Provincial budget promises major tax cuts, housing assistance

http://www.canada.com/topics/news/story.html?id=89e9c614-cd62-4857-b6f5-5148ae611a43

This article talks about BC’s provincial plan to cut down on taxes. Over the next three years, the government promises BC citizens a $1.5 billion tax cut at the same time, they will also aid first-time house owners and the poor by making homes for affordable. They will also increase the number of homeless shelters for the homeless. Their plan is called Budget 2007 and its purpose is to have British Columbia a more attractive and safer place to live. Their plan includes a 10 percent reduction in income tax for every individual. For example, someone earning $50,000 will save about $350 and another person making $100,000 will save about $850 in taxes. This program is also expected to add seniors, with fixed incomes who are unable to keep with high property tax by allowing homeowners to defer their property tax at the age of 55 instead of 60. To add to this, the federal government has given BC extra funding for their anti-green house strategy, which is to prevent global warming. The plan also encourages more people to buy hybrid cars, by including a $2000 sale tax rebate. Without a doubt this will cost some serious money. However this is all possible because the Canadian economy had a surplus of $2 billion in revenue compared to last year. Despite all these good news, with US’s housing economy struggling as of late, it could have a huge impacts to BC, especially, the lumber industry.

Chapter 4 Relation- Consistency with Economics Objectives

The announcement of tax cut is huge for residents of British Columbia. This plan will be in effect for the next three years. The point of tax is to provide services that are accessible to the public without having to take out money out of their own pockets. So with lower tax rates, some might fear that the quality of public services will be reduced. However that won’t be the case here in BC. The reason why the government is able to reduce tax is simply because the economy is doing extremely well. In fact with reduced tax rates, it would further encourage the economy to boom, since people now have more money in their pockets to spend. However there is also another economic reason for the government deciding cut $1.5 billion tax over the next three years. That is to influence the allocation of resources. For example, one of the major issues that the government is facing is global warming, and their strategy is to encourage more people to purchase hybrid cars by including a $2000 sale tax rebate. Also with Vancouver’s recent price increase in housing, the BC government also included tax rebates for first-time house owners. Ultimately, their plan is to make BC a more attractive place to live, which would further improve the economy.

This is great news that BC government is going to cut taxes over the next three years, but like the article stated, the US economy is very influential to BC economy. If the market for US housing is unstable, the lumber industry will, without a doubt, take a huge hit, and since BC has such a heavy reliance on that industry many BC residents would feel the effects. Although reduced tax seems great for the next three years but what happens after that? Three years from now the Winter Olympics are coming to town. This would do two things. One, reduce quantity and quality of social services since most of the tax payers’ money are going towards it, and two, increase provincial taxes in order to make up for the over budget. I think people should look past the three years, and realize that tax will increase afterward because of the Olympics alone. However I doubt that would happen since many would be distracted by Canada’s success during the Olympics since they are considered to be one of the favorites to lead in medal counts.