BC’s unfair tax system means richest households pay lowest overall tax rate

(Vancouver) Public debate about taxes may be focused on the HST, but a new report suggests that the HST is only one piece of an inequitable provincial tax system, a system in which the richest 20% of British Columbians pay a lower tax rate than the rest of us.

The report, by the Canadian Centre for Policy Alternatives’ BC Office, examines changes to the overall tax system during the last decade, comparing the total provincial tax rate for households at different income levels. The total tax rate includes provincial income tax, plus MSP premiums and sales, carbon and property taxes.

“Most people probably assume that the wealthy pay a higher tax rate,” says study co-author Seth Klein. “That’s how income taxes work. But when we look at all taxes combined, it’s a different story.”  The report’s key findings include:

• In 2000, most BC families paid about the same total tax rate, with families in the top 10% and top 1% paying a little more.
• By 2010, however, the tax system had become regressive, with the richest 20% of households paying a lower total tax rate than the rest of us.

“A decade of income tax cuts has lined the pockets of the wealthiest British Columbians,” says co-author Marc Lee. Combined, provincial income tax cuts introduced since 2001 deliver an average of $9,000 per year to the richest 10% of BC households, and a whopping $41,000 to the top 1%.  In contrast, lower income households received an average tax cut of about $200 per year, and those in middle got just over $1,200.

The study finds that between 2000 and 2010, BC’s tax revenues fell by 1.7% of GDP, representing a loss of $3.4 billion in provincial revenue.  “Tax cuts come at a high price,” says co-author Iglika Ivanova. “If we’d kept our tax system the same, we’d have $3.4 billion more to spend on needed public services today.”

The provincial government now relies more heavily on MSP premiums, the carbon tax, and sales taxes for public revenue. These taxes hit lower- and middle-income households harder. British Columbians now contribute more to the provincial treasury in MSP premiums than businesses contribute in provincial corporate income taxes.

The study calls for a Fair Tax Commission to look at how we pay for the services and infrastructure BC needs, and to make sure everyone contributes a fair share.

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For more information or to arrange an interview with the authors, contact Sarah Leavitt at sarah@policyalternatives.ca or 604-801-5121 x233.