Who says summer never has any political news Recently, British Columbians have been treated to balanced budget claims and the idea of making mortgage interest tax deductible. Both bear close analysis.

"Look Ma, it's a balanced budget." The government's announcement of an actual balanced budget (for the fiscal year that ended March 31, 2000) was pleasant news for them, with a cherry on top from the Auditor General who endorsed the accounting. That was the good news. The bad news for taxpayers is that the overall provincial debt increased by over $2.2 billion from $32 billion to $34.2 billion.

How can a government announce a balanced budget but still increase the debt Simple, the balanced budget law and the announcement apply to only part of government spending. Capital expenditures are excluded. Finance Minister Paul Ramsey has argued there is no contradiction between a balanced budget claim and increasing debt, similar to balancing one's yearly expenses and revenues but yet holding a mortgage. The analogy is error-prone. While many households do incur a one-time large debt obligation, i.e. - a mortgage - they do not continue to increase that debt each and every year.

If individuals imitated the Province, they would dig themselves deeper into debt but set up a separate checking account to pay the interest on it. Thus, they could claim their main checking account was not overdrawn - i.e., that it was balanced - because withdrawals never exceeded deposits. It is a technically correct claim on one front, as the Auditor General has noted, but it misses the big picture: increasing indebtedness overall.

Under the current scenario, the provincial government could claim balanced budgets from now until eternity yet increase the debt every year. The economics of the situation do not change by applying balanced budget legislation and lingo to only part of government's operations; British Columbians will continue to see more of their tax dollars, Hydro payments and user fees directed to interest on a growing debt.

Mortgage Interest Tax Breaks

Premier Ujjal Dosanjh recently floated the trial balloon of making mortgage interest tax deductible. No doubt this is tempting but taxpayers should resist the bait. Tax cuts need to be widespread and permanent. Those tempted by this trial balloon should ask themselves whether they care to pay significantly higher taxes once their mortgage is paid off. And on the incentive front, there is no motivation in this idea for a high-paid computer wizard to move to British Columbia if they already have a paid-off mortgage. Those individuals will still be hit by exorbitantly high marginal rates.

If the provincial government wants to increase the wealth of individual British Columbians, try cutting the red tape, property taxes, and development fees of builders - though the province is now headed in the opposite direction after the leaky condo fiasco.

The BC government has always blanched at offering across the board tax cuts, though they had no problem with across the board tax hikes in the early 1990s. It's a complete mystery as to why they bash widespread tax relief in favour of tax cut trinkets now and then, such as a cut in the small business rate or this latest idea. Personal income taxes increased faster over the last couple of decades compared with any other tax, and surtaxes were loaded on in the 1980s and 1990s. Income tax cuts should be the priority for federal and provincial tax reduction. The other ideas floated by the federal Alliance (i.e., a GST reduction) and the provincial NDP (mortgage interest deductibility) are cheap election-time baubles that should be rejected in favour of overall long-term relief for the tax is the most punishing.