Dr. Jim Cutt, Professor Emeritus in the University of Victoria's Department of Public Administration, recently published an opinion piece in the Times Colonist in which he claimed that BC's tax cuts are paying for themselves. For the sake of the province, we should all hope that such magic were true, but Cutt is wrong.

Cutt's column claimed that the Liberals inherited a structural deficit, but those claims were based on unrealistic assumptions of increasing expenditures and declining revenues. The fact, as verified by the Auditor General, is that the Campbell government inherited two successive surplus budgets. In his first day in office, Premier Campbell fundamentally changed the structure of BC's public finances with a massive tax cut. Any "structural deficit" is the result of that foolish act.

Cutt inferred that BC moved to the second lowest average tax burden after the cuts, but the facts are that BC had the second lowest average tax burden under the NDP (see http://www.fin.gov.bc.ca/archive/budget00/reports/bgt2000_table_h02.htm). What the tax cuts did was to change the marginal rate for top income earners while shifting the tax burden from high to lower income people. That is what Cutt acknowledged when he wrote that "tax burdens have been partially shifted from the margins of effort and enterprise to a wide range of consumption activities".

It is true that the absolute dollar amount of the budgets for health and education have not been reduced, but it is not true that there have been no real reductions in health and education. The Minister of Education admitted that government did not fully fund the contract that was imposed by legislation. The increases for health care went to imposed contracts for doctors and nurses, but hospitals closed and services were reduced because the budget has not been adequate to maintain the save level of real service delivery.

We won't know if the budget is balanced for 2004-05 until the Auditor General submits his report in the summer of 2005 - after the next election! In the meantime we only have the government's estimates. When it said that tax cuts would pay for themselves, no one added that short falls in tax revenues would be made up for by over $700 million in federal equalization payments. If the 2004-05 budget is balanced, it will only be because of equalization payments and windfall profits due to high natural gas prices.

Gary Collins forecast a 12% increase in personal income tax revenue for 2003-04. Under his current forecast, personal income tax revenue will be lower in 2005-06 than it was in 2001-02 - so much for tax cuts paying for themselves. It is unlikely that Collins will meet his forecast of a 12% increase in personal income tax revenues this year which creates a hole that must be filled by equalization and natural gas (see http://www.bcbudget.gov.bc.ca/bfp/bgt2003_appendices_table-a8.htm).

Cutt concluded his opinion piece using the same tactic displayed on the government website - he cherry picked a few economic indicators and claimed that they show hope for the future. By contrast, the BC Progress Board, hand picked by the Premier, offers a much more pessimistic outlook. It's latest report is available at http://www.bcprogressboard.com/news.html (a link not found on the government website) or one can look at the provincial economic forecasts from any of the major banks. For example, the Toronto Dominion recently said that "After recording anemic growth in the 2001-02 period, the British Columbia economy is expected to display little bounce this year and next. Although the housing market in B.C. will likely remain a pocket of strength over the forecast period, some of this year's softness in the province's all-important lumber and tourism sectors is expected to drag on into 2004, while further provincial government downsizing will continue to constrain growth. On a brighter note, the successful bid for the 2010 Winter Olympics has boosted the province's medium- to longer-term economic outlook." (See http://www.td.com/economics/prov/prov0703.html.)