ASK A BRITISH COLUMBIAN ABOUT TAXES, and you’ll likely hear some variation on the idea that everyone should pay their fair share. Most people assume that the wealthy pay more, not only in straight dollars, but also a higher tax rate as a share of their income. So they would be shocked to learn that, in reality, that is not how our provincial tax system works.
This report examines changes to the provincial tax system over the last decade. We look at the total provincial tax rate for households at different income levels (the actual tax bill as a share of household income for all personal provincial taxes combined—income, sales, carbon and property taxes, and MSP premiums).
We find that together these changes have created a tax system where the rich now pay a lower total provincial tax rate than the rest of us.
- In 2000, most BC households paid about the same total tax rate, with households in the top 10% and top 1% paying a little more.
- By 2010, however, the tax system had become regressive, with the richest 20% of households paying a lower total tax rate than the rest of us.
This regressive tax shift was driven by the following:
- Large income tax cuts primarily benefited upper-income earners, both in dollar terms and as a share of income.
- Combined, tax cuts delivered an average of over $9,200 per year to the richest 10% of BC households, and more than $41,000 to the top 1%. In contrast, lower income households received an average tax cut of $200 per year, and those in middle got just over $1,200.
- As a share of income, this translates into a 3.6% savings for the richest 10%, and a 5.1% savings for the top 1%. For the bottom half of households, in contrast, the tax cut benefit was about 1% of income.
- BC now relies more heavily on regressive taxes: MSP premiums, the carbon tax, and sales taxes.
These taxes hit lower- and middle-income households harder. Changes in tax policy have shifted the provincial revenue mix:
- Between 2000 and 2010, the share of provincial government revenues coming from personal income taxes dropped by nearly one third.
- The province now collects more revenues from sales taxes (28% of revenues) than from personal income taxes (27% of revenues).
- BC families now contribute more in MSP premiums than businesses contribute in corporate income taxes.
British Columbians pay for tax cuts in reduced public services:
- Between 2000 and 2010, BC’s tax revenues fell by 1.7% of GDP (the size of the province’s economy). That may sound like a small change, but it’s equivalent to $3.4 billion. Meaning, if we’d kept our tax system the same, we’d have $3.4 billion more to spend on needed public services today.
Publication Date:
2011
Location:
BC, Canada