But don’t hold your breath that new progressive tax changes are in the offing.

First, a closer look at that expert panel: You can find the government’s announcement of the panel’s terms of reference and a list of the panel members here. Sadly, the panel is not mandated to examine the fairness of the overall tax system, nor is it to propose ideas to restore the BC tax system’s progressivity (something that is sorely needed, as we found in this CCPA study last summer).

Rather, the mandate is narrowly to advise on how to improve the “business competitiveness” of BC’s tax system, and to offer recommendations on “administrative improvements to streamline the Provincial Sales Tax.”

The membership of the “expert” panel is entirely made up of business representatives. Not a single person on the panel is an academic economist (the one person with an academic connection is Grace Wong, a former assistant dean with UBC’s Sauder School of Business). There are no representatives from labour or the community or non-profit sectors. The panel chair, Sarah Morgan-Silvester, is the current chancellor of UBC, but has spent most of her career as a senior banking executive.  In short, there is not a single person on the panel one might expect to offer a dissenting voice ­– a perspective that is interested in anything other than how to lower taxes for the corporate sector.

And how about that cool new online BC Budget simulation tool for the public? You can access the “My BC Budget” website here.

Now I love online tools, and I’m told I’m somewhat nerdy when it comes to the BC Budget, so I was all ready to geek-out on this.  And thus, my disappointment is deep.

The stated intent of the online tool is to:

“Let people see the effect of raising and lowering revenues and spending on the provincial budget, with the goal of eliminating the 2013-14 deficit, which was forecast in September to be $458 million. Once people have achieved a balanced budget, they can send their solutions to the finance minister with their comments. The website also includes informative facts about the budget and is one of several ways the government is consulting with British Columbians in the lead-up to Budget 2012.”

The government’s ill-advised (and much-amended) balanced budget legislation commits it to balance the 2013/14 budget (an entirely arbitrary deadline). And so, only when someone has used the online simulator to model a balanced budget does the tool allow you to submit your “solution”.

But the tool is much sillier (and nefarious) than that.

You can reduce any tax you want by as much as 100%, but you can’t increase any tax by more than 10% (which is certainly interesting, given the stated intent of trying to balance the budget).

When you start to fiddle with personal income tax levels, the “information” window kindly informs you that, “BC families generally have one of the lowest overall tax burdens in Canada, and BC currently has the lowest provincial personal income taxes in Canada for individuals earning up to $119,000 a year.”

What’s more, while you can adjust personal income taxes overall, the simulator does not allow you to adjust the income tax brackets (let alone propose one or more new upper-income ones, as I recently did here). Meaning, you cannot modify the progressivity of the tax system (the distribution of taxes by income) – Minister Falcon apparently isn’t interested in hearing about that.

And don’t go trying to propose increases in corporate taxes. If you do, the simulator responds with a finger-wagging note warning: “Raising corporate income tax would make the province less competitive compared to other provinces and countries, and would reduce long-term economic growth. Companies would decide to move to lower-tax jurisdictions, costing B.C. jobs and investment.”

This despite the fact that BC has among the lowest corporate tax rates in the country, and global accounting firm KMPG consistently finds BC to be one of the least expensive places to do business among major industrialized nations. Surely, we have room to move on this front.

Oddly, the one tax increase the simulator does not actively discourage is further increases to MSP premiums, the most regressive tax in the province.

Overall, the simulator is quick with warnings if you try to increase taxes to close the budget gap, but oddly silent when you try to lower spending. No bias there I guess.

(My thanks to both Shannon Daub and Iglika Ivanova for drawing some of these ridiculous features to my attention.)

We do indeed need a fulsome review of BC’s tax system, and the public certainly does deserve a chance to weigh in with our ideas for how to rethink the ways in which we raise and spend revenues. Sadly, neither this expert panel nor the online simulator will give is that chance. As I’ve said before, we need a full Fair Tax Commission, with an extensive public-engagement process that lets us genuinely deliberate on these matters.

The paper comes out at a time when all Canadian provinces face significant pressure to reduce the rate of growth of health spending while continuing to improve access and quality of care but when there is no agreement on the specific changes needed to ensure that public healthcare dollars are more efficiently utilized. As a result, individual provinces are experimenting with a variety of reforms. In BC, the two major policy options being introduced are an activity based funding (ABF) model for hospital surgical procedures; and an integrated model for caring for people with chronic conditions and complex needs in the community. Though both of these are formally priorities of the Ministry of Health, ABF is receiving the vast majority of the financial resources and technical expertise.

Our paper raises serious concerns that the current preoccupation with reforming hospital funding is simply too narrow to effectively address BC’s most pressing health care challenges, many of which have roots outside the hospitals (in our inadequately funded community care system). This is why we titled our report Beyond the Hospital Walls: Activity Based Funding Versus Integrated Health Care Reform.

The current focus on ABF is a reflection of the conventional, hospital-centric model of health care that our system was built on. While this worked well to meet the health care needs of Canadians in the 1960s, it’s outdated in the 21st century when chronic disease management — which is better handled in the community, not the hospital — is increasingly becoming a pressing concern.

But what’s worse is that ABF is not just a distraction from the real problems in our health care system: it may actually reinforce the silos and fragmentation within the health care system, hindering efforts to improve overall system integration and coherence (this stand in the way of priority #2). This is why jurisdictions where ABF has been in place for a number of years are increasingly looking to move away from it towards funding mechanisms that incentivize integration across the system (among hospitals, family doctors and community care services like long term care and home support).

The paper outlines a strategy for health care reform that is timely, practical and evidence-based, and that will address the root causes of problems in our health care system.

Our review of the international evidence on health systems reform suggests that the best performing systems are the ones that have developed mechanisms to collaborate and share accountability across services and providers. The key to their success is understanding the patient experience across the continuum of diverse health services the patient needs at any one time. High performing health systems are organized in a way that allows providers to be jointly accountable for providing cost-effective care in whichever venue is medically appropriate – the patients’ home, the family doctor’s office or the hospital. There are many examples of how this can be done, both internationally and from our own backyard (Northern Health Authority is a leader in this area). All that’s needed is for the BC government to show leadership, look at the evidence, and actually implement the initiatives that have proven successful province-wide.

We hope that Canada’s premiers, who are currently meeting to discuss health care in Victoria, find a way to avoid getting bogged down into narrow issues like hospital funding reform and engage in a broader discussion of how to improve quality, increase access and ensure the cost effectiveness of the overall health care system.

The following are just a few of the issues that hit the convention floor.

The RCMP and public private partnerships

There was a lot of coverage in the media about the breakdown in negotiations over a new RCMP contract between British Columbia and the federal government. A side bar issue that got no coverage dealt with the new RCMP Division Headquarters in Surrey.

Solicitor General Shirley Bond complained to a UBCM panel about the province’s inability to control rising RCMP costs. The example she gave was the RCMP’s new Division E headquarters that saw costs balloon from $300 million to $1 billion.

However, it turns out that the new headquarters is a federal public private partnerships and that so far the province’s privatization agency, Partnerships BC, has billed $2.5 million in consulting fees on the project. Remember when the government argued that P3s offered fixed costs and price stability?

