Budget 2017 is a good news budget. While it falls shy of being a “something-for-everyone” document, it does announce some useful tax/premium reductions along with increased spending in a number of high priority areas. It also extends the province’s track record of sound fiscal management. Apart from the risk stemming from the high debt load of certain Crown corporations, Tuesday’s budget reinforces BC’s top notch credit rating.
On February 21st, Finance Minister Mike de Jong introduced a pre-election budget consistent with the government’s commitment to balancing the books, while also managing to deliver some targeted tax relief and spending increases. Critics will say these are simply pre-election perks, but we see it differently. Years of solid fiscal management coupled with stronger-than-anticipated economic growth provided the government some maneuvering room.
- BC Budget 2017 anticipates three more years of operating surpluses for the provincial government in the $250 to $300 million range.
- However, the new Budget builds in plenty of cushion which suggests the province will exceed its budget targets and realize even larger surpluses.
- Tuesday’s document contained some tax relief for both individuals and businesses. The single largest measure is the halving of MSP premiums over the next couple of years for households with incomes below $120,000.
- For businesses, as advocated by the Business Council, PST is being removed from electricity. This is a welcome move, especially for energy intensive sectors selling products into competitive international markets. The small business tax rate is trimmed from 2.5% down to 2.0%. Business will also benefit from the MSP premium reduction.
- The most significant spending increases were channeled to the K-12 education system as well as to programs for families and individuals in need.
- Consistent with the Business Council's recommendation, government capital spending rises by $1 billion, with the funds going to build and refurbish infrastructure in the education and health sectors, and to improve transportation infrastructure.
- The additional capital outlays contribute to higher levels of tax-payer supported debt. Provincial debt, however, remains manageable and low by Canadian standards. The debt grows more slowly than the provincial economy, so the tax-payer supported debt to GDP ratio falls from 16.1% this year to 15.9% next year.