Chapter 4: Government in Canada

“BC Budget cuts Income Taxes and Pledges over 4 years for Housing”

Canadian Press, Published: Tuesday, February 20, 2007

Summary

The new budget set by the provincial government of British Columbia is to cut income tax and those at lower income levels will be getting more help. The new provincial budget focuses on housing and finances. The highlights of the new budgets include anyone earning up to $108 000 to get a 10 percent personal income tax cut, the province will spend $2 billion on housing strategy over four years, another 900 full-time shelter beds, and an increase of $50 for income assistance and welfare. The budget also allows first-time homeowners to not pay the property transfer tax if they buy a house with a value up to $375 000. This is only a brief summary of the new provincial budget, which also includes other things such as assistance for low-income seniors, rental assistance programs, reduction of sale taxes, and many more.

Reflection and Relationship

Provinces receive about 70 percent of their revenues from taxes alone. This is also true in British Columbia. Now that the government is planning to cut sale for people who buy energy efficient products such as hybrid cars, energy efficient boilers, and furnaces they lose a large portion of their revenue. Not only are they giving tax breaks they also plan to increase welfare and shelter rates for people on income assistance. This makes you wonder how they are going to keep these promises when they are losing a portion of their revenue due to the tax cuts they are making. In order to keep these promises the government may depend on personal income taxes that are collected. In the new budget only people that make it up to $108 000 per year can get a 10 percent income tax cut. Since Canada runs on a progressive approach in income taxes, people with a higher yearly income pays a higher rate in taxes. So that means only a small fraction of people will be able to get that tax cut, since there isn’t a large amount of people meeting that requirement.

Another thing is that the cuts in sales taxes and tax exemptions for energy efficient products don’t guarantee people will buy them. This may create the initiative for people to buy energy efficient products, but there are no guarantees. People may continue to buy inefficient energy products therefore not affecting the collections of sales tax. Also the cancellation of the property transfer tax for first-time homebuyers, who buy a home that is valued up to $375 00 is a joke. There are hardly any homes with that kind of price around anymore. With house prices still rising this new regulation will have hardly any effects.

One reason for the government to make such a move may be a result from how well the economy in British Columbia is doing. The royalties collected by the government may be able to cover the cost of these new assistance programs. For any reasons having tax cuts are always a good thing even if it is only good for the short run.