Both the NDP and Conservative tax plans miss the mark

Both the NDP and Conservative parties have unveiled plans for tax relief ahead of British Columbia’s October 19 election. Unfortunately, neither party’s proposed changes would address the province’s big tax challenges.

The NDP plan would provide an immediate direct payment of $1,000 for the average family. In 2025, the plan would effectively exempt an additional $10,000 of individual income from annual income taxes, increasing the basic personal exemption to $22,580. According to the NDP, this change would reduce personal income taxes by more than $1,000 for most households and more than $500 for individuals.

Meanwhile, the BC Conservatives would exempt $1,500 per month of rent or mortgage interest costs from provincial income taxes, increasing by $500 each year reaching a maximum monthly exemption of $3,000 by 2029. According to the plan, the tax change could provide a $1,600 cash rebate annually.

Unfortunately, while British Columbians clearly need tax relief, neither of these policies address the province’s main problems—uncompetitive personal income taxes imposed on professionals, entrepreneurs and businessowners and the poorly designed provincial sales tax (PST).

B.C. currently has the fourth-highest top combined (federal and provincial) statutory personal income tax rate (53.5 per cent) among 61 Canadian provinces and U.S. states, and significantly higher (16.5 percentage points) than neighbouring Alaska and Washington.

That’s a big problem. According to a significant body of research, high and increasing tax rates discourage economic growth by reducing the reward from productive activities such as entrepreneurship, work and investment. And when deciding where to live and work, high-skilled workers including doctors, engineers and entrepreneurs consider (among other factors) personal income tax rates. Jurisdictions with lower tax rates have an advantage in attracting and retaining these high-skilled and productive people who fuel economic growth.

There’s also the issue of B.C.’s provincial sales tax, which—unlike in other provinces—applies to a wide range of inputs (equipment, new technologies, etc.) used in the production process by businesses and entrepreneurs. Consequently, compared to other provinces, it’s more expensive to do business in B.C., which has the highest tax on investment in Canada. And lower investment means lower rates of economic growth, which is key to job-creation and prosperity across income levels.

And there are also a slew of less well-known tax increases and tax changes (the new Employer Health Tax, for example) that have made the province less tax competitive. Overall, these higher taxes have made the province a decidedly less competitive place to work, start or expand a business, and to invest. Given that B.C. has experienced effectively no economic growth (as measured by per-person GDP) over the past six years, the next government in Victoria must address these issues.

While both the NDP and Conservative parties have promised tax relief for British Columbians, neither of their plans would fix B.C.’s main tax challenges. Policymakers should address the actual problems—high personal income tax rates on professionals, entrepreneurs and business owners and a poorly designed provincial sales tax—for the benefit of all British Columbians.