Here we are at the half way point in the BC election and the BC Greens have released their whole platform. I’d been waiting for this release of the full platform to write up my comment. The pieces that had been released had caught my eye and the eye of many others as being actually very interesting, well thought out, and based on evidence. I think people did not want to jinx it by being overly optimistic to early on. But certainly when the Green’s released their plan to use mobility pricing to address congestion, well that was too much for this economist, earning the BC Green’s membership in the Economist Party of Canada.
All joking aside it is now time to get into the platform. I took it along as my reading material for my varied medical appointments and it provided an excellent read (along with conversation fodder with those in the waiting areas and the medical staff). People actually have a lot of really interesting questions to ask folk like me, people who are non-partisan and fairly informed on public policy matters. We had some really good chin wags and people were really interested in getting some facts on things like what was the BC debt situation, how much would day care costs and how would we pay for it, and do deficits really matter. I wish people knew that they could just ask people like me their questions. Did you know you can? Go ahead and tweet, email, or call. I’ll do my best (and I am more likely to answer the real questions and not the ones that are some variant about me being some paid hack for one of the political parties—full disclosure, not a single one has paid me or even asked me my opinion).
As always, I am going to focus on those items that are in my bailiwick. What is actually really helpful and quite refreshing is that the BC Green Party Platform starts with what I would call their guiding principles. These principles help get a sense for what the policies are intended to achieve. There is so much in this platform that it is hard to focus on just a few things, but here are a few considerations (if you are interested in post-secondary education analysis of the platforms, see Alex Usher here, you will see he is not so bully on some of the Green elements including the “ungodly bad idea to create in BC the same graduate tax credit rebate that New Brunswick, Nova Scotia, and now Manitoba all have had a shot at”).
On page 16 of the platform it says “Work with the federal government to streamline business and consumption taxes to avoid distorting effects on business investment decisions and to promote risk taking and innovation.” Well, holy hell! Could that be a commitment to finally do away with the completely inefficient PST system and getting us into the 21st century with an HST? I guess that is a question to put back to the BC Greens because that is sure how I, lowly tax economist, reads it and that gets me excited.
Look, I know this is a sore point in this province. I am with you that the BC Liberals completely messed up the implementation of the HST in this province. They failed abysmally and in every way in the way they announced, communicated, and implemented this hot potato and the end result was not surprising. But the problem was that it was good economics. The PST is a real drag on the BC economy; it reduces investment, slows economic growth, and leads to lower quality employment. Not particularly, the Expert Panel on BC’s Business Tax Competitiveness said
In particular, unless the PST burden on the investments BC businesses must make to remain competitive is reduced, some of BC’s recent gains in investment levels will be put at risk and this, in turn, will result in fewer job opportunities for BC workers. This core issue informed the Panel’s work and its recommendations
And, upon being direct specifically by the Minister of Finance not to recommend a return to an HST:
The Panel urges the BC Government to undertake a comprehensive assessment of a made-in-BC value added tax. The Panel believes that an alternative such as the Business Transfer Tax (BTT) discussed in the Report is a feasible option to replace the PST.
We need put emotions aside and have a logical discussion about this. There are in fact some real options moving forward including moving forward on the BTT as outlined by Kevin Milligan, the Expert Panel on BC’s Business Tax Competitiveness, or going with an HST as outlined by others. Kudos to the BC Green’s for being willing to revisit this discussion, unlike the BC Liberals who lack any degree of leadership on this topic despite promoting themselves as economic leaders.
Basic Income Pilot
The BC Greens have committed to “draw on experience in other jurisdictions to design a basic income pilot to test whether giving people a basic income is an effective way to reduce poverty, improve health, housing and employment.” I certainly hope one experience they will wait to draw on is Ontario which just announced yesterday that it is rolling out their pilots in Hamilton, Thunder Bay, and Lindsay (no relation ;-)). They will also announce an Indigenous community in the Fall, I believe. I also believe that we will be seeing results of this pilot around 2020 and I certainly hope the data will be made accessible to academic researchers! There is certainly a lot to be learned from these pilots, but do not mistake how much this is going to cost. And given the amount of time and effort BC will put into a pilot there is no reason for us not to wait for Ontario to do theirs, learn from these pilots, and then design ours based on their lessons. And let’s remember, if we move ahead with a basic income, this is not cheap, not by a long shot and the BC Greens are already taxing and spending for a very aggressive platform.
