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BALDREY: B.C. NDP bury ‘can’t balance the budget’ cliché

Finance Minister Carole James was rightly proud last week when the auditor general signed off on the books from the last fiscal year and agreed the budget surplus was a whopping $1.5 billion.
Carole James

Finance Minister Carole James was rightly proud last week when the auditor general signed off on the books from the last fiscal year and agreed the budget surplus was a whopping $1.5 billion.

So much for the tired old cliché that the NDP could not operate the proverbial peanut stand. Under James’ watch, the fledgling government – now two years old – has been putting up some pretty good numbers in its budgets.

A continuing strong economy means money is pouring into the government’s financial coffers, which is a good thing as the health-care system continues to gobble up tax dollars at an insatiable rate.

Nevertheless, the government’s public accounts also contained a bit of a warning about just how fast things could go wrong for those books should an economic slowdown occur.

James built prudence into her 2018-19 budget (as well as the current year’s), as any good finance minister would. Like her B.C. Liberal predecessor, Mike de Jong, she lowballed projected revenues on several fronts, particularly those linked to taxation.

Personal income tax revenues ended up being $1.5 billion higher than expected and corporate income tax was more than $1 billon higher. Countering that somewhat was a $400 million drop in property transfer tax revenues.

That is a lot of money moving around in supposedly unanticipated ways. It is also a reminder that taxes can have a volatility that can make or break government budgets.

Which brings me to the table on page 13 of the government’s public accounts, as prepared by the province’s comptroller general. It charts where government revenues have come from the five past fiscal years and breaks them down into seven categories.

Those categories are taxation, contributions from the federal government, fees and licences, miscellaneous, contributions from Crown corporations, natural resources and investment income.

What is interesting about this chart is that it shows over the past five years, the only significant area of growth when it comes to those categories is the taxation one. Taxation revenues have climbed almost $10 billion over the past five years and now account for almost 60 per cent of the overall revenue total, up from about 50 per cent five years ago.

That big jump occurred while the other categories’ growth was minimal or had even flat lined.

James said the steady and substantial growth in tax dollars is the result of a well-performing economy – which means people are earning incomes, paying taxes and spending money, which is further taxed – and I do not doubt her.

The B.C. economy has been chugging along for years now, and allowed first the B.C. Liberals and now the NDP government to post some impressive budget surpluses.

The NDP has introduced some new taxes – the employer’s payroll tax and the speculation tax are the two most notorious – but it has also scrapped a big one as well: the Medical Services Premiums. Nevertheless, the NDP is just as addicted to taxation as any other government.

However, this increasing reliance on more and more tax dollars to pay for things like the inevitably huge annual increase in health care spending alone – $500 million to $1 billion a year – exposes a government to a potential deficit situation should the economy start to slow down by even a minor degree.

An economic slowdown will reduce personal income tax revenues, corporate income tax revenues and sales tax revenues. Based on the trend of the past five years, the lost revenue is unlikely to be made up from other areas (barring a big increase in tax rates or bleeding a Crown corporation dry).

A budget deficit would likely reduce the government’s currently strong credit rating, which in turn would make it more expensive to borrow money to build such things as badly needed infrastructure projects.

Of course, there are no signs of a slowdown yet although some economists insist another worldwide recession is just around the corner.

This uncertain state of affairs is what keeps finance ministers like James from boasting too much about the government’s economic performance. She knows that disaster can strike at any moment.

For now, though, she can keep smiling. Just two years into the job, and the good times continue to roll.

Keith Baldrey is chief political correspondent for Global BC.

Keith.Baldrey@globalnews.ca