Trudeau on Protests, BC budget

Two big things happened today.  First is Trudeau refused to meet with Andrew Scheer after his comments, but met with other opposition leaders and some even called him racist.  Reality is his speech mentioned most of the Wet’suwet’en are for the pipeline and this is about stopping a bunch of radical activists from holding country hostage.  I get after Oka and Ipperwash, government is reluctant, but they can always ask for blockades to be ended but with promise for dialogue.  More importantly vast majority of blockades are not indigenous or could care less about them.  Most are left wing activists who have little understanding of the issue and are just latching on to try and promote their anti-pipeline, anti-oil and gas policies.  As such asides from those on indigenous land, its time to start arresting protesters.  I am all for peaceful protesters, but you don’t have the right to interfere with others.  Go hold a big rally on parliament hill, but don’t disrupt the economy and harm others.  Never mind when people are inconvenienced they are more likely to be hostile to whatever you are protesting rather than sympathetic and goal of any movement is win over public opinion while this does opposite.  For few protests on indigenous land, best to promise to hold talks and dialogue but under one condition, only if they end blockades.  This can help bring a peaceful resolution to this.

Second part is BC budget and while mostly stay the course, the big bomb shell was tax hike on rich.  Now I know taxing the rich more is popular, but I think people need to look at facts before supporting it.  More importantly government should look at details not simplistic rhetoric.  I am not opposed to tax hikes on rich under any circumstance, but I do believe there is a certain level that is too high and once reached, it should not go any higher.  I also think continuously going back to rich every few years with tax hikes is bad policy.  Otherwise take the time to figure out right rate and if it needs to go up, do it once and do so because there are good reasons and benefits from it.  One of them things businesses trying to attract talent like is stability and predictability so one tax hike most can live with, but one every few years makes place seem less predictable which investors don’t like.

Here are the facts, top provincial rate was 14.7% in BC as recently as 2017 and NDP raised it to 16.8%.  Now it will go up to 20.5%.  That is a 40% increase in 3 years and usually this is only done in exceptional circumstances not when you have a balanced budget and growing economy.  Also the federal government under Trudeau raised top rates too so as recently as 2013, top combined marginal rate in BC was 43.7%, while now it will be 53.5%.  At 43.7%, raising a couple percentage points is no big deal, but 9.8% is a lot.  Never mind a big issue is wealthy are highly mobile so how competitive are our rates compared to others.  Before today’s announcement, BC had 3rd lowest top marginal rate in Canada, but was still slightly higher than Alberta and Saskatchewan, but lower than provinces east of that.  Now we are third highest and while similar to Ontario and Quebec, which I don’t believe it is wise to put our rates that high.  BC has debt to GDP at 15% while those two are at 40%, while BC has a carbon tax, those two do not.  As such we don’t need taxes as high.  Never mind BC is in Western Canada, not Eastern Canada and before hike, we were quite competitive.  Rates were 16.8% in BC, 15% in AB, 14.5% in SK, and 17.4% in MB.  With hike we are now 3.1% to 6% higher than our Western counterparts.  Not only that, we compared to the US we are even less competitive and now even higher than high taxed states like California.  On a global level if you check OECD stats (https://stats.oecd.org/index.aspx?DataSetCode=TABLE_I7), even most European and Nordic Countries don’t have top marginal rates as high as 53.5%.  At least at 45.8% like in 2015, 47.7% in 2017 or 49.8% in 2019, our top rates were reasonably close to most our competitors.  We may not be highest, but I prefer we aim for middle of pack, not lowest like Tory candidate Rick Peterson’s policy of a flat tax would create, but not near top either.  In fact as recently as 2014, Quebec tax review recommended top combined rates not exceed 50% and I agree with that recommendation.

Yes I am personally impacted, but like any proud Canadian I am not against helping others, I get upset when I feel I am being targeted to score political points, not to achieve some greater benefit to society.  Here are some facts to consider, in the 90s there was 9 point difference between top rates in BC and Alberta and you had a massive brain drain.  With this hike, it will be 5.5 points and while I doubt someone would move over a 1.8% difference, 5.5% might be high enough.  To make matters worse the 9.8% tax hike total brought in very little revenue.  Federally, PBO website (www.readyreckoner.ca) showed only $1.6 billion raised from Trudeau tax hike which 0.5% of total budget and only half what was predicted.  Provincially, NDP predicted $250 million for each tax hike so a total of $500 million which is 0.8% of provincial budget and that ignores behavioral change so if federal numbers anything to go by, likely half that will be raised.  So the amount raised is close to a rounding error and if you are going to make us less competitive at least have something big to show for it.  From a political standpoint, it makes a lot of sense as NDP wanted to avoid going into deficit as that would jeopardize their chances of re-election as well as they want trip up BC Liberals and playing class warfare great wedge issue.  Much of their base is disappointed at how slow progress has been so this will help fire them up while puts BC Liberals in a tough bind.  Promise to keep it, they lose fundraising advantage as many wealthy donors will only donate on expectation this gets repealed.  But promise to repeal it and allow NDP to turn away from bad economy to play whose side is each leader on and with most being middle class or working class, NDP can claim they are champions of them, BC Liberals of rich.  But I believe its time to start making policy on what is best for province and country, not what one’s elections.

I believe the way forward here for my two supported parties is as follows.  For Tories, promise a tax review to close loopholes as I am pretty sure any review will advise against top rates over 50% and it will likely produce similar results to the Mulroney tax reform in 1987.  For BC Liberals, much like in 2001 promise to cut taxes for all residents based on finances permitting.  Otherwise keep it vague to avoid falling into this trap, but because, cost of such tax cuts would be small it can easily be done after.  If elected and province has a surplus, proceed immediately to cancel at least one if not both top rate hikes, but also ensure there are tax cuts for lower and middle income earners too.  If it would throw province in deficit, then focus on getting budget back into balance as while tax cuts for rich not popular, if things are going well people don’t tend to care, but if done at time of austerity it can be political suicide.  More importantly as a proud Canadian, I want to live in a country that encourages success and entrepreneurialism so I feel the soak the rich attitude sends a message we are against success and innovation.  There are plenty of ways to help those left behind without high top marginal rates and a stronger economy such as developing our resources will mean more revenue regardless of rates which can be used to help those struggling.

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