The Municipal Auditor General

Mayors and councilors were not happy about the province’s decision to impose a Municipal Auditor General on them. Councilors argued from the convention floor that they were already forbidden by law to run a deficit and had many of their major projects subject to referendum.

However, the province backed down on most of the issues promising to pay for the new office (but not for the cost of audits) as well as swearing that new MAG would not have the power to second guess local policies, including tax policy.

The big issue that still remains is governance. The UBCM wants the same model the province enjoys in its relationship with its own AGM. That would mean an MAG would report to an accounting board made up of local government representatives. No dice Communities Minister Ida Chong told the convention. Apparently local governments will make up only a minority of the board. The business community has been promised its own chair at the table.

The business community (primarily the Canadian Federation of Independent Business) is on a full-court press to see business property taxes cut with the cost being shifted to homeowners. Of course business, unlike homeowners, can write off their property taxes against federal and provincial taxes.

Government downloading and rural areas

Every UBCM convention holds individual forums for different sized communities. My favorite is always the Electoral Area Directors’ forum made up of mainly people representing spread out rural areas. While diplomacy is the order of the day when big communities talk to the provincial government, with Area Directors you get a lot more down-to-earth candor.

Over the years Area directors have had a continuing complaint about downloading of costs. This year the complaint was over diking policy. As a Central Kootenay Director told the provincial officials at the forum, “One of the reasons you are downloading is that you lack resources. If you can’t handle it, we sure can’t.” The chair of the presentation on diking sent the provincial officials away with this message:

We don’t have the expertise, equipment or money. Flood mitigation needs more funding. Send the message back.

Extended Producer Responsibility (EPR)

Over the years residents, particularly in urban areas, have become used to a growing level of recycling. Blue boxes take away our newspapers, cans and plastics. For many of us there will soon be recycling of kitchen scraps.

It turns out there is some risk of things going the other direction. The Area Directors heard a presentation on Extended Producer Responsibility. Under this program producers and consumers or products will have responsibility for them. It sounds attractive but what will it actually mean?

A Director from the Sunshine Coast told the panel they were planning to extend their blue box program and asked for advice considering the EPR policy. An industry spokesman advised the Director that they couldn’t give practical advice but that it would be “prudent to wait.”  An industry spokesman reported that some governments were putting a pause on such projects. “Remain nimble” she advised.

It turns out we may all have to be more nimble if we have to start taking our newspapers to depots rather than having them picked up in blue boxes.

Wages for public employees

It appears Christy Clark’s government is determined to make public employees pay for the government’s ineptitude on the HST. In a panel on the economy Finance Minister Kevin Falcon told the audience:

With respect to the wage mandate for the whole public service at net zero for two years – that tough mandate is likely to continue.

Public sector wages have already fallen due to inflation and the two year wage freeze. The Finance Minister appears determined to push them down further. Meanwhile, at least for now, wages in the private sector are going up.

Ferries

At the forum on the economy an Island Trust Trustee told the panel of Ministers:

Ferry fares are killing our communities. We are losing jobs because of the ferry fares.  If government isn’t willing to put money into ferry infrastructure we are going to continue to lose jobs.

Transportation Minister Blair Lekstrum said they were cutting 400 sailings but that it would not likely affect fares. Finance Minister Falcon suggested fares really didn’t make much difference because when they cut fares temporarily during the recession, ridership didn’t go up. The Island Trustee disagreed.

Open government

I went to one of the 7:30 am “clinics” on Thursday morning on “open government.” I had hoped it might deal with the government’s poor record on access to information but instead it dealt with the governments new web sites.

It wasn’t a total loss though. The government’s data website that now contains more than 2,400 data sets looks pretty interesting. And the open information site that publishes the government’s FOI releases is certainly worth reading on a rainy Sunday afternoon. Too bad their policy of releasing the information only 72 hours after it goes to the FOI requestor will probably discourage media from using FOI.

Workshop on market housing

Thursday afternoon there was a workshop on market housing that was much more interesting than last year’s all day workshop. Last year was mainly taken up by how little the province could or would do. This year instead focused on how much was actually being done in communities like Vernon, Langford and Surrey.

 There were dozens of other policy issues addressed in the week long convention. Paul Willcocks has an interesting column on the debate about smart meters here. It is remarkable just how much information flows in a meeting like this.

The most illustrative part for me was the announcement that there was going to be a review of BC’s tax system.  The CCPA has called for a Fair Tax Commission but the review promised by Christy Clark promises to be anything but fair.  Instead, as the government backgrounder states:

The panel of business leaders and experts will be asked to:

• Develop recommendations to help support a globally competitive, diverse economy that supports jobs and innovation with the Province’s balanced budget framework.
• Develop recommendations to simplify and streamline the sales tax system to make common-sense improvements to reduce administration for government and business
• Develop recommendations for closing tax loopholes

The point here is that, once again, our tax policy will be made by “business leaders and experts” – the same people who gave us the HST.

So that is who the government will be listening to. Who did they present their plan to? Not the legislature. Not the people we elect to represent us. On Wednesday the Premier’s speech was to the Surrey Board of Trade.  Thursday the Vancouver Board of Trade got to see the plan. Friday it was a speech to the BC Business Council.  Some people have called this the Liberal Party’s annual report to donors.

Now business plays a vital role in British Columbia. Their voice needs to be heard. But for ten years it is the only voice that has been heard. The result has been cuts in taxes for business and the wealthy, increases in fees we all pay and cuts in services for those who need them most. And for the government the result last month was a humiliating defeat of their centerpiece tax policy.

If the government had been just a little less deaf to the concerns of ordinary people we might have seen a tax change that worked for all of us.  Ontario implemented an HST after a year of consultations. As a result of those consultations the Ontario HST looked different than ours and there was much less hostility than we saw in BC.

Eric Reguly had a very good column in the Globe and Mail last month when he addressed this question in the context of Italy’s decision to kill a minimal wealth tax.  He concluded:

The point is that austerity programs will fail if they hurt, or are merely thought to hurt, the poor and middle classes more than the rich. If the average taxpayer knows that the rich are feeling no pain while he or she is, rebellions are almost certain and history shows that they can end badly for the privileged. Afflicting the rich and the unrich together is the way to go. It would also help build trust in governments at a time when they, like Italy’s, suffer a severe trust deficit.

There is no doubt in BC when it comes to government there is a trust deficit. The process by which the Jobs Plan was rolled out and a continuation of having “business leaders and experts” make tax law will make it worse.

The Minster’s presentation focused on highlighting the cost of the move back to PST/GST, providing some large numbers for the media headlines, instead of looking at the big picture.

In case you missed the media coverage, the provincial coffers are projected to suffer a loss of $2.8 billion over the next 3 years, relative to the estimates presented in February’s Budget 2011. The Ministry estimates that $2.3 billion of the loss is brought about by the HST defeat and the move back to the PST/GST system.

The Minister argued the impact of the HST defeat is manageable, but warned that:

“We’re going to be very tough on operating expenditures and people need to understand it is going to be a government that is going to be run very, very tightly from a fiscal point of view.”

