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The 2016 BC Budget: High Marks for Fiscal Management...
But BC Must Do More to Improve Competitiveness
The Business Council's commentary on the budget unveiled by Finance Minister Mike de Jong on the afternoon of February 16. Budget 2016 tells a generally upbeat story of British Columbia’s economic performance and fiscal health. Economic and job growth are running above the national average, and BC is one of only two provinces expected to post a balanced operating budget (or surplus) both this year and in 2016-17.
- Budget 2016 foresees three more years of operating surpluses for the provincial government in the $600 to $700 million range. The budget is built around conservative revenue and growth assumptions, making it likely that the government’s targets will be met or exceeded.
- The budget revamps MSP premiums, providing relief for single parents with children and, to a lesser extent, couples with children. But basic MSP rates go up 4% a year, meaning most businesses that pay these premiums for their employees will face higher operating costs.
- The government took steps to spur additional home construction by exempting new homes up to a value of $750,000 from the property transfer tax (PPT). A higher PPT rate will be levied on properties above $2 million. The province will start collecting data on foreign ownership of residential property.
- There were a few minor tax measures for business (extending tax credits for mining and providing PST exemptions to parts of the agriculture industry), but Budget 2016 contained little that will improve BC’s competiveness or attract new business investment.
- That said, it is encouraging that, apart from MSP premiums, there were no other tax increases. The government is creating a Commission to review the overall competitiveness of BC’s tax system, a welcome step that the Business Council has pushed for.
- Capital spending rises by more than $1 billion in fiscal 2016-17. As a result, taxpayer supported debt climbs – but the ratio of taxpayer-supported debt to GDP still edges lower over the next few years.
- The government will establish a BC Prosperity Fund that will see an unspecified amount of non-renewable resource revenue saved to help eliminate the province’s debt over time and make investments in health care, education, transportation, social programs and other priorities.