Finance Minister Mike de Jong has boldly hired a truth-in-budgeting watchdog to monitor the 2013/14 pre-election budget that he has promised will be legitimately balanced.
Economist Tim O’Neill parachuted into Victoria this week to begin two weeks of analysis prior to budget day on Feb. 19. He’ll review the economic forecasts and, most importantly, revenue projections.
The former chief economist for the Bank of Montreal has a reputation for unwavering fiscal candor and has done this kind of analysis in Ontario, Nova Scotia and Ottawa. His findings will be made public on budget day.
The stakes in this fiscal gambit could not be higher for the Liberals. Given the state of slumping revenues from the resource sector there is no way they should be attempting to introduce a balanced budget.
There’s really only one way to guarantee a sufficient revenue stream and that is by increasing personal and corporate taxes. Talk about being between a rock and a hard place. On the one hand they are risking a budget day PR disaster if O’Neill is not amused by what he finds. On the other hand, they risk a public and business backlash over tax hikes.
In fact, it appears that a personal income tax windfall was built into the government’s fiscal plan back in 2012. In the agonizing process of retreating to the PST/GST from the muffed HST, the government reduced the income tax deduction thresholds of all British Columbians as of Jan. 1. While ardently claiming to be offering its hard working citizens the most attractive income tax regime in the country, the Liberals will collect more income tax this year by way of a $1,000-plus reduction of the basic and spousal pre-tax income thresholds.
The Canada Revenue Agency’s “Payroll Deductions Formulas for Computer Programs” publication places the B.C. basic personal exemption for 2013 at $10,276, a decrease of more than $1,000 from the 2012 basic exemption of $11,354. The spousal exemption for 2013 is set at $8,860, a decrease of more than $1,000 from the 2012 exemption of $9,964.
In every other province and territory, the 2013 figures are higher than the 2012 thresholds. For example: Alberta’s basic deduction increases more than $300 to $17,593 and Ontario’s increases $170 to $9,574. A senior federal revenue official says: “British Columbia has traditionally utilized the indexing method for the basic personal amount. Effective January 1st however, the amounts have been legislated without indexing.”
Back in December, de Jong said to achieve the 2013/14 balanced budget target, “we’ve still got $200 million to $300 million of work to do.”
But, it looks like half the work was already done through this income tax threshold change. My accounting sources calculate the reduction in the basic threshold will generate a minimum of $63 in new tax revenue per worker in B.C.’s workforce of about 2.5 million. That adds up to at least $160 million. And, that is without even factoring in spousal deductions.
The fact that the Liberals have hired O’Neill at significant risk reinforces their belief that being perceived as good fiscal managers is their best election campaign advantage.
However, in a Globe & Mail survey, 85 per cent of the newspaper’s readers say the appointment of the budget watchdog does not give them any more confidence about the government’s books.
The finance minister’s opus has been damned before O’Neill even gets his hands on it. M