However, closer look at the numbers reveal that the provincial financial situation is not nearly as dire as it may seem. And that returning to PST/GST is not all that costly, when compared with how much it would have cost to keep the “fixed” HST.

Firstly, comparing the costs of repealing the HST to the February budget estimates is misleading. Budget 2011 numbers did not include the cost of the last minute HST “fix” that Premier Clark announced this summer. Keeping the HST would have involved a significant budget loss relative to the numbers announced in February, as Seth Klein pointed out here. This is why the impact of reverting to PST/GST should be compared to the impact of keeping the “fixed” HST.

The cost of the one time rebates of $175 per child regardless of family income and for low- and modest- income seniors were estimated at $200 million. The government’s news release announced that these checks would go out before the end of the year, so they should be considered as expenses in 2011/12.

In addition, the HST was slated to be reduced to 11% in July 2012, which would have cost the government around $638 million in 2012/13 — 3/4 of the annual cost of a 1 percentage point reduction (estimated at $850 million). In 2013/14 the government would have given up $850 million. And this isn’t even considering that in July 2014, the tax was going to be reduced to 10%, giving up a total of $1.7 billion in revenues every year. At that rate, the government’s actually going to be collecting more revenue with the PST/GST than otherwise.

Some of these extra costs would have been offset by the increase in the corporate income tax to 12% (from the current 10%) in January 2012 and by postponing the small business tax cut slated for April 2012. These would have generated an additional $100 mil  in 2011/12 (1/4 of the annual revenue gain, estimated at $400 mil) and just over $400 million each in 2012/13 and 2013/14.

Thus, the real comparison of the costs of repealing the HST looks more like this:

My analysis shows that the provincial treasury would have faced a shortfall of $800 million even if the HST had survived the referendum. The real net costs of reverting to PST/GST are $1.5 billion, not $2.3 billion.

Of course, using the bigger number is more effective if one were looking to lay the blame for provincial fiscal challenges onto the referendum results.

Now, let’s turn to the total provincial fiscal position. Many analysts/commentators seem to have forgotten that the fiscal plan features unusually large contingencies and forecast allowances over the next 3 years. These total $2.5 billion over the 3 years and thus entirely cover the costs of the HST reversal.

If the HST defeat is not an unexpected event worth dipping into the contingency funds for, I don’t know what is.

As for the forecast allowance, the government has already built a lot of prudence into the budget projections by using economic growth forecasts that are considerably lower than the private sector consensus forecast (2% vs 2.8% growth for 2011 and 2.3% vs 2.8% growth in 2012).

In other words, the BC government has a real fiscal gap of only about $300 million over 3 years relative to Budget 2011, not $2.8 billion. This is a lot more manageable and hardly requires the kind of tight-fisted approach advocated by Minister Falcon.

Some of the media commentary around the fiscal update, such as Vaughn Palmer’s piece in the Sun are suggesting that the BC government is using the current fiscal challenges as an opportunity to punish British Columbians for exercising their rights in the HST referendum. This would be a great mistake. Not only would it go against our country’s respect for democracy, but it would also put a drag on the already fragile recovery (latest job numbers released today show BC is shedding jobs, full-time jobs in particular).

The best part about having the results is that now we can move on from the narrow issue of what type of sales tax is better and focus our energies on some of the bigger issues affecting British Columbia.

Since the HST was first announced in the summer of 2009, it has dominated the policy debates in BC despite the fact that either way, the tax was going to have only marginal effects on the economy.

Yes, the HST is slightly more economically efficient than the PST. But the difference has been vastly exaggerated by HST proponents, who also refused to acknowledge that the tax is unfair to modest and middle-income families.

This is hardly surprising to readers of this blog who may recall me making this point before:

The HST is certainly an improvement on the PST from an economic efficiency point, but it’s a relatively small improvement. I am convinced that the economic benefits touted by the BC government and over exaggerated and the significant job growth, in particular, will not materialize.

The reason why HST only has a marginal impact is that taxes play only a marginal role in investment decisions. The main determinant of investment is expectations for future sales, driven in part by the general economic environment. Proximity to markets, the availability of appropriate infrastructure, access to cheap energy, access to a skilled labour force, and political stability are all much more important considerations when a firm is choosing where to set up shop.

The independent panel report, commissioned by the BC government, estimated that the actual economic impact we can expect from HST falls far short of the “giant leap” touted by U of Calgary’s Prof. Jack Mintz. For example, while Prof Mintz estimated 113,000 new jobs and 8% increase in capital investment by 2020, the independent panel found that we could realistically expect about 24,400 more jobs and 4% increase in business investment over the same period.

While I personally would have preferred to keep a reformed version of the HST, I think it’s counterproductive to fret over marginal efficiency differences after the people have spoken.

I’m also glad to see a return to somewhat improved tax fairness. We have witnessed a very large increase in income inequality in BC over the past 20 years, and we need to be very careful not to pursue policies that will make this problem worse — like the HST.

Recent research we’ve done at the CCPA shows that the HST is only one piece of an inequitable provincial tax system, a system in which the richest 20% of British Columbians pay a lower overall/total effective tax rate than the rest of us. Much more needs to be done to make sure everyone contributes a fair share to fund the the services and infrastructure BC needs in.

Now that the HST debate is over, it would be great to see some of the energy and focus many academics, business and community leaders dedicated to debating the HST be redirected to designing and debating solution to the real challenges facing BC.

Our unemployment rate remains high and slightly above the Canadian average at 7.3%. The economic outlook has worsened considerably over the last 6 months, with or without HST. There’s a serious risk of our main trade partner, the US, going into a second recession, which may push us back into a recession as well. Canadian corporations are not investing, even in the HST provinces. That’s because it’s not about taxes!

In the meantime, BC hasn’t had a budget and significant policy changes since Feb 2010. The Feb 2011 budget, tabled in the midst of a party leadership race, was prepared as a “placeholder” budget, padded with unusually large contingencies and forecast allowances to leave the new Premier room to implement their own policy priorities. Premier Clark has not tabled a budget yet, deferring the decision until after the HST referendum.

Now we know what we’re dealing with, I look forward to debating Premier Clark’s policy priorities for moving forward.

British Columbia families will remain vulnerable, burdened with unprecedented levels of household debt — 160% of income — the highest in Canada. More and more people are retiring with debt. Our housing market is weakening and bank economists are expecting a “correction” (aka, decline). Unemployment rate remains high, and is projected to stay over 7% for the next few years. Wages for those who are employed are barely keeping up with inflation.

The reality is that without a robust labour market recovery and real increases in household incomes, consumer spending will no longer be able to drive the type of strong economic growth BC experienced in the mid-2000s.

We’re still struggling with low business investment after years of corporate tax cuts that were supposed to stimulate investment and productivity. It’s not for lack of money: private non-financial corporations held $471 billion of cash in the first quarter of 2011. It’s also not for lack of competitiveness, or these corporations would have invested abroad instead of keeping the cash.

The problems that climate change poses continue to grow. We need an economic strategy what would invest in people and take bold steps to support a greener economy for our province.

