Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: Higher tax bracket ‘a risky game’ in the 2020 B.C. budget

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

Finance Minister Carole James delivered the NDP government’s 2020 budget on Feb. 18.

The government continues to aim for small annual operating surpluses and hopes to avoid getting into a deficit position. In addition, the NDP remains committed to a handful of signature initiatives, including incrementally advancing its plan to expand child care spaces and ramping up capital investment in the transportation, health care and education sectors. It’s also worth noting that the new budget is built on a relatively conservative macro-economic forecast, as was also the case with the 2018 and 2019 budgets.

READ MORE: Budget 2020: B.C. NDP taps top tax bracket for more revenue

Despite this, Budget 2020 does contain a few surprises that warrant a closer look.

The first is the absence of any clear strategy to diversify and strengthen the foundations of the province’s economy over the medium- and longer-term, beyond investing in infrastructure and other public sector capital assets. There is very little in Budget 2020 that will benefit the high technology, advanced manufacturing, or tradable service industries that occupy important places in B.C.’s increasingly diverse economy. Nor does the budget do much for the natural resource industries that supply the lion’s share of the province’s exports and underpin regional economies across most of B.C. And the NDP government is missing in action when it comes to new measures to spur the business innovation and productivity growth that are essential to support and sustain a high-wage economy.

A second surprise is the budget’s assumption that housing starts are set to decline steeply over the next few years. After reaching a record 45,000 in 2019, starts are expected to fall to 35,000 this year, before dropping further to 31,000 by 2022. A slump in residential construction is projected to occur even though B.C.’s population will continue growing at a steady clip and the government itself is allocating more money to develop social and other types of non-market housing. Dwindling starts will crimp new supply – and likely lead to higher housing prices — at a time when the government is rightly concerned about affordability.

KEEP READING: Budget 2020: ICBC ‘dumpster fire’ to turn into $86M surplus, NDP say

A particularly ill-conceived surprise in Budget 2020 is the NDP’s new higher tax bracket for upper-income individuals (those earning at least $220,000 a year). This follows an earlier NDP tax hike imposed on people earning $150,000 and up.

For a left-leaning government, the politics around “taxing the rich” may appear attractive. But on economic policy grounds, the government is playing a risky game. Combined with federal income taxes, the top marginal tax rate in B.C. will now be just shy of 54 per cent, fully 17 points higher than in Washington State and almost six points higher than the top marginal rate in Alberta. As individuals exposed to the new, higher income tax rate adjust their behaviour to minimize tax liabilities, the government will likely collect less extra revenue than it is expecting.

By treating the most productive slice of the population as an ATM machine for government, B.C. will make it harder to recruit talent, discourage entrepreneurial activity, and lead to the loss of high-paying managerial, professional, and technical jobs across a mix of industries. In embracing a high tax path, the NDP government, perhaps inadvertently, seems intent on turning British Columbia into a graveyard for professional and business ambition.

READ MORE: Budget 2020: Weaver ‘delighted,’ minority B.C. NDP stable

All in all, Budget 2020 counts as a disappointment to the business community. It reflects an unwarranted complacency about the underlying health of the economy. It provides very few reasons for companies, entrepreneurs or investors to direct their capital and attention to advancing economic development opportunities in B.C. And it sends a signal to highly skilled people that they would be wise to at least consider taking their talents elsewhere.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

B.C. Budget 2020

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Elvira D’Angelo, 92, waits to receive her COVID-19 vaccination shot at a clinic in Montreal, Sunday, March 7, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
110 new cases of COVID-19 in Interior Health

Provincial health officers announced 1,005 new cases throughout B.C.

RCMP cruiser, no date.
One man apprehended after high-risk situation in Ashcroft

Distraught man made threats directed at police, potentially had access to firearms

Janice Maurice, president of the South Cariboo Museum Society, and vice-president Peter Brandle, hope to see the Clinton Museum reopen its doors this spring. (Kelly Sinoski - 100 Mile Free Press).
Clinton Museum anticipated to reopen this year

Society board waiting to hear from province on health orders.

Interior Health nurses administer Pfizer-BioNTech COVID-19 vaccines to seniors and care aids in Kelowna on Tuesday, March 16. (Phil McLachlan/Kelowna Capital News)
69 new cases of COVID-19 in Interior Health

The total number of cases in the region is now at 9,840 since the pandemic began

Kelowna General Hospital (File photo)
Interior Health hospitals not strained by rising COVID case counts

While provincial hospitalizations rise, health care systems in the B.C. Interior remain robust, say officials

Rainbow trouts thrashing with life as they’re about to be transferred to the largest lake of their lives, even though it’s pretty small. These rainbows have a blue tinge because they matched the blue of their hatchery pen, but soon they’ll take on the green-browns of their new home at Lookout Lake. (Zoe Ducklow/News Staff)
VIDEO: B.C. lake stocked with hatchery trout to delight of a seniors fishing club

The Cherish Trout Scouts made plans to come back fishing soon

Vancouver Police Const. Deepak Sood is under review by the Independent Investigations Office of B.C. after making comments to a harm reduction advocate Sunday, April 11. (Screen grab)
VIDEO: Vancouver officer convicted of uttering threats under watchdog review again

Const. Deepak Sood was recorded Sunday saying ‘I’ll smack you’ and ‘go back to selling drugs’ to a harm reduction advocate

Provincial health officer Dr. Bonnie Henry prepares a daily update on the coronavirus pandemic, April 21, 2020. (B.C. Government)
B.C.’s COVID-19 infection rate persists, 1,005 new cases Friday

Hospitalization up to 425, six more virus-related deaths

Premier John Horgan receives a dose of the AstraZeneca COVID-19 vaccine at the pharmacy in James Bay Thrifty’s Foods in Victoria, B.C., on Friday, April 16, 2021. THE CANADIAN PRESS/Chad Hipolito
B.C. Premier John Horgan gets AstraZeneca shot, encourages others

27% of residents in B.C. have now been vaccinated against COVID-19

The Nautical Dog Cafe at Skaha marina is getting its patio ready in hopes Mother Nature will provide where provincial restrictions have taken away indoor dining. (Facebook)
‘A lot of instability’: B.C. restaurants in layoff limbo

As COVID-19 cases stay high, restaurants in British Columbia are closed to indoor dining

Prime Minister Justin Trudeau looks on as Deputy Prime Minister and Finance Minister Chrystia Freeland responds to a question during a news conference on Parliament Hill in Ottawa, Tuesday, Aug. 18, 2020. THE CANADIAN PRESS/Adrian Wyld
Expectations high as Trudeau Liberals get ready to unveil first pandemic budget

The Liberals will look to thread an economic needle with Monday’s budget

Royal Inland Hospital in Kamloops. (Dave Eagles/Kamloops This Week file photo)
RCMP intercept vehicle fleeing with infant taken from Kamloops hospital

The baby was at the hospital receiving life-saving care

Since April 4, 38 flights with COVID-19 cases have departed from Vancouver International Airport, while 23 arrived. (Phil McLachlan/Capital News)
Vancouver the largest source of domestic flights with COVID-19 cases: data

This month alone, 38 flights with COVID-19 cases have departed from Vancouver International Airport, while 23 arrived

John Furlong, Own The Podium board chairman and former CEO of the Vancouver Olympics, addresses a Vancouver Board of Trade luncheon in Vancouver, B.C., on Wednesday November 25, 2015.THE CANADIAN PRESS/Darryl Dyck
John Furlong presents 2030 Winter Games vision to Vancouver Board of Trade

Vancouver and Whistler would remain among host sites because of 2010 sport venues still operational

Most Read