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June 29, 2001

What they didn't tell you about those "Dramatic Tax Cuts"

 

Did you know that one third of one percent of BC taxpayers (about 8,000 people) will get 14% of the benefits from the $1.5 billion in tax cuts? Those folks with over $250,000 in assessed income will get an average BC tax cut of $23,848. Now that's dramatic! Compare that to an average tax cut of $6 - that's right just six dollars per year - that the 24% of taxpayers (about 625,000 people) will get who have less than $10,000 in assessed income.

For all the shocking details, click here for a table that is consistent with but far more complete than the one you find on the Ministry of Finance website.

Graph of Tax Cuts by Income

A Strange Notion of Equality

Based on the 1996 taxation statistics, there were just over 1,673,000 BC taxpayers with income under $30,000. All those folks combined will save a total of just over $209 million with the New Era tax cuts. By comparison, there were 7,920 BC taxpayers with income over $250,000. All 7,920 of those folks will also save a total of $206 million. There you go, with 1,664,000 fewer people the 7,920 well off get just as much. They never said that during the election.

A $30 billion example of the present value calculation

With one announcement the Campbell government spent about as much as the total accumulated provincial debt. The $1.5 billion tax cut goes on year after year whereas debt is a present value lump sum. To compare the two, financial analysts calculate the present value of the annual tax cuts. At 5% interest, the tax cuts have a present value of $30 billion.

In expressing their thanks to the Campbell government, the BC Business Summit repeatedly pointed out that the cuts went well beyond the promise of reducing the bottom two brackets. Half of that $1.5 billion is the cost of going beyond the bottom two brackets. The present value of going beyond the bottom two brackets is $15 billion. Tax Cut = $30 Billion gamble

Of course, the government believes that this enormous gamble will pay off with higher economic growth. To the extent that it does, the $30 billion present value cost of the tax cuts may be reduced. To the extent that it doesn't, a major hole is blown in the government's ability to finance any program.

Since making this enormous gamble, and after saying on Voice of BC that the NDP left the books in not too bad a shape, Finance Minister Collins has started saying that there is no money for anything. If there is no money for anything, it is because the New Era rolled the dice and put $30 billion on the line for that one announcement. We are left waiting to see what numbers come up.

 

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