On top of these, persistent poverty and rising income inequality threaten our economic wellbeing. We spend too much paying for the consequences of poverty instead of addressing the root causes of the problem. We are not fully using the skills and productive potential of those in poverty or those whose lower incomes limit the kind of opportunities available to them. Even the Conference Board of Canada has acknowledged that not just poverty but income inequality “can diminish economic growth and undermines social cohesion.

These are the types of issues that should be at the center of the economic debate in BC, not the best type of sales tax.

This is the question I investigate in my latest CCPA report The Cost of Poverty in BC. If you’re not in the mood for reading the report, you can watch a short video that summarizes the findings here.

Study after study has linked poverty to poorer health, lower literacy, more crime, poor school performance for children, and greater stress. In this report, I use the statistical association between poverty and these negative outcomes documented in the research literature, and combine this information with estimates of the costs these outcomes impose on government finances and on society at large.

My findings confirm what we’ve already suspected: poverty comes with a very high price tag. The cost of poverty to government alone is estimated to be between $2.2 to $2.3 billion per year. The costs to society as whole is $8.1 to $9.2 billion annually. That’s a lot of money – close to 5% of the total value of our economy.

The study focuses on two types of costs in particular. First, I quantify the societal resources devoted to tackling poverty’s negative consequences. These include the health and crime-related costs of poverty. Second, I capture the economic value of foregone economic activity and lower productivity that are associated with poverty. BC isn’t using all the talents and productive potential of its citizens who live in poverty and this acts as a drag on our economy. These costs are what economists call “opportunity costs:” they do not represent resources we’re actually spending now but rather resources that would become available to society if poverty was significantly reduced or eliminated.

The methodology is based on a landmark Ontario study, The Cost of Poverty in Ontario: An Analysis of the Economic Cost of Poverty in Ontario. The Ontario project was a collaboration of a number of prominent business economists and researchers, who developed a systematic way to account for the monetary cost of poverty both in Ontario and in Canada as a whole. The advisory team included then TD Bank Senior Vice President and Chief Economist Don Drummond, Canadian Policy Research Networks Senior Fellow Judith Maxwell, among others.

Here is how the cost of poverty in BC breaks down:

Note that these estimates do not capture all of the costs of poverty. Notably excluded are the costs that child poverty imposes on future generations by perpetuating the cycle of poverty. I also do not measure many of the less tangible costs, such as the impact of high poverty levels on social cohesion and our feelings of safety in our communities. The direct cost of providing frontline social services to those in poverty are also not counted.

Poverty takes an enormous toll on the people who experience it. On this basis alone, we must do better than having one in nine British Columbians in poverty (the highest poverty rate in Canada).

The high costs of poverty in BC should make us all concerned about poverty for additional, purely economic reasons. It makes more sense to tackle poverty directly than to continue bearing the costs of its consequences.

The best way to do that is with a comprehensive poverty reduction plan that contains clear targets and timelines for reducing poverty. A plan is needed to focus government efforts and ensure that different initiatives are coordinated and build on each other. Seven Canadian provinces and two territories have such plans or are in the process of developing them. BC should be next.

In an earlier CCPA report, we estimated that the cost of a comprehensive, poverty reduction plan in BC would cost $3 to $4 billion per year when fully phased in. This may seem like a lot of money in a slow economy, but it’s an investment in a better, more prosperous future for BC.

With an aging population starting to retire and a looming skills and innovation shortage, the real question is not “Can we afford to reduce poverty?” but “Can we afford not to.”

Personally, I frown on offsets most of the time. Some colleagues have tried to make the best of them to use for forest conservation or to fund fuel switching and other desirable practices that move us toward a no carbon economy. I like all of these things but have concerns about how offsets work in the real world, and whether they make sense at all when we need to be at 350 parts per million when we are currently at 390. I can live with some limited and shrinking amount of offsets in the medium-term, but by 2020 or so they should be phased out completely in favour of real reductions in emissions from polluters.

In the case of carbon neutral government, there has been an additional concern cited about public dollars, at $25 a tonne of CO2, being diverted to the Pacific Carbon Trust, a Crown corp created to invest in private sector offset projects, typically by contracting out to private firms like Offsetters. The public sector in BC also pays the carbon tax, recently increased to (also) $25 a tonne as of July 1. (Aside: Happy Belated third birthday carbon tax; you’re getting so big and strong, you worry us that you will inadvertently crush the poor; we’ll have to fix that before we let you get any bigger.)

Offsets are really just another way of pricing carbon emissions, so mandatory offsets in the public sector mean government bodies are currently facing a carbon price of $50 per tonne, or double that of the private sector (school boards get a rebate for carbon tax paid but are still on the hook for PCT contributions). The rub is that PCT only funds projects in the private sector. The Sun reports:

Among the private corporations that benefited from such offset expenditures: Lafarge cement; forest companies Canfor, Interfor and TimberWest; natural gas company Encana; and Kruger Products, a manufacturer of toilet paper and related products. They earned the right to sell offsets to the public sector based on energy-saving initiatives.

Bob Simpson also writes about a particularly perverse case:

In May, the PCT purchased, for an undisclosed amount, 84,000 tonnes of carbon emissions from EnCana, a highly profitable company and one of British Columbia’s largest emitters. EnCana’s greenhouse gas reduction was reportedly obtained between 2008 and 2011 from a technological improvement in its extraction operations.

However, in the same region of the province that this reduction was supposedly achieved, the Horn River basin, EnCana is building its Cabin Gas processing plant without using carbon sequestration as originally promised. At full production, this one plant alone will add 2.2 million tonnes per year of new carbon emissions to the province’s total emissions. This is more than double the greenhouse gas emissions produced by the entire public sector on an annual basis, and represents 6.5 per cent of the emissions reductions needed to meet B.C.’s legislated targets by 2020.

This seems typical of BC’s typical flow of perverse subsidies to businesses – super-cheap green electricity for new coal mines and shale gas fracking; high prices paid to other private companies to generate that electricity; P3 projects for transportation and hospitals. Crony capitalism with a Lotusland twist.

The total bill for carbon neutrality was announced at $18.2 million. Some of the bigger chunks include $1.1 million for Vancouver Coastal Health, $664,000 for BC Housing, $406,ooo for the Vancouver School Board, $1.5 million for UBC, $444,000 for SFU, and $389,000 for UVic. Local governments are not technically part of carbon neutral government, but most have signed on to be so as of 2012 in exchange for rebates on their carbon tax (if they had been part in 2010, they would have kicked in roughly $4 billion extra to PCT).

Given the size of these institutions and a BC public sector of $40 Billion per year, none of these are huge amounts. Relatively clean electricity powers much of the public sector, and over time we need to cut out the gas. And the high carbon price has led to real projects that are reducing emissions. Perhaps the biggest concern to me is for schools, where the overall budget has basically been frozen for years, forcing real cuts in services due to inflation. It would be easy enough to cut school boards a cheque as they do for carbon taxes paid, but this has not been the case.

To be fair, there another side to the story and that is the BC government’s own investments in retrofitting buildings and its efforts to reduce emissions through videoconferencing and reduced travel. These are good things, and $75 million has been spent on such projects over the past three years through the Public Sector Energy Conservation Agreement. The problem is that the program is unfunded as of April 1, and the original one was over-subscribed. So there are projects that could be done if funds were made available, but they are not so the public sector must pay into the PCT, which does not fund projects in the public sector.

