Surpluses and Choices
Author:
Mark Milke
2000/12/04
Budget time is about choices, and the recent announcement that British Columbia now has a surplus should be a reminder why certain tax-and-spend decisions matter more than others.
As it concerns the surplus, (yes Virginia, there is an actual surplus) the province's total debt is forecast to decline from the high-water mark of just over $34.2 billion this past March to $33.8 billion by March 2001. But taxpayers should hold the applause until next summer. Until then, when the Auditor General certifies the numbers, the estimate of a surplus is just that - an estimate.
As for what to do with the surplus, in BC, our choices are more restricted and in part because of the decade-long string of deficits. For example, Alberta's health care spending will total just under $6 billion this year, up 52 % since 1995. BC's spending rose to $8.5 billion this year, up 29 % since 1995. If as expected, the government injects another $500 million, that figure will change to a 37 % increase since 1995.
On the tax front, Ontario and Alberta will cut business taxes in half over four years. Already low personal taxes in Alberta will be cut by 20 percent next year on average while Ontario will continue to cut personal taxes, indeed, as it has since 1995. In addition, Alberta has offered a rebate of up to $840 this winter to families who will see their natural gas bills shoot through the roof.
As it is, one main reason the government is able to balance its books is precisely because of a jump in natural resource revenues - $632 million higher than expected in the original budget for this year (and $1.8 billion higher than in 1991). On the Crown corporation side, $100 million more is expected than originally forecast (and $700 million higher than ten years ago), while Ottawa will hand over about $65 million more than originally predicted ($700 million higher than ten years previous).
Some of revenue boost could have been re-directed towards temporary tax rebates a la Alberta. Unfortunately, much of that money was already spoken for, with little of it coming back to taxpayers. If the government had not bumped up civil service wages by $1.3 billion in the midst of a supposed "zero, zero, and two" wage freeze, duplicating our neighbour's tax reductions and health care spending increases - both temporary and permanent, would have been possible.
Taxpayers should pause for a moment and consider the difference between the permanent spending increases and tax relief. Spending increases carry with them guaranteed annual higher bills due to wage agreements and the difficulty of dislodging a particular spending program, even when unnecessary or unrelated to its original purpose. Obviously, some spending increases are necessary in certain departments, but tax relief has a feedback effect upon economic growth, i.e. - tax relief boosts private sector activity and entrepreneurship in a way that government spending does not.
The current government has a bias towards spending, particularly on its public sector political allies. Tax relief has been meager and forced in response to competition to other provinces and due to Ottawa. That has to change, otherwise other provinces will continue to outstrip BC in terms of investment, economic growth, and job creation and wage growth. The current government often asks whether British Columbians "afford" tax relief. The same question seems never to be asked about the spending side of the envelope.