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B.C. budget stays balanced, provides new benefits for families

New child benefit kicks in this year, as do new taxes on pop, vaping, but no relief for business
B.C. Finance Minister Carole James | B.C. government webcast

B.C. Finance Minister Carole James handed down her third consecutive balanced budget  Tuesday – a financial blueprint that anticipates a $227 million surplus and contains an assortment of either new or increased taxes and a new child benefit that goes into effect this year.

The budget came down as a rally was staged at the BC Legislature. But it was the usual suspects, protesting in support of hereditary Wet'suwet'en chiefs opposed to the Coastal GasLink pipeline, but rather a pro-resources rally by out-of-work forestry workers. They would have come away mostly empty handed, as the budget contains little in the way of aid for B.C.'s beleaguered forestry sector, which is expected to generate significantly less tax and stumpage revenue for the government in 2020.

The most significant tax for business is the new employer payroll tax, which partially went into effect last year, and is now in full effect. Employers will also have to budget to pay higher minimum wages, which will rise from $14.60 per hour in 2020 to $15.20 per hour in 2021.

Higher-income British Columbians will pay more in income taxes, while close to 300,000 B.C. families should see more money in their pockets, as the Medical Services Plan (MSP) is now fully eliminated and a new child benefit that was announced in last year’s budget takes effect October 1.

"Together, these two measures could save families thousands of dollars," James said.

Employers that did not previously cover their employees’ MSP premiums are now paying a new employer health tax. However, the $1.9 billion it will raise in 2020-21 is still $800 million short of the $2.7 billion that MSP raised, so that shortfall has to be absorbed through other parts of the budget.

British Columbians who make more than $220,000 a year will pay more in income taxes, as the new marginal income tax rate will rise to 20.5% for the upper tax bracket. That’s on top of an increase to the upper tax bracket that raised the top marginal tax rate from 14.8% to 16.8% in 2019.

“We have asked the top 1% to pay a little bit more,” James said. “We believe that they benefited from a strong economy; we believe they can contribute a little bit more.”

The Independent Contractors and Businesses Association called James' budget "a Seinfeld budget about nothing."

“Finance Minister Carole James offered absolutely nothing to businesses staggering under the weight of higher taxes, red tape, and anti-employer policies," said ICBA spokesman Jordan Bateman.The ICBA also slammed the government for not earmarking capital towards the George Massey Tunnel replacement project.

“The Massey Tunnel replacement continues to be stalled, which should anger tens of thousands of commuters at B.C.’s worst bottleneck,” Bateman said.

The B.C Ministry of Finance says there is money in the capital budget for the George Massey Tunnel – just not in the three-year plan. The capital budget includes $1.9 billion under "transportation and trade network," which includes the George Massey Tunnel. But that funding is over five years.

The Business Councilof BC (BCBC) welcomed the fact the fact the budget is balanced, and also welcomed some of the social spending that addresses affordability issues. But it has failed to address a growing competitiveness gap.

“While government has prioritized a variety of worthwhile program areas, including childcare, housing affordability, education, and transit and transportation investments, paying for this requires a competitive and growing economy," said BCBC chief policy officer Jock Finlayson. "The budget does not pay sufficient attention to the storm clouds facing us due to slower global growth and escalating tax and regulatory costs at home."

The BCBC has been working with the B.C. government to address the "leakage" that results from B.C. industries, which pay the highest carbon taxes in North America, competing with jurisdictions that have lower carbon pricing or none at all.

"Regrettably, our collaboration with the province on this important policy file appears to have hit a wall," said BCBC president Greg D’Avignon.

“In spite of the stated goal in the budget to ensure that BC’s leadership on climate change does not materially impair BC’s business competitiveness, there is no expansion of the CleanBC Industrial Incentive and Industrial Investment programs to companies emitting less than 10,000 tonnes of carbon,” said Andrew Wynn-Williams, divisional vice president for the Canadian Manufacturers and Exporters.

“Given that carbon tax revenue next fiscal will reach nearly $2 billion it is time to help the manufacturers who pay a significant portion of that by using it to fund programs that support competitiveness."

B.C.'s high carbon tax is just one disadvantage for business, however.

“Since 2013, the B.C. government has added more than $5 billion in incremental tax costs on B.C. businesses," Finlayson said. "On top of this are steep increases in property taxes on business and industry in many B.C. communities. These trends are making it harder to do business and to scale-up our companies."