Various Property Taxes
The Greens have proposed various measures to cool the real estate and Tom Davidoff provides his always excellent assessment of these measures. There is one, though, that really gets mine and Kevin Milligan’s goat and that is the proposed measure to tax lifetime capital gains in excess of $750,000 on principal residences. There is this issue in that the provinces (excluding Quebec) have all signed the tax collection agreements. In signing those agreement the signing provinces have agreed to a common definition of taxable income that is set by the federal government. The federal government has established that the capital gains from a principal residence is exempt from capital gains taxation. This means a provinces cannot tax that income. And no, this is not a matter of a shrewd one off negotiation because this is the heart of the tax collection agreements. Now we know that Ottawa is eyeing the principal residence exemption. Effective for the 2016, all tax filers who sole their principal residence are now required to report the sale of that residence to qualify for the exemption or face stiff fines and penalties. It has been rumoured that this is the first step towards a life time cap, but it will be years before that comes into play. In the meantime, the Green’s will not be able to deliver on this platform promise.
UPDATE: Now come people are suggestion that the Greens could be proposed to do this through the property transfer system. First, their language suggests otherwise. Second, yes, such a tax has been proposed by Rhys Kesselsman but as noted by Kevin Milligan
— Kevin Milligan (@kevinmilligan) April 26, 2017
Measuring the Economy
The BC Greens note that GDP is but one measure of how the economy is growing. This is very true. GDP is simply a measure of the “total unduplicated value of the goods and services produced in the economic territory of a country or region during a given period.” It is designed to measure certain (but not all) economic activity and is certainly not a measure of social or even economic welfare. Economists have developed many alternative measures with the intent of better assessing social welfare but nothing really provides a single result or indicator. Despite our protestations, GDP continues to be used by others as though it is THE measure of life, the universe, everything (42!). The BC Greens are, instead, proposing to develop a genuine progress indicator based on a range of indicators based on the social determinates of health. While for those more used to mainstream economic indicators this might sound out there, but economists have been long working in this area. I don’t think any one has been signed off on as being ready for prime time, but I think there is enough established knowledge in this area to make some real headway here. And my colleague Lynda Gagne as done a lot of work in this area as well and I am sure would be very interested in working with Andrew and his team.
Tolls & Congestion Pricing
Unlike the BC Liberals and BC NDP, the BC Greens are not going to eliminate tolls, instead they are going to work with the Metro Vancouver Mayors to develop and implement a rational tolling system to management congestions and finance the region’s share of the transportation plan. As I said when parsing the BC NDP platform, infrastructure is expensive and someone needs to pay for it. Not only is infrastructure expensive but in a major cities many of our roads and bridges are hugely congested as everyone gets into their cars and drives everywhere. Congestion is a fairly simply concept, things become congested when demand exceed capacity. I am sure it will come as no surprise that the origin of the concept of using prices to manage congestion is an economist, William Vickrey to be exact. He proposed increasing fares on public transit during rush hour to manage demand. He later extended the concept to road pricing. Now most people view congestion pricing as a tax grab, similar to the reaction to a carbon tax, but that can be battled by ensuring that the congestion pricing is properly communicated as revenue neutral by reducing property taxes. This is in fact an ideal situation since funding transportation infrastructure through revenues from a congestion charge rather than through property taxes is ideal as the former’s level is linked to the consumption of the funded service.
The Fiscal Plan
One thing that is impossible to summarize in this blog is the social investments that the BC Greens are outlining in their 97 page document. The BC Greens are committing to massive spending in BC, from health care to education to public safety to municipal infrastructure. By the end of the four year period, spending will have increased to nearly $4.4B in just 2020/2021 a year. To fund this increase, the BC Greens will obviously have to raise taxes. Unlike the BC NDP who opt to waive their magic wand and ignore this issue until after the costing period, the BC Greens tackle it face on. And folks it is not pretty and it gives you a good idea of what is behind the BC NDP curtain. I applaud the BC Greens for the transparency they do provide in this area, though they are still lacking some details.
Here is where the money will come from:
- The BC Greens commit to raising the BC Carbon Tax to $50 per tonne by 2021, one year before the timeline set by Justin Trudeau for the provinces to meet the set floor and one year before Alberta’s Carbon Tax is set to hit $50 per tonne as well. But what I did not see in this plan is any increase in the low income transfer. Maybe I missed it. In the appendix I see this “A BC government will also act to protect those on low incomes from any adverse effects of the carbon tax increases” but I don’t see a spending line item. I also note in the appendix that the BC Greens end the commitment to revenue neutrality (and so the Economists Party takes back their membership card). By 2020/21 the revenues from this increase will total $865M a year.