There seems to be an increasing recognition that this state of affairs does not make sense. Upon release of the carbon neutral government report, the Sun story adds:

Environment Minister Terry Lake said talks are underway with the Pacific Carbon Trust on how offset funds might be returned to public institutions such as schools. While “people don’t like the thought of public money going to help big organizations,” Lake noted that companies such as Encana also generate revenue for the province that goes back into funding health and education. Non-profits such as the Nature Conservancy of B.C. have also benefited from selling carbon offsets as a result of carbon sequestered in a Kootenay property that was not clearcut.

So we’ll wait and see. I’d much rather see a higher carbon tax applied to both public and private sectors on equal terms – and use some of the proceeds of the tax to fund mitigation projects through the PCT or otherwise. Another possibility is that the public-private carbon price gap be eliminated over a few years – the idea of government taking initiative and leadership on climate action is a good one to preserve. In the meantime, compensation should go to public bodies to ensure services are not adversely affected, and retrofit dollars should flow to create a asset base of low-carbon public buildings. And let’s see some real climate action from big industrial polluters, too, which the government’s right hand seems to be encouraging, just as its left hand is pointing out climate achievements.

[Note: This post builds on analysis on carbon pricing for the Climate Justice Project. See Fair and Effective Carbon Pricing: Lessons from BC.]

Our BC analysis draws on Statistics Canada’s Social Policy Simulation Database and Model to look at total BC taxes and key subcategories of personal taxes (income tax, commodity tax, property tax, MSP premiums) as a share of total household income, in 2000 and 2010. Results were broken down into deciles, and because so much of the real action is in the top decile it was further broken down into top 1%, next 4% and next 5%.

Unsurprisingly, total BC taxes as a share of income declined for every income group. This has undermined funding for public services, but has also led to a shift in who pays how much. The average tax cut was 2.3% of income, though there were larger gains as income increased. Tax reductions were only worth about 1% of income for the lower-middle deciles, increase to 1.8% of income for the upper-middle, then rise to 3.6% for the top 10%. However, the top 1% got tax cuts worth 5.1% of their income. In dollar terms, that is a gain of $41,000 for the top 1%, while those in the bottom deciles average a tax cut of a couple hundred bucks.

By contrast, in 2000 BC had a relatively flat tax system, with a modest bump in tax rate for the top 1%. By 2010, the tax system as a whole had shifted to become regressive. Income tax cuts, unsurprisingly, were the principal driver of lower taxes. The value of income tax cuts averaged about 0.2% of income for the bottom decile, rising to 5.2% for the top 1%. The provincial income tax system continues to be progressive, but has flattened out over the course of the decade.

Gains from income tax cuts were somewhat offset by increases in MSP premiums for middle-income groups, as much as half of a percent of income. But as “head tax” MSP premiums inevitably shrink as a share of income as income rises. So much so that for the top 1% the difference between 2000 and 2010 is negligible (and rounds to zero). For the bottom two deciles, exemptions based on income mean that the rate is effectively zero in both years; changes to increase the threshold meant reduced payments to a very small share of income (0.1%) for D2.

Bottom line: we need a fair tax system, and recommend a Fair Tax Commission that would engage a conversation with British Columbians about what public services we need, and how to pay for them fairly. A good tax system must also compensate for the tremendous inequality that arises in market incomes, which reiterates the need for progressive income taxes at a time when CEO, bankers and lawyers are making huge gains while middle class households are getting squeezed.

We were pleased to see a positive response from the Premier, who apparently shares our concern about the declining middle class. Alas, her Finance Minister, Kevin Falcon, simply dismissed the study without reading it. He then comments: “They want to go back to a system — tax the rich. They’re talking about the professionals that we’re trying to attract to B.C., the doctors and the nurses. We want them to come to B.C. and we want them to stay. We don’t want to chase them out with a tax system.”

Just to put that comment in perspective, the cut-off for making the top 1% in 2010 was $358,614 with an average income in that group of $825,000. We are not talking middle-class professionals here, though he’s right about the “tax the rich” part. Given what a great place BC is to live I don’t think a tax system that makes the wealthy pay a fair share is too much to ask.

A final note: we have received some criticism from economists that we include tax credits from GST/HST and carbon tax systems as income, rather than deducting them from taxes paid. We discuss this issue in the paper — technically, they are tax benefits, paid out the year after the tax year filed (you actually get a cheque or direct deposit) and by accounting convention they are considered transfer income in the SPSD/M. In a footnote we do some alt calculations that show the treating them as deductions from taxes lowers the bottom decile rate but still does not change the fundamental conclusion about regressivity. In any event, the key points from the analysis are what is happening at the top, not the bottom, as there are other things going in the bottom decile (we also discuss this if you want to get geeky about it).

Almost everything that is vital to a healthy community, from life expectancy to levels of depression to crime rates, is affected by inequality. This is true in both rich and poor countries.  (The Spirit Level: Why Equality is Better for Everyone, by Richard Wilkinson and Kate Pickett).

Social factors begin to affect us at conception, so that life in the womb and the perinatal period can affect well-being later on.  Even if exposed to stress in the womb, however:

A nurturing environment after birth can provide the child with enormous potential to change their course of development. This is known as “developmental plasticity,” which means that the brain can adapt and change as the child grows with a positive environment.

The important message here is in how we as a community support pregnant women. Stressful lives are most often linked with socioeconomic disadvantage. This research shows we should be targeting these women with support programs to ensure the stress does not negatively affect the unborn child.  (Repeated Stress in Pregnancy Linked to Children’s Behavior)

Poverty can even cause brain damage. Researchers discovered that U.S. children from “low socioeconomic environments” displayed a response in their pre-frontal cortex that was similar “to the response of people who have had a portion of their frontal lobe destroyed by a stroke” (Poor Children’s Brain Activity Resembles That Of Stroke Victims, EEG Shows).

The damage may result from conditions such as poor nutrition, lack of time with over-worked and over-stressed parents, or fewer opportunities for intellectual stimulation – all of which may affect the quality of care that a child receives.  This does NOT mean that all poor children are so afflicted, but the average poor child is more likely to suffer.

Every dollar invested in the young not only saves lives and prevents illness, but it will also save at least $7 dollars in future social costs. For instance, lead poisoning, ADHD, and autism resulting from toxic chemicals and pollution in the United States cost $77 billion annually. Globally, almost 350,000 women die each year in childbirth – most of whom could be saved for the cost of just six fighter jets. Even worse: over 22,000 children under the age of 5 die every day from hunger and preventable diseases – almost 9 million every year. This year’s U.S. military budget is around $800 billion, and the world spends twice that on war. The simplest change would be to redirect wasteful military spending to end the worst elements of global poverty.

In 2009, the combined net worth of the world’s 1,011 billionaires increased to $3.6 trillion, up $1.2 trillion in just one year. This NEW wealth alone could end global poverty.

Perhaps the most important point is that none of these social, economic, and environmental problems are necessary. All scarcities, as Murray Bookchin pointed out over 40 years ago, are artificial. We possess the knowledge and the wealth to eliminate the worst of these afflictions. Why aren’t we doing so?

