The B.C. budget released this week is yet another blueprint for more spending, which the province cannot afford, and new taxes, which the taxpayers cannot afford.
Prior to the release of the pre-election budget, total government spending for 2014 was expected to be 108 per cent of all revenue collected, and nearly double the total tax revenue in 2014. This disparity will rise over the life of the proposed budget.
In balancing the budget the B.C. Liberals first suggest they will ramp up spending by nearly $300 million over three years with “investments”, primarily in early childhood goodies.
The Liberals have identified nearly $1.1 billion in savings across various departments. This revelation might lead some to wonder what in the world the government has been doing in the past few years to waste this $1.1 billion, but the past is the past.
No politician has ever seen a dollar he couldn’t spend, and true to form, the B.C. Liberals immediately identified an opportunity to continue to waste nearly one-half the previously wasted $1.1 billion on a whole range of important initiatives. The $497 million in “savings” will be “invested” in critical programs such as the Arts Legacy Fund, The B.C. Creative Futures Fund, gambling addiction programs and yet another carve out for business adversely affected by the carbon tax. The Liberals are no doubt thrilled to have stopped the wasteful spending.
When doing the math, one may be forgiven if one suggests that it would have been more effective to simply stop wasting the previously misspent $1.1 billion. We’d be about $200 million better off as a result.
More “constrained spending” includes an additional $2.4 billion over three years in health, the bulk of which will go to increased public-sector employee wages and benefits. The education budget will continue to spiral upwards, despite declining student enrolment, with much of the increase again going to finance more educators’ wages and benefits. We’ll spend $1 million forcing school kids to eat fruit and vegetables in school — presumably because parents aren’t forcing kids to eat them at home. Health and education expenditures in 2014 were forecast to be nearly 42 per cent higher than all taxes collected in that year.
The increased tax on business is advertised as merely a one per cent add-on, taking corporate taxes from 10 to 11 per cent. One hopes with the new investment in education our media and politicians will pick up some math skills and understand that a nominal tax increase of one per cent on a 10 per cent tax is a 10 per cent increase in tax paid. Similarly, a 2.1 per cent increase from 14.7 per cent to 16.8 per cent on income over $150,000 is in reality a 14.3 per cent increase in taxes paid. There are few enough high-income earners in B.C., this increase will ensure there are fewer. The expected tax revenue will never be realized. Business will pass on the 10 per cent increase to customers and employees in the form of higher prices or fewer jobs, or both, and this new tax revenue will also never be collected.
On a positive note, the B.C. government anticipates selling off some government-owned assets. Predictably, supporters of big government see the selling of assets as some sort of betrayal of a social contract. In fact, state control of any assets other than those required to deliver direct services to the taxpayer is a misallocation of public funds. Funds that otherwise would be left in the pockets of the taxpayer, or used in actually delivering those services.
As pre-election budgets go, this one is fairly tame when it comes to vote-buying programs and promises. It is not surprising the Clark regime is prepared to move away from the successful low tax policies to garner more votes in May. Balancing the budget, however, is more of an election promise than a reality. Expectations for robust economic recovery in the U.S. are still a gamble. China is China. Europe is unlikely to recover in the foreseeable future. Currency devaluations worldwide have vastly inflated the value of our resource commodities, which will ultimately result in a drop off in demand and reduced royalty revenues. Without significant program and department spending cuts across ministries, expect to see deficits well into the future — but no election could ever be won promising cuts.
Mark Walker is the publisher of the Penticton Western News.