Traditionally, finance ministers buy new shoes before a budget. Carole James ordered army boots.
The first boot was called the “speculation tax.” Wrong words. It is a frontal attack on private property, hitting foreigners and Canadians equally. There is so much dust in the air that the outcome is unclear at the moment.
For sure, thousands of ordinary British Columbians will have their family, work commute, vacation or retirement plans troubled by this one. With our declining dollar and even after the foreign tax, wealthy foreign buyers will find discount prices in the turmoil. They will then outwait this government in a way that ordinary people can’t.
The fuss from the first boot has forced some relief to actual British Columbians. Not much to other Canadians though, who are still (less heavily) targeted. It is a strange unequal vision of our country. Next time we take our seat around any federal-provincial bargaining table for whatever, B.C. can expect few friends.
But now for the much bigger one, the second boot, that has almost gone unnoticed. That is the sneakily named “school tax,” but no schools here. It is a revenue grab properly described as the “wealth tax.” When the label on a package is deliberately misleading, it’s time to sniff inside. This one stinks.
Economics 101: There are three basic things you can tax: income, transactions and wealth.
Income we tax progressively, at higher rates as the dollars rise. Those who earn more, pay more. No surprises, the principle is established.
Transaction taxes — mostly sales taxes on new things — are fine. You consume more, you pay more. That is a flat tax on value-added.
Transaction taxes on old things — used cars or houses — are not fine. No value is being added here. The result is a restriction on trade, which locks people in — into larger houses they should sell, for example. The property transfer tax is in this category, and the new five-per-cent rate is oppressive.
Finally we get to the “wealth tax” — what the NDP is calling the “school tax.” We have always had this in simple form, through real property tax. Everyone pays the same rate, notionally to pay for municipal services to property.
But this “wealth tax” is a big, big change from property tax and more confiscatory than all of the above together. For the first time ever, property is to be taxed progressively. The more valuable the property, the higher the percentage rate, yielding a devastating hit on ordinary homeowners in runaway real-estate markets.
No one knows the unintended consequences of this. The government admits it has done no studies. There has been no advance consultation of the sort that could have saved Gordon Campbell’s doomed HST.
There are some obvious dangers. The rates look small but already would extract huge dollars and, worse, will be very easy to change. That added 0.4-per-cent new top rate on total assessed value (every year) can quickly go to 0.6 per cent or higher — just the stroke of a pen in Victoria. That $3-million threshold can so easily be lowered bit by bit to $2.5 million or $2 million as the easiest way to stick it to lifetime savers.
Class warfare, here we come.
This tax is a direct threat to savings. Tax someone’s income this year and it can be replaced. Take someone’s savings each year, though, and bit by bit they are gone. Forget your inheritance, kids.
The “wealth tax” also stands to be a major deterrent. Wealth and talent very often go together. Why would any talented person come to such a uniquely unwelcoming place as B.C.? There are lots of other nice places in the world. This is not the way to become a “tech hub” — that super economic driver that politicians love to talk about.
The NDP is aiming for a redistribution of wealth. If that is your goal, surely there are better ways.
James is a decent human being. Some backroom ideologues wrote this tax. The whole situation just screams for a walk-back and the appointment of a committee or royal commission to look at the “wealth tax” as arguably the most radical change in tax policy in North America in 100 years. Forget the extra revenue for a year and discuss if this is right, or how it should be changed. Otherwise risk getting it very, very wrong.
A lot of people voted for change in the last election. I don’t think most people voted for huge, unknown and unintended consequences. Fabled Premier W.A.C. Bennett lasted 20 years, in part because he occasionally took a “second look.” Premier John Horgan might learn from that.