- The BC Greens buck the trend and will not, or so I read, commit to the 50% reduction in MSP premiums. Which given the substantial investment in health that they are outlining in their platform, that is reasonable. Look, health care is already expensive and eats up 50% of the BC budget as it is and that is without addressing the pressures that we have related to the opioid and mental health crises. To think we can eliminate the MSP and fund health care pressures is dreaming in gum drops, unicorns, and candy can kittens. The BC Greens are being honest and realistic with tax payers by committing to eliminating the MSP premium in full and instead immediately rolling funding to health care into the pay roll and income tax system in what sounds a lot like Option 2 proposed by Iglika Ivanova here. All in, the revenues from this will amount to $810M by 2020/21.
- The BC Greens will, much like the BC NDP, raise person income taxes but unlike the BC NDP are not clear on what this means for you and I. This is a vague promise that says “Begin the transition to tax fairness by increasing the share of taxation contributed by those earning over $108,460 per year over four years by 1% in 2017/18, rising to 3% in 2020/21. The BC Greens indicate that they will raise $275M a year by 2020/21 from this initiative but I have no idea how. That is what rates and for whom. The current rate for those over $108,460 is 14.7%. The BC NDP have promised to raise the rate for those over $150K to 16.8% and indicate they will raise $250K a year from that. Here is where I think the BC Greens should be much more transparent: how much and for whom because there are many permutations and combinations that potentially get the same revenue but voters should know the rates a priori.
- Like the BC NDP, the BC Greens will increase the general corporate tax rate to 12% which actually I was reminded the Expert Panel on BC’s Business Tax Competitiveness recommended it be increased to 11.5%. If the Green’s proceed with movement on the PST and a few other small items on business competitiveness then this can be argued as being in the realm of a revenue neutral move.
- The BC Greens believe they will raise $500M a year from their housing measures discussed above but the revenue from their ill-conceived principal residence capital gains tax measure will have to be netted out.
- The BC Greens will spend all the expected surplus, contingency, revenue growth, and the like netting them a whopping $800M a year by 2020/21. This means there is no room for fudge, emergencies, debt payment, credit rating downgrades, nothing, nada. It’s a bit risky.
- The Greens will expect to net about $450M a year by 2020/21 from three really interesting initiatives. First, the BC Greens get their membership card in the Economist Party back again as they will eliminate all boutique tax credits which is awesome because these things are nothing but a waste of money. Remember, say it with me: taxing you all year to give it back to a chosen few at tax time does not constitute a tax cut! Second, they will establish “a working group to develop proposal for an overhaul of the tax system that will reverse the trend to regressive taxation, streamline and simplify the tax system, and remove perverse incentives and distortionary effects.” Rock on. I think this is great (hmmm, what will the working group do if all the boutique tax credits are gone?). There is only so much that can be achieved at the provincial level, but since there is equal appetite at the federal level, there is much that could be done. And piggy back this with a mandate to crack down on the underground economy (that is not in the platform but a nudge is as good as a wink) and Bob’s your uncle as us Brit’s say. And may I say, I might know a gal for you *winks*. Third, they will, perhaps with the help of the working group “develop options to shift taxes in order to incentives choices that benefit society and disincentive choices that are harmful and costly.” That could be a sugar tax, which might not change choices but is amazing tool to raise revenue!
- The BC Greens will raise about $150M a year by 2020/21 from resource rents, fees, and licenses. Hmmm, not sure what this is linked to the platform and a word search got me no love.
- Finally, and again a word search got me no love, there is $460M a year from internal repurposing. This might be similar to the BC NDP proposal for an internal review for waste and eliminate waste and inefficiencies. The federal Liberals ran with a similar item in their platform and the Chretien/Martin Liberals had a similar exercise. In fact, most incoming governments come in with similar exercises. It is a lot of money to find, but it is not unrealistic and at least the BC Green’s have guiding principles to inform this process.
Finally, in the fiscal plan section, the BC Green’s are proposing balanced budget legislation which is not something that is necessary. Balancing a budget over a business cycle is the point of fiscal policy. So it is really unnecessary but I imagine that this is just a line item to play into some BC Liberal swing voters.
So there you go, the BC Green Plan. It is certainly more transparent on the funding side that the BC NDP. There is still room for more transparency and clarity, but if you want your government to make these kinds of investments in social programs in this province, these are the tradeoffs.
So there you have it. You now have all three platforms. It is a lot to digest. Now go read them yourselves and be sure to vote on May 9! I know I will.