BALDREY: Talk about pain, a new dialogue on taxation looms

The latest update to the state of the province’s finances is a reminder of two trends that have characterized the priorities of the BC Liberal government since it came to power in 2001.

One is its insistence on not raising personal income tax rates, and the other is its continuing minimalist approach to funding public education.

The BC Liberals boldly slashed income tax rates by 25 per cent almost immediately after assuming power, and one can argue that lost revenue has meant all kinds of services and programs have been short-changed as a result.

When the NDP government tabled its first budget in 1992, personal income tax revenues contributed 28 per cent of all revenue to government. The B.C. Liberals’ 2002 budget saw that percentage drop to 21 per cent.

In this year’s budget, personal income tax revenues will make up about 17 per cent of the budget – about the same percentage of the W.A.C. Bennett government’s budget in 1970.

Cutting income taxes has been the rage among all kinds of governments, in Canada and the U.S., whether they lean left or right. It’s a populist approach, but populism can lead to some unintended consequences down the road.

In this instance, spending pressures don’t disappear just because taxes do, and so the BC Liberal government has tapped into peoples’ pockets in different ways – steadily rising MSP premiums, for example – to make ends meet.

It has also shifting spending priorities, which brings us to education funding.

Back in 2002, funding for the K-12 education system took up about 19 per cent of the government’s spending dollars.

This year, that percentage has shrunk to barely more than 10 per cent, as funding for the system has essentially been frozen for a number of years. Of course, declining enrolment has played a role in this, but it’s not the only factor that explains this shift.

Another huge factor, of course, is the relentless financial pressure the health care system puts on the provincial budget, as it gobbles up dollars that in previous times may have been spent on other things.

Back in 1970, for example, health care spending took up just 20 per cent of all government spending. It had climbed to 37 per cent by the time the BC Liberals came to power and, on their watch, it has steadily grown and is nearing the point of consuming almost half of all the money collected by government.

In terms of sheer dollars, the comparison between the changes when it comes to funding health care and education is astounding.

The health ministry’s budget this year will be $7.5 billion higher than what it was in 2002, which is somewhat mind-boggling. By contrast, the education budget will have grown by less than a half-billion dollars in that same time period.

While it’s easy to dismiss the hysterical critics who accuse the government of trying to "destroy" or even privatize the education system, it’s true the system is not the spending priority it once was. And education funding has never been a major issue in any recent provincial election campaign, so the BC Liberals haven’t felt much public pressure in this area, with the possible exception of the current teachers contract dispute.

The number of voters who have children in the system has steadily declined over the years, as the Baby Boom generation ages and approaches retirement. And given the never-ending competition with the voracious health care system for more money, there doesn’t appear to be much chance of any dramatic change on this front – unless, of course, the tax regime changes. If personal incomes taxes (or corporate taxes) are given even a modest hike, it may increase available funding for things like education and social services.

But that would take a significant philosophical shift by the BC Liberals (although the Clark government did bump up the corporate tax rate ever so slightly), or pretty well any government for that matter.

And there is scant evidence the public is clamouring to pay more taxes. However, in the years ahead, as the quality and quantity of government services and programs inevitably decline, a new dialogue on taxation may have to take place.

Until we get there, however, some pain is going to be felt in a number of areas. We may not be paying more taxes, but we’ll be paying in other ways.

Keith Baldrey is chief political reporter for Global BC.

Keith.Baldrey@globalnews

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