The BC Liberals were heavy favourites heading into the 2017 provincial election.
They had a charismatic leader in Christy Clark. They boasted the strongest economy in the country and a stellar financial balance sheet, which helped the province secure the top credit rating in Canada.
One issue that had been dogging the party was tolls on a couple of new bridges in Metro Vancouver. The public didn’t like them. So on the eve of the campaign, the Liberals decided to cap them at $500 a year.
The underdog NDP smelled an opening.
In mere hours after the Liberals' announcement, the New Democrats said they would eliminate tolls altogether. It was a watershed moment in the election, one ultimately credited with putting the NDP in position to form a minority government.
I mention this as a bit of historical context to what happened Monday, as the second week of the current B.C. election campaign got under way. Liberal Leader Andrew Wilkinson announced that, if elected, his party would eliminate the 7-per-cent provincial sales tax for an entire year, then reduce it to 3 per cent for a year, before allowing it to revert to its original rate.
Badly trailing the NDP in virtually every poll, the Liberals are in need of a moonshot proclamation, one that prompts voters to think twice about the affection with which they apparently regard the governing New Democrats.
As an attention-grabber, there’s little doubt the Liberals have found something that will have people talking, in both good and bad ways.
The best estimate is the elimination of the PST for one year will cost the treasury about $7-billion. And then there would be an additional loss of $3-billion to $4-billion with the reduction of the tax to 3 per cent for an additional year. The Liberals have indicated this revenue plunge would not be balanced by spending cuts, which suggests they are prepared to add roughly $10-billion to $11-billion to the deficit over the course of two years.
Keep in mind that the NDP is already projecting a $13-billion deficit for the current fiscal year.
That is a lot of debt, but if we have learned anything during these extraordinary times, it’s that the public doesn’t seem to get too worked up about governments blowing their brains out financially to help us get through the pandemic.
Mr. Wilkinson’s idea is aided by a couple of things.
First, B.C. entered the health crisis in excellent financial shape, with one of the lowest debt-to-GDP ratios in Canada. So it can afford to take on more debt before alarms are sounded by credit-rating agencies in New York. And secondly, the Business Council of British Columbia over the summer had recommended a time-limited, 50-per-cent cut to the PST as a means of stimulating the economy.
Cutting the PST in half, for a year or two, sounds like a reasonable temporary measure to give the economy a jolt. But eliminating it entirely for a year and then reducing it to 3 per cent for another year smacks of desperation. It’s the Liberals looking for their own bridge-toll moment, a Hail Mary pass they pray changes the trajectory of the campaign.
In making the announcement, Mr. Wilkinson said he hoped the move would give people the “chance to get out and do the things they want to do … get out into restaurants, to enjoy life.” Except for the fact we’re still in the middle of the pandemic and public-health officials are urging us to be more cautious and restrictive in our movements, not less so.
I’m just not sure, consequently, how much this tax cut will resonate with the public. People’s minds are elsewhere right now. The last thing many are thinking about is going out to spend money in crowded restaurants and malls. This policy move is not going to get the same bang for the buck it might during normal times.
Finally, the BC Liberals (a coalition of centrists and conservatives) have always had to worry about policies that could anger the party’s right flank. I’m not sure how a politically motivated decision to massively increase the deficit is going to fly with the conservative wing of the party. It could do more harm than good.
In the end, I don’t think Mr. Wilkinson is a compelling enough leader to overcome the vast chasm in support he and his party are facing. And while this tax move is audacious, it comes across as cynical and reckless.
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