The budget tabled this week by the B.C. Liberal government reverses – if not disavows – the tax philosophy that has guided it for its 12 years in power. Corporate and personal income taxes are being increased. Add these measures to the carbon tax and the provincial sales tax, and B.C.'s competitive position will be substantially weaker.
For the next three years, projected spending growth is limited to 1.5 per cent – at best a stretch goal. Debt to gross domestic product will have grown to more than 18 per cent by 2015, from 13 per cent in 2009. This remains far better than Ontario and Quebec, but nothing to be complacent about. Annual interest charges today are almost $3-billion and forecast to be more than $4-billion.
Premier Christy Clark has tossed a bone to her base with the promise of a balanced budget, while stealing from the opposition on taxes and social spending promises. This is textbook political triangulation. There were so many New Democratic party policies in the budget document that people in the lock-up briefing joked that this was NDP leader Adrian Dix's first budget.
But by raising taxes and bootlegging much of the NDP's platform, the self-described "free enterprise" Liberal party demolished its own political narrative along with any residual credibility. The key points of B.C. Liberal differentiation relative to the NDP are gone.
If nothing else, Ms. Clark's Liberals have been all politics and public relations, all the time. That's why it is very odd that Tuesday's budget was not linked to the government's "Jobs Plan" for which it is spending millions in pre-election advertising. Nor was it linked to last week's Throne Speech.
The B.C. Liberals once had a claim to economic realism. The Throne Speech undermined that, too. Its centrepiece was the assertion that liquefied natural gas could contribute a whopping $1-trillion to provincial GDP over 30 years. Anchored on the dubious prediction that government revenues would exceed $130-billion over 30 years, based on new taxes on an industry that today doesn't exist, the Clark government is flogging a new "prosperity fund."
Without any evidence or tangible investment commitments to back up their claim, the Liberals say the province is in for a windfall that will "transform" British Columbia. Most others call it the "fantasy fund."
Meanwhile, back on planet Earth, this budget will make it more expensive to invest and do business in the province.
An assortment of other taxes (disguised as fees) has also swelled. Medical services premiums are up, hydro rates are up, and property-tax exceptions are being closed. No consequential spending cuts are being made. Presenting a balanced budget only became hypothetically possible with the declaration that certain assets would be sold. However, we don't know which assets, when they might be sold, or for how much.
Tax, fee and royalty increases will have an immediate effect on business and have already drawn sharp criticism from business groups. Jock Finlayson of the B.C. Business Council said, "This is an inopportune time to be adding to the tax burden facing business and industry. Further erosion of the province's overall competitiveness will have negative longer-term implications for jobs and the economy."
A day before the Clark government tabled its budget, former Bank of Montreal economist Tim O'Neill signed off on its revenue forecast assumptions. You know a government has a very serious credibility problem when it feels compelled to ask an outsider to vouch for its honesty and competence. Such is the deteriorated state of the B.C. Liberals.
The Liberal decline can be traced to Gordon Campbell's decision to spring a new harmonized sales tax on an unsuspecting public immediately after his party won the last election. His caucus soon drove him out of office. Radio talk-show host Christy Clark won the race as a perceived "outsider" and HST opponent. Her bubbly personality and time away from the cabinet table created a sufficient distance from Mr. Campbell. It's been downhill ever since.
Ms. Clark and her Liberals are betting that voters have short memories and even shorter attention spans. What we're witnessing is the last desperate gasp of a government with the unmistakable hallmarks of a fin de régime.
Daniel Veniez is a Vancouver-based entrepreneur, a former political aide in the Mulroney government and a former candidate for the Liberal Party of Canada.