost after the government’s executive council decided to suspend the 15% personal income tax cut announced October 27 by Premier Gordon Campbell during a televised address.
The Liberal government cabinet said it was suspending the tax cut in order to give itself maximum flexibility to set the government’s economic and fiscal agenda.
The decision came after Premier Campbell announced his resignation November 3, but also said he would stay on as premier and Liberal party leader until a new leader was selected in February.
Campbell said in a release, “The cabinet has decided that during this period of transition, it’s important that decisions are not made that would unnecessarily limit the executive council’s ability to set priorities and implement their agenda for government.”
He also said the 2011 throne speech set for February 14 would not set out any new initiatives, suggesting any new policies or government directions would be announced once a new premier was sworn in. The 2011 budget will also be a “status quo” budget.
If the income tax cut is axed, an estimated 0.1% or 0.2% of provincial GDP would likely be lost as a result, according to a forecast made by Helmut Pastrick, chief economist for Central 1 Credit Union, shortly after the tax cut was announced.
The uncertainty over income taxes, however, just adds uncertainty in the province’s tax system with the existing ambiguity over the future of HST, which will be brought to a referendum vote next September. (See “Uphill battle remains for HST despite Premier’s resignation” – BIV Business Today, November 3 and “Economic impact of Premier’s income tax cut analysed” – BIV Business Today, October 29.)