B.C.’s NDP government will likely raise taxes and increase government spending

Yesterday, British Columbians finally found out who will govern the province. The NDP, led by John Horgan (pictured above) and supported by the Green Party, was given an opportunity by B.C.’s lieutenant-governor to form government.

Which raises an important question: what are the likely fiscal policy implications of a Horgan-led government, propped up by the Greens?

Of course, the details will become clear when the new government tables its budget. But if we extrapolate from the policies contained in the NDP-Green power-sharing agreement and those common to both parties’ election platforms, then British Columbians can expect higher taxes, increased government spending and a return to deficit spending.

Consider the NDP-Green tax increases, which include higher carbon, personal income and business taxes. Specifically, the NDP-Green agreement calls for a non-revenue neutral increase in B.C.’s carbon tax from $30 to $50 per tonne by 2022. It also commits to expanding the types of activities covered by the tax.

Both parties have also called for increasing personal incomes tax rates. The NDP wants to raise the marginal tax rate on British Columbians earning above $150,000 to 16.8 per cent from 14.7 per cent while the Greens promised to increase personal income taxes on those earning over $108,460.

And both parties said they want to hike the general business tax rate from 11 to 12 per cent.

As a recent Fraser Institute study found, the NDP-Green tax changes, once fully implemented, would add $1.4 billion a year to B.C.’s total tax burden—that works out to $594 higher taxes for the average British Columbian family.

In addition, the NDP-Green tax changes would make B.C. a much less-attractive place to invest, work and engage in entrepreneurial activities.

While the NDP campaigned on increasing government spending, they did commit to a fiscal framework that maintains a balanced budget. But the deal struck between the NDP and Greens commits the NDP to policies and government spending not part of the NDP’s election platform.

If premier-designate Horgan keeps the NDP’s election promise to balance the budget, that means other spending must be cut or additional taxes must be raised. If not, the new spending will likely be financed by deficits.