Post on 14-Jun-2020
Progressive Tax Reform: Tax Options for Raising New Revenues
Seth Klein December 2013
www.policyalternatives.ca
Thursday, December 12, 2013
Overview
Why BC needs tax reform
Changing the public conversation
Options for raising new revenues
Where do we go from here?
Thursday, December 12, 2013
The context
• Two great inconvenient truths of our time:- climate change
- growing inequality
• We need additional revenues, but....
A decade+ of tax cuts = provincial tax revenues as share of GDP 1.6%
= $3.5 billion/year foregone revenues
Thursday, December 12, 2013
Provincial income tax revenue as a % of GDP
If BC taxes were = to the Canadian average, we’d have $2.4 billion more
Thursday, December 12, 2013
The changing mix of BC’s taxation system: revenues by source
Source: Iglika Ivanova’s calculations based on BC Ministry of Finance documents.
Thursday, December 12, 2013
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Poorest 10% Decile 2 D3 D4 D5 D6 D7 D8 D9 P90-95 P95-99 Top 1%
BC total tax rate by income group, 2010
Thursday, December 12, 2013
Fundamental shifts within BC’s revenues
corporations households
upper-income households middle & modest-income households
progressive income taxes regressive consumption taxes, MSP premiums, & user fees
FROM... TO...
Thursday, December 12, 2013
So what’s the solution?
• What taxes should be increased?
• How can we raise revenues in a fair and progressive manner?
• How do we talk about this with British Columbians when so many are struggling with affordability challenges?
Thursday, December 12, 2013
Changing the public conversation about taxes
Thursday, December 12, 2013
Only 10% say there should be no tax increase at all at any level
If personal income taxes were raised on some individuals in BC so the revenue could be used to reduce income inequality, protect the environment and improve access to public services,
at what income level should people start paying more taxes?
All income levels 5%
$55,000 per year 9%
$70k 19%
$85k 32%
$100k 57%
$150k 75%
$200k 84%
$250k 90%
cum
ulat
ive
% o
f res
pond
ents
Thursday, December 12, 2013
What about major corporations?
67% of respondents say they are asked to pay less tax than they should
44% say they pay much less than they should
60% of Liberal voters say less than they should
64% of Conservatives voters say less than they should
Thursday, December 12, 2013
When you think of all the taxes you pay, do you feel that...
You pay much more or a bit more tax than you should
71%
You pay about the right amount in taxes
27%
You pay a bit less or much less tax than you should
3%
Thursday, December 12, 2013
Thursday, December 12, 2013
Provide more access to home and community based health care services for seniors
69%
Eliminate Medical Service Plan premiums 61%
Protect BC’s forests and endangered species 58%
Increase welfare rates to ensure the poorest British Columbians can meet basic food and shelter needs
53%
Reduce class sizes in K-12 education 52%
Invest in an affordable housing strategy 51%
Make public transit more accessible and convenient 51%
Reduce the provincial debt 48%
Reduce tuition fees for post secondary education by 50% 47%
Create a $10/day child care program 47%
Fund home and building retrofits to reduce BC's greenhouse gas emissions
44%
% w
illing
to p
ay a
hig
her
shar
e of
ow
n in
com
e
Thursday, December 12, 2013
0 1-3 4-7 8-10 11
19%18%
31%
21%
12%
68% are willing to pay more tax for 4 or more policies
37% for 8 or more policies
1 in 5 for all 11
% o
f res
pond
ents
more willing to payless willing to pay
Thursday, December 12, 2013
0
11
Green NDP Liberal Conservative
6.86.5
5.4 5.5
mor
e w
illing
to p
ayle
ss w
illing
to p
ayAverage willingness to pay by voting intention
Thursday, December 12, 2013
Mistrust + lack of knowledge = TOXIC
Government = politicians = self-interested/incompetent/corrupt
Extent to which people over-estimate waste/inefficiency
The black hole of government revenues
There’s no set place it [sales tax] is being spent. For all we know, it’s going to pay politicians’ salaries. There’s no transparency about how it’s being spent.