Meaning that Independent MLAs Bob Simpson and Vicki Huntington will have their work cut out for them trying to maintain media focus and public attention on their welcome non-partisan call for the appointment of a special legislative committee to thoroughly investigate unconventional natural gas developments in the province.

It’s a call that 21 organizations and prominent British Columbians – including First Nations, leading environmental organizations, local citizens groups in the natural gas-rich northeast corner of the province, and individual town councilors – all support, and one that we at the BC Office of the Canadian Centre for Policy Alternatives have also endorsed.

For years, the policies of provincial NDP and Liberal administrations alike have been squarely focused on increased exploitation of BC’s natural gas resources, which are primarily situated in the Peace River and Northern Rockies regions of the province – an extensive, but remote part of BC that is larger than the state of Nebraska. This fact may help to explain why it has fallen to Simpson and Huntington to propose that the time has arrived for a sober assessment of the industry’s activities and the role that provincial policies play in shaping them.

It was under the NDP that the one-stop-shop for regulatory energy industry approvals – the Oil and Gas Commission – was created in an effort to eliminate the alleged red tape of multiple agencies reviewing applications by natural gas companies to drill gas wells, build roads and and situate pipelines. Dan Miller, under whose tenure as Energy and Mines Minister the OGC was created, would go on to do lobbying work for mining and energy company clients, including Enbridge Inc., the company hoping to build an oil pipeline from Edmonton to Kitimat.

It was largely under the Liberals, but also under the NDP, that various breaks on energy industry royalty payments and other credits were offered as inducements to industry expansion. With billions of dollars having flowed into provincial coffers over the past decade – much of it in the form of one-time sales of subsurface rights or royalty payments – and billions more potentially at play, neither Liberal or NDP MLAs have been particularly vocal about questioning a) whether or not the public should subsidize industry activities, or b) what the cumulative effects of rapidly accelerating industry developments mean for BC meeting its greenhouse gas emissions reduction targets or the environment more generally.

This reluctance takes on added significance in light of the rapidly accelerating use of hydraulic fracturing or “fracking” operations to boost natural gas production – operations that only a few short years ago Liberal and NDP MLAs alike could have been excused for not knowing a thing about. Now fracking is assisting in the production of nearly half of all the natural gas produced in the province, led by companies such as EnCana Corporation, whose former  president and CEO Gwyn Morgan went on to become a special advisor to Christy Clark. It is the rapidly emerging usage of this “stimulation” method – which involves pumping copious amounts of water under extremely high pressure deep underground to crack or fracture “unconventional” formations such as tightly bound shale rock, thereby releasing their gas – that lies at the heart of Simpson’s and Huntington’s initiative.

The rapid deployment of hydraulic fracturing at gas pads where numerous wells are located close together – and where each well is drilled deep into the earth and then drilled out horizontally for 2 kilometres or more – is a relatively new phenomenon dating back about a decade and with its origins in the state of Texas. As I wrote last year in a report released by the Program on Water Issues at the Munk School of Global Affairs, natural gas companies in northeast BC – including EnCana, Apache Canada and Talisman Energy – all increasingly employ fracking technology to boost gas production, in some cases setting industry records for water usage in the process with hundreds of Olympic swimming pools worth of water pressure-pumped underground at some sites.

The Oil and Gas Commission has approved hundreds of temporary water use permits allowing energy companies to divert hundreds of millions of gallons of water from streams, rivers and lakes in the Peace and Northern Rockies regions. Massive water diversion proposals involving longer-term water tenures known as water licences have also been submitted by energy companies to water stewardship officials with the new Ministry of Forests, Lands and Natural Resource Operations. Some of those proposals include diversions out of Williston Reservoir and have resulted in behind-door negotiations between gas companies and BC Hydro over what price the companies should pay for water from the province’s largest reservoir, which is the source of much of BC’s  hydroelectric power.

To date, both the Oil and Gas Commission and the Ministry of Forests, Lands and Natural Resource Operations have failed to consult in any kind of meaningful way with members of the public generally or First Nations specifically about the hundreds of short-term water use permits granted to natural gas companies or the dozens of long-term water licences sought by the industry.

“Public policies are driving the rapid expansion of BC’s unconventional gas sector, particularly in shale formations in the Peace Region,” Huntington, Independent MLA for Delta South, said in endorsing the call for the appointment of the special legislative committee to review the development of the province’s unconventional gas reserves. “It is incumbent on the government to ensure it fully understands the cumulative impacts associated with developing this resource.”

Both Huntington and Simpson expressed concerns that with prices for natural gas currently low that the provincial government may offer even more inducements to the gas industry in order to artificially prop up developments. This year alone, the province expects to hand $172-million to the gas sector in royalty rebates and infrastructure credits. In return, it expects to collect the equivalent of about $1 million per day – or $365 million – this year in net royalty payments from the industry. It’s not clear how much of the subsidies or the royalties will be attributed to natural gas produced from wells that were hydraulically fractured, although about one half of the gas currently produced involves use of the controversial stimulation technique that has been linked to methane contamination of household tap water, dangerous and potentially lethal leaks of gas laced with hydrogen sulphide and known as sour gas, and badly polluted waterways.

“The rapid expansion of this industry, and the potential for it to continue to expand with the aid of incremental government assistance, has led to serious public policy questions being raised by more and more individuals and organizations,” Simpson, Independent MLA for Cariboo North, said.

Huntington and Simpson cite a range of public concerns as influencing their decision to call for the appointment of a special committee of the legislature including:

• Economists asking if we are developing gas resources at the wrong time in the market cycle.
• Peace River residents in the Northern Health Authority calling for a public inquiry into the health and safety implications of oil and gas development.
• The amount of fresh water used in hydraulic fracturing operations and the disposal of the large amounts of toxic wastewater subsequently produced.
• The significant additional carbon emissions associated with the industry.
• Failure to address First Nations rights and title issues.
• Other jurisdictions such as Quebec and New York State taking a more precautionary approach to unconventional gas developments (both effectively have moratoriums in place pending further study).

In years past the BC Government has appointed special committees of the legislature to address high-profile issues. Notably in 2005, the government appointed committees to examine both the province’s aquaculture industry and prospects for electoral reform. Such committees are bi-partisan in make-up, have powers to call witnesses, can request or commission reports, and can travel to different regions of the province to hold meetings and assess public opinion. Their proceedings are also recorded and become part of the public record.

With a growing number of people – particularly those residents living in the heart of the province’s gas-development zone – saying its time to take a sober look at what escalated unconventional gas developments may mean for public health and safety, the environment and economy alike, appointing such a committee makes imminent sense.

But for many people in the province, prolonged periods of hotter and drier weather are often far from welcome.

That’s because when things get hot and dry they burn. And in many regions of British Columbia that may mean potentially deadly outcomes for residents in numerous communities as wildlfires sweep through forests on their borders.

With that in mind, fire ecologist Robert Gray has stepped forward with a timely critique of the provincial government’s wholly inadequate approach to reducing the significant risks that forest fires pose to numerous communities in BC – a critique that ought to be required reading for all provincial MLAs.

