The Campbell government's news release on removing their increase to the sales tax contains information that contradicts their message about economic recovery. The release says "The reduction to 7 per cent will add $270 million back into the pockets of British Columbians each year …" What makes that contradict the government's economic message is that information in the First Quarter Financial Report suggests the cut should return $281 million. The Ministry of Finance may not think that $11 million is a big deal, but in this Era of government propaganda one would expect an overstatement of the benefits.

At the end of September, the First Quarter Financial Report indicated that the 7.5% sales tax would raise $4.211 billion this year, $4.406 next year and $4.613 the year after. Putting the tax back to 7.0% is a reduction of 1/15th so it should return $281 on an annualized basis this year, $294 million next year and $308 million the year after. Maybe the Ministry of Finance reduced the anticipated benefits from restoring the tax to 7.0% because they have revised their estimates of the growth in retail sales downward. Of course, that would be off message from claims about economic growth.

The day after the sales tax announcement, Statistics Canada released its monthly data on retail sales. On both a seasonally adjusted and unadjusted basis, retail sales fell between July and August. The dip in August is the first time in five years that August sales were lower than July. One month does not make a trend, but the Statistics Canada data are consistent with the lower than expected claim about the benefits of the tax reduction.

In their note accompanying the August retail sales data, Statistics Canada noted "…retail sales fell in each of the western provinces. Nevertheless, retail sales growth in the first eight months of 2004 remained quite impressive in Alberta (+10.3%), Manitoba (+7.5%) and British Columbia (+6.4%)." Retail sales usually fall in September before picking up for the Christmas season and ending with the biggest month of the year in December. It will be February 2005 before preliminary data are available for retail sales in December, which will show whether or not BC has an "impressive" year. In the long run, the only way retail sales can growth faster than incomes plus population growth is for people to go deeper into debt.