Dr. David E. Bond is the retired chief economist of HSBC Bank of Canada
Christy Clark, B.C.'s new Premier is in a tight spot. Her predecessor, Gordon Campbell, stripped the cupboard bare spending on the Olympics.
Scores of important files were ignored, including a severely understaffed judiciary, a perverted energy market where electricity is sold south of the border for substantially less than what is paid for it in B.C., and absurd expenditures for things like a $500-million+ retractable roof on B.C. Place stadium.
And then there is the dreadfully unpopular Harmonized Sales Tax that Mr. Campbell introduced in his normal imperious fashion. An unprecedented campaign gathered enough signatures to force a referendum on the HST and it is far from certain the vote will be to approve the tax.
In an effort to gain voter acceptance Ms. Clark has offered special rebates and a promise to lower the tax by two percentage points beginning with 1 per cent in 2012 and another 1 per cent in 2013. Part of the cost of these cuts will be offset by a rise in the corporate tax but at the end of the day the province's net revenues will be down about a billion dollars. That fact was never mentioned in her brief statement announcing the changes.
Why Ms. Clark chose not to inform voters of the need for the revenue the HST would bring and what would have to be cut to offset the lost revenue should the referendum fail, or what taxes would be raised to close the budget gap, will never be known.
But it is evident that, like so many of her fellow political leaders in Canada, she must believe that voters will never accept tax increases and that they cannot understand the need for revenues to equal expenditure. True Clark and Company are not as bad as our U.S. counterparts who believe that they have an inherent right to low taxes yet limitless entitlements.
Eventually the reality will have to be faced. In the meantime Court back ups are ever growing, the education system continues to under perform, and infrastructure needs are being ignored. But we now have a retractable roof on BC stadium, a Vancouver convention centre that will never make money, a mixed up tax system and warm memories of the Olympics. Aren't we lucky?
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