In 2003, one such fire destroyed 334 homes and numerous businesses near Kelowna and forced the evacuation of 45,000 people. In 2009, in events eerily similar to those in 2003, tens of thousands of British Columbians near Lillooet and Kelowna were forced to flee their homes as out-of-control wildfires moved with frightening speed toward their communities. All told, the efforts made to fight the hundreds of blazes to burn in each of those two fire seasons would cost taxpayers nearly $800 million.

What concerns Gray is that in the years since 2003 – and with a brutal reminder yet again in 2009 of the havoc that wildfires can cause – the BC government has seemingly yet to grasp the significance of making the substantive changes to forest policy and forest management in the province that would reduce the likelihood of catastrophic, community-threatening wildfires in future years.

Gray has spent a lot of time thinking about such things. In 2003, he was one of the co-authors of Firestorm 2003, a report by a panel of fire experts working under the direction of former Manitoba premier, Gary Filmon, who had been called upon by then BC premier Gordon Campbell to assess what happened in that year’s fire season and to make recommendations on a new way forward.

In a nutshell, what Gray and others recommended was the need to be proactive in managing perimeter forests. In such forests, there should be one key objective: to reduce forest fire risk through the systematic clearing or thinning of trees and brush. Doing so, the Filmon committee concluded, would reduce fuel loads, meaning that when – not if – future fires burned, they burned far less intensely and with far less risks to people and properties than would otherwise be the case.

Doing such work is not cheap, costing between $1,000 and $20,000 a hectare, although most areas can be treated in the $6,000-per-hectare range.

In response to the work of Gray and others, the province began putting money into treatment efforts, with an initial grant to the Union of BC Municipalities of $50 million, and more recently a further grant of $25 million. But as the province’s independent Forest Practices Board noted last year, provincial funding had by the beginning of 2010 resulted in the treatment of just 35,000 hectares of perimeter forestland, while the total area of such land in need of fuel reduction treatments was 1.7 million hectares, of which 685,000 hectares was considered “high risk” and in most immediate need of treatment.

At such rates of treatment, it will take well over a century to complete initial fuel-reduction efforts in forests where high fuel loads are a clear and present danger to communities, to say nothing of the fact that treatment efforts must be ongoing to be effective.

Making matters of even greater concern is that there is a real risk that we will see more forest fires in BC in future years, not less.

Higher average temperatures and site-specific periods of prolonged drier weather are widely predicted outcomes of climate change. In 1993, meteorologists and climatologists with the Canadian Forest Service warned that this could result in much longer forest fire seasons. Should atmospheric carbon-dioxide concentrations double by the year 2040, the average Canadian “fire season” would increase by 30 days – a prediction subsequently revised upward to 40 days and 50 days in the case of BC.

Another fact not well appreciated by British Columbians is that while the costs of fighting wildfires is formidable – averaging $150 million per year over the past 10 years for a total expenditure of $1.5 billion – the true costs of future fires could be far, far higher. It all depends where the fires burn and the damage that they cause. A good case in point is in California, a jurisdiction that like BC appears to be more and more susceptible to catastrophic wildfires due to the effects of climate change.

In 2003, three forest fires in California known as the Old, Grand Prix and Padua wildfire complex forced the evacuation of 100,000 residents and completely destroyed 787 properties. The total estimated costs to date in dealing with those fires, is $1.2 billion. Only 5 per cent of that price tag actually applied to fire suppression. Much of it went, instead, to addressing damaged community water supplies and to flood control efforts.

When the true costs of fires are considered spending money up-front to reduce the likelihood of catastrophic outcomes makes sound public policy sense. The question is, where does the money come from to do the job?

To start, the province might finally get serious about increasing the amount of money it charges forest companies logging trees on publicly owned lands. Right now, logging companies gain access to droves of publicly owned timber for a pittance – the equivalent of 25 cents for each telephone pole’s worth of wood.

But beyond that, more substantive policy changes are needed. Somehow we must find a sustainable means of getting those communities that are most at risk of wildfires to play a more central role in reducing fuel loads in the forests surrounding them, forests that they understand better than most.

Gray believes that the central policy change required is to shift our thinking about how certain public forests are managed and to whose benefit. Right now, just about every hectare of public forestland in the province outside of parks is deemed to be there for one purpose: to grow trees for the forest industry. Yet in the forests surrounding communities, optimum tree growth may run counter to the interests of protecting the public from the very real dangers of wildfires.

“If the provincial government placed all Crown land surrounding communities under local government jurisdiction and enacted laws and policies that de-emphasized timber production and prioritized fuel hazard reduction, then local government could both protect local homes and businesses and cover most of the costs of doing so by using the wood fibre to kick-start local bio-energy industries including district and home heating systems, as well as the manufacture of exportable bio-energy products such as pellets, biochar and biodiesel” Gray said in an opinion piece published in The Vancouver Sun. “This, in turn, would make local communities less reliant on provincial subsidies.”

Quite clearly, given changing conditions on the broader forest landscape, we’ll probably also have to get a lot more serious about other things too, such as prescribed or deliberately set fires to reduce the prospect of more catastrophic and uncontrollable wildfires.

Eight years after the devastating Kelowna fires, with another forest fire season upon us and a provincial government mired in debt and clearly adrift in forest policy, Gray’s ideas are worth considering.

Much of the report is an analysis of the carbon tax (with some new distributional modeling) and recommendations on next steps, but it also includes a look at BC’s carbon neutral government mandate (which requires the public sector to pay an additional $25 per tonne for its emissions as “offsets”) and the Western Climate Initiative.

In addition to the report, our amazing communications staffers, Sarah Leavitt (Sarah also did the fantastic illustrations for the report) and Terra Poirier, have done up a cool animation based on the report about how to make the carbon tax work.

An oped also appeared in today’s Vancouver Sun:

Look to Europe for Next Phase of BC’s Carbon Tax

By Marc Lee

When it comes to good urban planning, transportation and taking action on climate change, Europe has a lot to teach us.

BC took important baby steps with its Climate Action Plan of 2008. Three years later, however, baby is still clinging to the coffee table.

The centrepiece of BC’s plan was the introduction of North America’s first carbon tax, which makes it more expensive to use fossil fuels. Now it is time to scale up the carbon tax and make it an engine for transformative change. But before we do that, we need to fix the tax so it is more effective and fair.

BC’s carbon tax is currently a weensy $20 a tonne, or about 4 and a half cents per litre at the gas pump But the price on greenhouse gas emissions needs to be about ten times higher – $200 a tonne – by 2020 if it is to have a meaningful impact on the consumption patterns on businesses and individuals.

Some people are bound to blow a gasket when they hear that. But to put it in perspective, $200 a tonne means that in 2020 we’d be paying prices that are the norm today in Europe. The problem comes when people are unfairly punished because they have no alternatives.

The impact of a carbon tax would be strengthened, environmentally and politically, if we used the carbon tax revenues to fund climate action, rather than frittering the money away on tax cuts (as is currently the case). Allocating just half of the revenues from a higher carbon tax to public transit expansion and energy efficiency retrofits for buildings would meet this need, while creating thousands of new green jobs.