- 30-ish man in Vancouver
Thursday, December 12, 2013
Taxes and budgets
when we do the budget exercise
me
govt
taxesservices
not necessarily linked in people’s minds
me
govt
taxes
(ie, black hole, never to be seen again)
Thursday, December 12, 2013
responsibilitypitching in
we all/most of us need to pitch in a little more
the cost of a cup of coffee per day?
fairnesspaying a fair share
the top [10%? 20%?] need to pay pay a little more, major corporations too
they can afford to pitch in more
reduce the income gap
transparencywilling to pay if know where $ goes
link calls for tax increases to specific outcomes
avoid public services are a good deal for what you pay (value for money frame triggers govt is wasteful/inefficient)
quality of lifefor all generations
appetite for seniors care linked to needs of younger generations for education, child care,
affordable housing
taxes are the price we pay for a high quality of life in Canada (triggers thinking beyond my own personal
needs)
participation
Thursday, December 12, 2013
Options for raising revenues
Thursday, December 12, 2013
Bracket! Taxable income range
(2012 dollars) ! Jan 2001! Jan 2012!1! $1 to $37,013! 8.40%! 5.06%!
2! $37,013 to $74,028! 11.90%! 7.70%!
3! $74,028 to $84,993! 16.70%! 10.50%!
4! $84,993 to $103,205! 18.70%! 12.29%!5! Over $103,205! 19.70%! 14.70%!
Top marginal tax rate
"#$%&'()*!+)*),-.!/!0,$1'(#'-.2! 48.70%! 43.70%!
% of BC Tax-filers
~ 59%
~ 27%
~ 4%
~ 4.5%
~ 5.5%
4th lowest in Canada
OPTION A: Increase personal income taxes
Thursday, December 12, 2013
Scenario #1
income tax change raises could fund
Increase existing top bracket
from 14.7% to 17%
(only top 5.5% of BC tax-filers affected)
$375 millionincrease in
welfare rates of $200 to $400/month
Thursday, December 12, 2013
Scenario #2
income tax change raises could fund
New tax bracket:Income over $150k
taxed at 18%
(only top 2% of tax-filers affected)
$400 million2,000 units of social housing
per year
Thursday, December 12, 2013
Scenario #3
income tax change raises could fund
2 new brackets @
$150k of income (18% tax rate)
$200k of income (21% tax rate)
This bracket would only affect top 1%
$700 million
2,000 social housing units/yr
PLUS
$300 million to restore class sizes, composition and
specialist teachers to level 5 years ago
Thursday, December 12, 2013
Scenario #4
income tax change raises could fund
Increase 5th bracket to 17%
&2 new brackets @$150k (20%) and
$200K (22%)
(top 5.5% of tax-filers affected)
$930 million
2,000 social housing units/yr
&restore class sizes, composition and
specialist teachers to level 5 years ago
&10% more funding to post-secondary ed
Thursday, December 12, 2013
Scenario #5
income tax change raises could fund
2 new tax brackets&
increases to the existing top 3
brackets of 2% of income
(only top 14% of tax-filers affected)
1.1 billion
Could now also fund the first phase of implementing a comprehensive
publicly-funded child care plan
Thursday, December 12, 2013
Scenario #6
20% increase to all tax brackets plus two new upper-income brackets
Raises ~$2.3 billionCould fund social housing;
welfare increases; restore class sizes, composition and specialist teachers to where
they were 5 years ago; 1st phase of child care plan;
and needed investments in community health care; and MCFD increases; and post-secondary increases;and substantial increase to environmental protection
Thursday, December 12, 2013
OPTION B: Increase & fix the carbon tax
• Increase the carbon tax- Currently $30/tonne
- Continue annual increases of $5/tonne
- In 4 years (reaching $50/tonne) would raise $2.2 billion
• Fix the carbon tax- Half ($1.1 billion) could be directed towards an expanded credit.
Bottom 50% of households would be net beneficiaries.
- Half directed towards climate action (building retrofits and public transit)
Thursday, December 12, 2013
OTHER OPTIONS
• Close loopholes and reduce deductions (personal and corporate)- RRSP deduction costs BC
$459 million
- 50% exclusion of capital gains costs $3.6 billion federally
• Reform the home-owners grant - costs BC $780 million
• Increase corporate taxes, currently the lowest in the country (each 1% increase raises ~$200 million)
• Increase resource royalties
• Luxury taxes
• Vehicle taxes
• Regulating and taxing cannabis
Thursday, December 12, 2013
Where do we go from here?
• We need to talk up the need for fair tax increases - The public will is there & and the options are many
- Tell our political leaders we support tax increases linked to new and improved services
• BC needs a major public consultation (a deliberative engagement process) to talk about: - What we want to pay for together; and
- How we want to raise the money to do so.
Thursday, December 12, 2013