Balance the budget, reduce taxes and harness BC’s natural resources

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Appeared in Business in Vancouver

With her Cabinet unveiled, the reality of governing now takes hold for Premier Christy Clark. In setting the government’s post-election agenda, the focus should squarely be on economic (income) and job growth, priorities Premier Clark clearly established during the election campaign.

If the Liberals are to deliver on a sound economy with strong employment growth, the first task should be ensuring a balanced budget this year. Doing so will then allow for an aggressive, purposeful plan for reduction in taxes in Budget 2014.

The current plan to balance the budget is based on constraining the growth in spending coupled with modest increases in revenues based on a growing economy and some tax rate increases.

To constrain the growth in spending, the government should deal with the largest component of spending: public sector wages, salaries and benefits. That is, public sector wages and benefits should be brought in line with similar positions in the private sector. Currently, public sector workers in BC on average enjoy a 14 per cent wage premium for comparable positions. This is on top of more generous pensions, an earlier average age of retirement, and markedly greater job security.

Another challenge on the spending side is health care. Budget 2013 forecast health spending would consume a little more than 52 per cent of total ministerial spending in 2013-14. Here, Premier Clark should look at adopting health policies common in other countries with universal access health care (i.e. Netherlands and Switzerland) that lead to greater competitive pressures between suppliers and better incentives for patient decisions. The key is explaining to British Columbians that such changes do not mean reducing or even altering our commitment to universality.

The Liberals should also immediately reverse the “temporary” personal and corporate income tax increases enacted in their 2013 Budget. The problem is that the Liberals did not account for the changes in individual and business behavior that these tax increases will cause, including reduced incentives for investment. In addition, many BC’ers are likely to tax plan in such a way as to avoid or minimize the “temporary” increase.

The increases also reduced the province’s tax competitiveness, relative to other provinces. This is particularly worried given the marked increase in business taxes associated with the re-introduction of the PST. Almost all of BC’s competitors have moved to a value-added tax (HST), which exempts business inputs and lowers the cost of investment and business development. The re-introduction of the PST coupled with the increase in the corporate income tax rate means BC is decidedly uncompetitive right now with respect to business investment and entrepreneurs.

Attracting high-skilled workers, businesses, and entrepreneurs while encouraging those already here to invest and expand their businesses requires competitive taxes. That is why the province must develop and implement a plan to offset the impact of the re-introduction of the PST.

Lastly, the success of the economy and the growth in future jobs and opportunities will be closely tied to energy policy. While the Liberals’ estimates of job creation and revenues may or may not be realized, and environmental (and aboriginal) challenges remain, expanding natural gas production and exports will offer significant economic benefits to the people of British Columbia. 

The Liberals must resolve the Pacific pipeline problem. Whether it is expanding the Kinder Morgan Trans Mountain pipeline, the construction of the Enbridge Northern Gateway pipeline (or both), it is important for Canada's prosperity. And Premier Clark must recognize that window for BC to realize the profit from pipeline development is limited.

Balancing the budget, tax competitiveness, and sound policies to harness our natural resources can and should form the basis for prosperity and jobs in British Columbia.

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