Metro Vancouver mayors have been calling for a share of carbon tax revenues, as they search for new sources of funding for transit improvements and expansion. A growing carbon tax could provide billions to build a first-class transit system.

With good public transit and more complete communities – where people live closer to public services, retail outlets, good jobs and amenities like parks and public spaces – our cities would look more like Europe’s. Instead of extreme commuting, people would have a range of options, from walking and biking to transit and car-sharing.

Some key sectors of the BC economy are also currently exempted from paying the carbon tax. Emissions from aluminum, concrete and a sizeable portion from oil and gas production are not covered. At the same time, the BC government is pressing for more development of oil and gas resources that contribute to climate change but only account for a fraction of one percent of BC employment. This is bad policy, as a carbon tax should create a level playing field across the economy.

Moreover, BC currently directs more than half of its carbon tax revenues to corporate income tax cuts. These tax cuts have no link to greenhouse gas emissions, so some of the worst corporate polluters benefit from tax cuts, and simply raise their prices to make up for any carbon tax that they do pay.

A final change needed is to make the carbon tax fair for individuals and families. If we use half the carbon tax revenues to invest in climate action, the other half should flow back to British Columbians, with an emphasis on low-to middle-income households, who pay a bigger share of their income in carbon tax than higher-income households.

Right now, the combined effect of personal and corporate tax cuts means that the richest households in BC get back way more in tax cuts than they pay in carbon tax. We should reverse these tax cuts, while greatly increasing carbon credits to low- to middle-income households, which would help reduce inequality in a province that has one of the worst records in Canada.

Done well, a carbon tax can be a powerful tool for reducing greenhouse gas emissions, creating new green jobs, lowering poverty, and demonstrating stronger leadership from BC on the climate file. It’s part of a vision of a future for BC with a higher quality of life as well as being a leader on climate action.

BC has already made a legislative commitment (to reduce greenhouse gas emissions by one-third by 2020) that would put us where the average European country is today.

Unfortunately, some politicians are trying to drag BC backwards. Their position is, “If other jurisdictions aren’t acting, why should we?” But this is the opposite of leadership. Our leaders need to speak to a positive vision of change, and we don’t need to invent it from scratch. We just need to learn the lessons from across the Atlantic.

Each ministry and agency is required to prepare a Service Plan that is published with the Budget.  These were initiated originally to provide more transparency in government work.  Over the years they have become increasingly opaque.  Reshuffling ministries and changing the format in which information is presented makes it almost impossible to compare things over time.  The Service Plans have largely become extended press releases.

But this year the Legal Services Society service plan broke the mold.  The Society offers legal representation for financially eligible people with serious family, child protection, criminal, or immigration problems, as well as information and advice services designed to help people resolve legal problems on their own.

In the report outgoing Chair D. Maryland McKimm QC makes the following point:

As I depart, the Legal Services Society is on a stable, albeit significantly reduced, footing. In the board’s assessment, however, the society is now providing services far below what the board believes is needed to properly assist British Columbians with low incomes and to effectively support the efficient operation of the justice system.

Would that we could see this kind of candor in other ministry service plans.  Health care funding in BC is the second lowest in Canada.  The Finance Minister took great pride in this during the Budget lockup before reporters.  In fact, the Budget documents show the government plans to actually reduce health spending as a portion of the GDP in coming years.

School Boards are in the same position.  Yes, funding per student is up in dollar terms (though not up as much as inflation).  But education spending as a percent of our GDP is falling.  In 2009 education spending equaled 5.8% of BC’s GDP.  By 2013 it is predicted to fall to 4.9%.  From 2009 to 2011 education funding will actually fall by $27 per capita.

Post secondary education is probably the most important investment a government can make.  Spending is virtually frozen and tuition fees continue to go up.

Environment funding is falling as are supports for the disabled and the arts. 

This is the price we have paid for over a decade of tax cuts that largely benefited corporations and the well off. 

So hats off to D. Maryland McKimm for penning the one service plan that had the courage to talk about providing services far below what British Columbians need.

Yes, it is technically true that in straight up current dollars debt hit a historic high in this budget. But I have news for you, so did BC’s nominal GDP at the projected growth rates. And you know what, our population is also at a historic high. Care to take a guess about the consumer price level as measured by CPI? Yup, another historic high right there.

Perhaps you’re starting to get the picture: we cannot make meaningful comparisons of monetary amounts like debt, government spending or revenues over time in current dollars alone.

I was happy to see that Mr Palmer chose to dispense with the sensationalism in his print edition column’s title, where the debt reference in the subtitle is a lot less alarmist: Finance Minister Hansen’s 2011 budget not as comfortable as he’d like us to think: ‘Levels of prudence’ can’t hide the fact that the debt situation is heading in the wrong direction.

I came across Mr Palmer’s commentary first, but he only one of the majority of media commentators who compare straight up dollar figures for our debt level today with dollar amounts under the NDP (over a decade ago) without accounting for the fact that the size of the population we have to support has also grown as has our ability to support debt (our provincial economy). What this does is make the increases in debt appear larger than they really are.

It’s a very common mistake, and it often goes uncorrected because it happens to serve the interests of those who oppose government spending, and therefore debt, on ideological grounds.

The provincial debt is projected to hit $60 billion by 2014, most media commentators report. The exact billion dollar figures are there for their shock value — these are some truly large numbers — but raising alarm over them is a bit like raising alarm over a family’s $500,000 mortgage.

Sure, the number sounds big, but we can’t actually tell if it’s a affordable or not without information on that family’s income.

And let’s be clear, our province is the equivalent of a rather wealthy family with a total income (measured by the size of the economy, or GDP) of about $200 billion.

When expressed as a share of our provincial GDP, our current debt level seems very affordable indeed. Our current debt level is 16.5% of GDP, which is projected to rise to $17.8% of GDP by 2012/13 and then decline slightly (figures from the 2011 BC Budget).

Yes, it’s higher than the 13.4% we reached in 2008, but this shouldn’t come as a surprise to anyone. We just went through the deepest recession we’ve had in 30 years. Of course debt would be higher than what it was during the boom — that’s what should happen.

The vast majority of government borrowing was used to finance capital spending. It spurred economic activity and created jobs at a time when the private sector was shrinking, providing a much needed stimulus to the economy.

There was no big boost in program spending, no real fiscal stimulus on this end. The small operating deficits we saw were caused by temporary, recession-driven reductions in revenue. Maintaining spending in the face of falling revenue was the right thing to do in order to support BC families through the recession and avoid putting an additional drag on the economy.

In the end, the BC economy grew faster than expected in 2010, but that had more to do with developments in the global commodity markets and the US economy than with made-in-BC policies. It could have easily gone the other way. Without the stimulus spending, BC would have experienced a deeper and longer-lasting economic downturn.

In short, increased government borrowing of that size was justified and our provincial debt levels remain affordable.

When measured properly, which is to say as a share of GDP, BC’s debt is nowhere near “historic highs”. It’s also among the lowest in Canada.

So enough of the debt hysteria already and let’s talk about some of the real issues that the next BC Premier will have to address.