In total, the government expects an increase of $343 million in tax revenue for 2020-21, despite an anticipated decrease of $43 million from declining resource revenue, particularly from the forestry and mining sectors.

Consumers will pay more for pop, as a PST exemption on sweetened beverages will be eliminated, and if they vape, they’ll pay a new $0.29 tax on vape juice.

The budget continues to provide additional funding for child care, but the $10 a day daycare promised by the BC NDP before the last election seems to be nowhere on the immediate horizon – nor has a $400 rebate for renters materialized in the 2020-21 budget.

James blamed the BC Green Party, with whom the NDP has a governing agreement, for not introducing the rebate promised in 2017.

“The Greens are not in support, and they are minority partners in this,” she said.

While a number of measures aimed at cooling Vancouver’s overheated housing market – a speculation tax, for example – has had some impact, real estate prices still remain too high for many would-be homeowners.

“I don’t think there’s anyone who would say we’ve reached affordable housing in British Columbia,” James said. “But what you aren’t seeing is the kind of spikes that you were seeing with a speculative real estate market.”

One of the biggest tax increases to be felt by most British Columbians is not unexpected. The B.C. carbon tax will rise another $5 per tonne in April, to $45, which is roughly $0.10 per litre for gasoline and $0.09 per cubic metre for natural gas.

There are words in the 2020 budget for B.C.’s struggling forestry sector, but almost no money. A meagre $13 million is earmarked for “new opportunities for the bioeconomy and revitalizing the forestry sector.”

James noted a number of measures her government has implemented to help the forestry sector adjust to the new realities of a shrinking timber supply, but said there is no short-term fix to the crisis currently gripping the sector, which has seen numerous sawmill closures.

“This is a problem that didn’t arrive overnight and isn’t going to be fixed overnight,” James said. “It’s going to take some time to look at revitalization in the forest industry.”

Perhaps the most significant new measure in an otherwise stay-the-course three-year plan is the new BC Child Opportunity Benefit, which was announced in last year’s budget but which takes effect this year, on October 1.

It provides up to $1,600 annually per child, and up to $3,400 for a family with three children. It is not universal, however. It works on a sliding scale, with the cutoff being $114,000 annually, at which point families are not qualified to receive the benefit. The government expects close to 300,000 families to receive the benefit.

The payments will be made monthly starting October 1. As James pointed out, the old child benefit applied only to children up to the age of six, whereas the new one applies until the child reaches 18.

The budget continues record spending on First Nations, through $3 billion in gambling revenue sharing over three years, and includes money for on reserve housing, which has historically been strictly a federal responsibility.

The budget bumps up spending for its CleanBC climate and energy plan by $419 million over three years. As the Pembina Institute points out, that brings total spending for CleanBC to $1.3 billion, which the institute describes as "a landmark investment in climate action." The new spending earmarks $120 million for carbon tax rebates and $155 million for industry for things like energy efficiency

Once the B.C. carbon tax hits $50 per tonne in 2021, the government plans to pause further increases until it harmonizes with the federal carbon tax, which will hit $50 per tonne in 2022.

On affordable housing, the budget earmarks $50 million over three years in additional funding to address homelessness, including the building of 505 new shelter spaces, but appears to delay funding for other affordable housing initiatives. It earmarks $45 million for its Building BC program – intended to build 114,000 affordable homes over 10 years – but defers that spending to the 2022-23 budget.

"Projected completions in BC Housing’s Service Plan appear to have dropped by roughly 2,400 homes in the first four years of the government’s 10-year plan," says the BC Non-Profit Housing Association.

As for the financial “dumpster fire” engulfing the Insurance Corp. of British Columbia, the Crown corporation posted a $91 million loss for 2019-20, which is an improvement over 2018-19, when it lost more than $1 billion.

James’ budget plan expands the provincial tax base by requiring e-commerce and streaming companies such as Netflix to register and collect provincial sales taxes. That measure is expected to raise $11 million in 2020-21 and $16 million in 2021-22.

On the capital side of the budget, the government has allocated $22.9 billion over three years for infrastructure:

•$7.4 billion, transportation

•$6.4 billion, hospitals

•$2.8 billion, public schools

•$3.1 billion, post secondary education

•$3.2 billion, housing.

Some of the bigger ticket items in capital spending include:

•$1.2 billion, Pattullo Bridge

•$1.6 billion, Broadway line

•$1.3 billion, four-laning Highway 1 to Alberta border

•$1.3 billion, Royal Columbia Hospital expansion

•$2 billion, new St. Paul’s Hospital

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