Tax and spend: that is what governments do. If done well, the economy flourishes, standards of living rise, and people become better off. If done poorly, the economy stagnates, standards of living fall, and we become worse off. The Canadian Taxpayers Federation's (CTF) Fiscal Report Card grades the B.C. Liberal government's tax and spending performance in five areas: balanced budgets, spending, debt reduction, taxation, and corporate welfare. B.C.'s Liberal government has done a solid job in most areas, but with increases in spending and no commitment to debt reduction, it will be challenged to continue delivering the economic gains we have experienced to date.

To ensure a commitment to balanced budgets, the Liberal government passed the Balanced Budget and Ministerial Accountability Act in April 2002. Under that law, the government may not forecast a deficit for a fiscal year. The CTF gives the Liberal government a B+ grade on its budget performance because they took the courageous step to legislate balanced budgets.

Liberal spending performance started off well but has taken a turn for the worse. With the CPI increasing by about 2% per year and population by just over 1% per year, Liberal spending, at an average of 1.94% per year in its first term, showed responsibility. Spending has increased an average of 5.6% per year between 2005 and 2007, and is expected to rise on average by 3.5% per year to 2010. The Liberal government appears to be afflicted by the big spending disease that seems to affect most second term governments. The CTF gives the Liberal government a C for its spending performance.

The Liberal government should be commended for getting B.C.'s debt back to 2001 levels in 2006. However, debt reduction by accident must be replaced by a program of debt elimination by design - a legislated debt reduction plan. A legislated debt reduction plan, just like the legislated balanced budget plan, will promote the achievement of debt freedom and all the benefits the province can derive from it. With public debt charges costing $2.2 billion this year - or $6-million each day - the Liberal government must start taking debt repayment seriously. The CTF gives the Liberal government a C- for its debt performance.

The Liberal government has done a good job reducing personal and corporate income taxes. The commitment to introduce a dramatic cut in personal income taxes resulted in a 25% across the board personal income tax cut by 2002 and a 10% reduction in 2007. Today, B.C. has the second lowest personal tax burden after Alberta and has gone a long way in making its corporate tax schedule more competitive. However, B.C.'s tax system is still confusing and complicated, pointing to the need to a lower, simpler and flatter income tax system. Eliminating the remaining capital tax on financial institutions would improve this grade. The CTF gives the Liberal government a B+ for its tax reduction performance.

Government's have yet to come up with a spending program more wasteful than corporate welfare. The Liberal government eliminated subsidy programs channeling funds to individual businesses then started channeled funds to industries such as tourism and the arts. More significantly, it created a set of complicated tax cuts targeted to favoured industries. Subsidies to businesses must be eliminated, not repackaged. The CTF gives the Liberal government a D for its tax reduction performance.

Today, we see a Liberal government sidetracked by politically motivated spending increases, a reliance on debt reduction by accident, and back-door corporate welfare schemes. B.C. is now off the equalization dole and back to "have" province status. The focus on balanced budgets and tax reduction helped to put B.C.'s economy back on track. Big spending threatens to derail those gains.

For the full report, please go to: http://www.taxpayer.com/main/studies.php?topic_id=5