Tax Cuts, Government Reform Largely Imaginary in B.C.

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Appeared in the National Post, December 29, 2003
Many Canadians, and the public in B.C. in particular, believe that the Campbell government has instituted a package of radical reforms including large spending reductions, massive tax cuts, and unprecedented privatization. The reality, however, is much different.

According to the latest report from the Office of the Auditor General of British Columbia, total direct government spending in 2000 (the last full year of the NDP’s tenure) was $25.8-billion. In 2001, the Liberal’s first year in office, spending increased by $1.7-billion -- 70% of which went to health care and education. In 2002, the Liberals increased spending again, this time by $2.3-billion. While the growth of government spending slowed in 2003, total direct spending is expected to be $30-billion, up $200-million from last year. All told, the Liberals have cranked up spending by 16% ($4.2-billion) since the spendthrift NDP left office.

What has most certainly taken place is a reprioritization of spending. Health, and to a lesser extent, education, are consuming more and more provincial dollars, which means less is available for other areas. This is not, however, a phenomenon unique to B.C., as most provinces are grappling with increasing health costs.

In addition, the size of Premier Gordon Campbell’s tax cuts has been largely exaggerated. In 2001, the B.C. Liberals reduced personal income taxes, business taxes, and a host of other taxes, totalling $1.4-billion. Since then, however, the Liberals have reversed course. They have increased sales taxes, property taxes (twice), tobacco taxes (three times), the gas tax, and a host of other minor taxes. From 2001 to 2003, taxes have been increased by a total of just over $1-billion. Conceptually, the Liberals have cut about $400-million net out of a budget that is expected to collect $25.2-billion from taxpayers this year -- not exactly major tax relief.

With respect to privatization, the headlines would make one believe that a host of industries are being uprooted and turned over to the private sector. The reality is that the B.C. Liberals have done very little. British Columbia maintains the third-largest Crown corporation sector among the provinces. In many of these cases, there is no compelling reason for government involvement. The lack of reform has been clearly demonstrated in the recent u-turn in the privatization of B.C. liquor stores. In fact, the only privatization to date is the sale of B.C. Rail. Privatizations remain the exception rather than the rule.

Another concern is the unwillingness of B.C. Liberals to confront union pressure and reform our labour relations laws. B.C.’s labour relations laws are the least flexible in Canada, behind only Quebec. While Quebec’s newly elected Liberal government is reforming its labour laws, B.C.’s government has again done little. Unions in B.C. are still protected by the ban on the use of replacement workers during strikes, the treatment of technology that requires notice to unions of its introduction, successor rights, and closed-shop legislation that forces workers to join and support them as a condition of employment.

Simply put, the public’s perception of the B.C. Liberal’s reforms has little basis in reality. To make matters worse, the B.C. Liberals are paying the political price for these (nonexistent) radical reforms without actually enjoying their economic benefits. As such, British Columbians may begin to associate genuine reform -- namely spending reductions, tax cuts and privatization -- with a stagnant economy. This is of great concern for those that know that less government involvement leads to higher rates of economic growth.

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