B.C. records $4.1-billion surplus this year

By Chad Skelton, Vancouver Sun
Published: Wednesday, July 11, 2007

The B.C. Liberal government announced a record $4.1-billion surplus today for the 2006-2007 fiscal year.

The surplus is more than six times the $600 million forecast by the government in the budget and a billion more than last year's $3.1-billion surplus.

Finance Minister Carole Taylor said the massive windfall shows the government's economic policies are working. But the NDP said the surplus is simply a result of the Liberals once again underestimating their revenues - and not spending enough on social programs like health care.

Taylor said the government has already dedicated $3.4 billion of the surplus to infrastructure projects across the province - such as upgrading hospitals and building roads. The remaining money - about $1 billion - will be used to pay down the debt.

The record-breaking surplus came despite a 29-per-cent drop in natural gas prices last year, which resulted in gas royalties for the province coming in $1 billion lower than expected. That drop was only partially offset by higher-than-expected forestry revenues, the government said.

While revenues from natural resources were much lower than expected, the government took in almost $1.6 billion more in tax revenues than it forecast - a result of the province's booming economy and rising employment.

The province's major Crown corporations also brought in $714 million more than expected - a result of lower energy costs for BC Hydro and increased casino revenues for the B.C. Lottery Corp.

While the government took in more money than expected, it also spent more. Overall, government spending was $534 million higher than budget. Health spending alone was $420 million over budget.

NDP house leader Mike Farnworth said he'd rather see the Liberal government invest more money in social programs like health care at budget time than come in with surprise surpluses at year's end.

"Once again, we've seen the government has deliberately underestimated the size of the surplus, and that's not helpful in terms of giving a true financial picture to the people of this province each year," he said.

However, Taylor said she's proud of her government's cautious approach.

"Yes, you can accuse me of being too prudent and too cautious," she said. "[But] what's the downside? You have a larger surplus we can spend on hospitals, schools and roads."

Taylor refused to say today if she planned to introduce more tax cuts in next year's budget.

However, she did say that, as part of the government's initiative to reduce greenhouse gases, there likely will be "tax changes" to encourage people to be more environmentally friendly.

cskelton@png.canwest.com

© Vancouver Sun 2007

And it'll only get even better as we get closer to 2010 and perhaps maybe even beyond.

We are rolling , I hope we never look back word to the days of the NDP again . ( stone age )
You can dislike the government all you want to but look at our Provincial position now , no way the NDP could have ever done this.

I think everyone in BC deserves a free slurpee.

Tax cuts proven to pay for themselves, Liberals say
NDP gives credit to booming economy

Chad Skelton, Vancouver Sun
Published: Thursday, July 12, 2007

When the B.C. Liberal government slashed income tax rates in 2001, it tried to calm the public's fears about cuts to government services with an interesting argument.

"I believe that those tax cuts will pay for themselves over time," said then Finance Minister Gary Collins.

The government's argument was simple, if controversial: that the 25-per-cent cut in income tax rates, and a drop in corporate tax rates, would jump-start the B.C. economy -- leading, in time, to more government revenues overall.

The NDP accused the Liberals of voodoo economics -- and some prominent economists cast doubt on the idea.

And indeed, for the first few years after the cuts, things didn't look good -- with personal income tax revenues dropping from about $6 billion a year to just $4 billion.

But on Wednesday, with the release of the public accounts for the 2006-07 fiscal year, the Liberals claimed they were right all along.

That's because, for the first time since they took office, revenues from personal income taxes were actually higher than they were before the 2001 cuts.

Personal income tax revenues in 2006-07 were $6.9 billion -- nearly a billion dollars higher than in 2000-01, the NDP's last budget.

"I think that these numbers are a really strong endorsation of our policies as a government," said Finance Minister Carole Taylor. "What this ... shows very dramatically is that, while tax cuts at first cause your taxation revenue to drop, as it stimulates the economy ... your tax revenues start to go up quite dramatically."

Not surprisingly, the NDP disagrees -- saying high commodity prices, not the Liberal tax cuts, are to thank for B.C.'s booming economy.

"The fact people are working in industries they weren't previously is why they're paying more income taxes," said NDP house leader Mike Farnworth.

Even economists are divided on whether Wednesday's numbers are the end of B.C.'s tax-cut debate -- or just the beginning.

Jon Kesselman, an economist with Simon Fraser University's public policy program, said he doubts the Liberals' tax cuts have really paid for themselves.

"It all gets back to whether those [2001] personal tax cuts can get credit for most of the economic growth we've seen," he said. "It's quite plausible they get credit for some of it. But probably not most of it."

In other words, said Kesselman, even though tax revenues are higher now than they were before the 2001 cuts, they'd probably be higher still if the Liberals hadn't cut taxes. Kesselman said he thinks the Liberals have a stronger case to make that their corporate tax cuts paid off -- because businesses often choose to locate in low-tax areas.

James Brander, an economist with the University of B.C.'s Sauder School of Business, is more impressed with the Liberals' tax cuts than Kesselman. He said it's well documented that higher tax rates don't always mean higher government revenues -- because people will be discouraged from working.

The tough part, said Brander, is figuring out at what point tax rates become so high they start losing the government money. But Brander said he's pretty sure B.C. was at that point before the Liberals took office.

"My reading of the evidence ... is before the Liberals took office, tax rates in B.C. were probably counterproductively high," he said.

And while there are a number of factors influencing B.C.'s economy -- including high commodity prices -- Brander said the Liberals' tax cuts appear to have worked.

"My best guess is that the tax reduction ... has generated enough economic growth to pay for itself," he said.

In February, the Liberals announced an additional 10-per-cent tax cut for those making up to $100,000. And Taylor said Wednesday her government is committed to further reducing taxes.

But Brander said the public shouldn't expect these latest tax reductions to have the same effect on the economy as the 2001 cuts. That's because tax cuts give the biggest boost to the economy when tax rates are unreasonably high, he said. When the Liberals cut taxes in 2001, said Brander, B.C. had one of the highest marginal tax rates in the entire country. Now it has one of the lowest.

cskelton@png.canwest.com

B.C. TAX CUTS AND TAX REVENUES

2000/01: Last NDP Budget

JUNE 2001: Within days of being elected, Premier Gordon Campbell announces a 25-per-cent across-the-board income tax cut. The cut doesn't take full effect until the following year

FEB. 2005: The B.C. government reduces taxes for those making less than $26,000

FEB. 2007: The B.C. government cuts income taxes by a further 10 per cent for incomes of up to $100,000.


© The Vancouver Sun 2007




It's a combination of a booming economy and tax cuts, and with a Liberal government allowing a booming economy to happen unlike the NDP.

We are rolling , I hope we never look back word to the days of the NDP again . ( stone age )
You can dislike the government all you want to but look at our Provincial position now , no way the NDP could have ever done this.

Well said.:applause: I like the NDP response of blaming the government for underestimating the surplus. I'll take those "happy surprises" anytime over the deficit riddled, "fudge it" budgets their government were so famous for.