If you think the Horgan government’s pandemic generosity extends to the higher-incomed, then the 112th Edition of the Canada Revenue Agency Payroll Deductions Formulas is instructive reading.
In it there is the news of a looming Canada Day surprise – fireworks, but the emotional kind – for larger earners in British Columbia: A hefty, prorated, belated and retroactive tax hike.
The February 18 provincial budget introduced a new top tax bracket on taxable income of more than $220,000, imposed a 20.5% rate on it, and made it retroactive to January 1 of this year. (Only Quebec and Nova Scotia have a higher tax.)
The budget hasn’t become law yet and the tax hasn’t been collected.
But it certainly hasn’t been forgotten. Far from it.
In the CRA document is news that the new tax rate will be collected starting July 1 – not at the 20.5% rate, but at a pro-rated amount for last six months of 2020 that claims the difference between the old rate at that income level and the new rate.
That will make it 24.2% on each dollar earned above $220,000. Make an extra $1,000, pay $242 to the province. A year ago, by the way, this provincial rate was 16.8% on income over $157,748 – so, a roughly 50% increase in one year in those earnings north of $220k.
Let’s not forget the 33% federal rate on income of more than $214,368, too, so the overall take is about 57% on that taxable income starting next month.
The 2020 provincial budget is due to be dealt with when the legislature resumes June 22. The federal budget hasn’t even been introduced. Nevertheless, the show goes on.
As governments of all stripes provide relief, make concessions and forfeit revenue in the pandemic, the only real tax change coming in the province targets those with incomes that spend the most on the very goods and services that might reboot the economy.
The province’s website has a lengthy list of deferred and delayed taxes: on sales of sweetened drinks, fuel, tobacco, on the carbon tax, on logging, on the payroll health tax, on the school tax for commercial property, on property taxes for rural areas, among other things.
The NDP has likely surveyed the public, or just asked around the cabinet table, and found little sympathy for top earners. The prorated penalty has to feel delicious for a party that can’t quite shed its tradition of class conflict.
It is, though, little better than opportunism. The money is there to grab, after all.
What it does in an immediate sense – apart from taking income earned during the pandemic and keeping it from being recycled through consumer spending into a besieged economy – is to further make the province uncompetitive.
At the time, the provincial budget was considered a bit of a nothingburger, a placeholder for what most expected to be a pre-election budget of goodies.
I was no clairvoyant, but I asked Finance Minister Carole James on budget day what contingency plans the government had to deal with the coronavirus. Her answer indicated it hadn’t emerged as any kind of an issue upon which to focus. Pressed, she eventually said government would look at assistance if it were needed, but she clearly didn’t have anything handy to impart in the way of a plan.
That was mid-February, what seems an eon ago. Here we are, discombobulated, with massive unemployment and economic struggle and consumers clearly quite tentative in the tepid reopening of business.
Next on the agenda: take more money away from people who are able to spend.
As uncomfortable as it might seem to defend high-income earners, it would be wise to place another tax holiday on the table here. The stores and restaurants need the dollars coming in the door more than the government does at the moment.
The time will come for the province to reckon with the revenue base, and most surely people earning more will pay more. That is in the NDP’s DNA and it’s doubtful the species will evolve. But for the time being, available cash has to rebuild communities and protect their jobs hour by hour, transaction by transaction. We are in nothing less than this urgency.
Kirk LaPointe is the publisher and editor-in-chief of Business in Vancouver and vice-president, editorial, of Glacier Media.
