BC’s 2018 budget was announced on February 20th. Its focus was to provide lower income households with tax relief. It provides some parents with reduced child care fees while also reassuring parents that spaces in child care and in schools would become more adequate.
There are numerous articles that focus on the many highlights (some are listed below) that will work to assist the many varied interests of middle and lower income households in BC. Less reported however is that in order to provide the tax relief outlined within the budget, the BC Government will undertake a record-breaking capital spend and increase overall taxes to the tune of $4.4 billion over three years.
As mentioned above highlights include the reduction of childcare fees with a goal of increasing the number of child care spaces by 22,000, as well as creating programming to support child care providers who want to become licensed.
Senior care will also receive a very welcome boost as the province announced $1.5 billion in health-care related spending. Further both the Peace Arch Hospital and the Royal Columbian were allocated funds for much needed upgrades and renewal projects.
The Canadian Bar Association was pleased to see that the BC Budget addressed some of the issues related to expediting justice and access to legal services for Indigenous peoples, and those living in rural and remote communities. Though they also stated that the money received was only about 25% of what is truly needed.
Schools also made the list, thankfully. Fifty new seismic projects were promised over the next 18 months with a goal of removing portables and reducing classroom sizes.
Notably missing was any commitment from the BC Government with respect to the redevelopment of St. Paul’s Hospital. Some of the transportation issues in the rapid growth areas of Surrey and White Rock were also left unaddressed, specifically the Surrey LRT and Massey Tunnel replacement. Finally, the budget didn’t provide further specific funding for the BC-born Digital Technology Supercluster that was announced by the Federal Government last week.
Which brings us to what concerns us the most about this budget… are we losing our competitive edge?
This budget appears to lack support for the entrepreneurial spirit, the mid-size family operations and large corporate leaders of today’s BC. These are the innovators, high-growth companies, and the large corporations like Boeing, Finning, Lululemon, Pattison, who employ a large percentage of BC’s workforce. Let’s review what’s in it for them:
A new employer-based payroll health tax will replace a portion of the revenue previously received from MSP. Corporations will pay 0% to 1.95% dependent on their overall salary obligations. While pushing the full burden of MSP to the employers, the government admits this new strategy will leave a large gap in revenue that used to be received from MSP, in 2018-2019, that gap will be as much as $2.1 billion.
Earlier this year the BC Government raised the top personal income tax rate from 14.7% to 16.8%. Combined with the new and higher top federal rate of 33%, in conjunction with stringent rules on income sprinkling, ensures that high-skilled workers in BC are now taxed at a marginal rate of 49.8%.
Entrepreneurs, executives, high-skilled workers, and high-net worth individuals who are looking to purchase a luxury vehicle because you still have too much money… look for the new luxury car tax (new or used), of 15% for vehicles worth $125,000 and 20% for vehicles worth $150,000 or more.
If this new luxury tax is the proverbial straw and you’re looking south to an ever-increasingly lucrative US market where taxes are decreased and trade issues loom, you should still be cautious because effective Feb. 21, 2018, there will be an increase on the property transfer tax from 3% to 5% on properties worth more than $3 million.
In addition, a new and additional school tax of 0.2% will apply to residential properties worth more than $3 million, including detached homes, strata condos or townhomes, and vacant property. Residential properties valued at more than $4 million will pay 0.4%.
Given the US tax reform, the upcoming Federal budget, and ongoing trade uncertainty, will this balance opportunity on both sides of the spectrum? Time will tell.
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