One Comment About Taxation – Reading, Writing and the Arithmetic of B.C.’s Budget

 

As a child, I always loved the “three R’s” of my education: reading, ‘riting and ‘rithmetic. Since the federal and provincial governments have March 31 fiscal year ends, the budgets for the upcoming years are starting to be presented (except for the federal government which decided to go to a fall presentation rather than late winter as has historically been done). I often apply the three R’s when reviewing budgets.

 

First, the reading. Last week, British Columbia released its provincial budget and I read it. Most people were expecting a troubling fiscal position and that was confirmed. My reading draws six clear messages: sustained multi-billion dollar deficits (with excessive spending), rapidly rising debt, personal tax increases, expansion of the provincial sales tax (“PST”) base, suspension of personal tax bracket indexation and the deferral of previously announced capital projects.

 

B.C.’s projected deficit for 2025-26 is approximately $9.6 billion, rising to $13.3 billion in 2026-27, with deficits remaining in the billions thereafter. Interest on the rising debt is also climbing. That’s a fiscal train-wreck.

 

On the spending side, the government touts that it is reducing its headcount by about 15,000 positions over the next three years and includes “…an estimated savings of $3.5 billion through expenditure management over the course of the fiscal plan.”  With deficits approaching $10 billion and rising thereafter, those reductions are modest and do not materially alter the structural trajectory.

 

To fund its huge expenditures, the B.C. government is turning to the only place it can: tax increases.

 

Instead of going after its usual targets – the so-called “rich” and corporations – the government is broadening the base. It will raise the personal income tax rate on the lowest bracket from 5.06% to 5.6%, stating that the “average taxpayer” will see an increase of $76 in 2026. To unpack this, I asked my friend Jay Goodis of Tax Templates Inc. to run the numbers.

 

Jay noted that a single individual earning $50,363 (the top of B.C.’s first tax bracket in 2026) would pay just over $200 more per year in provincial tax (wiping out any benefit people might receive from the recent 1% federal reduction of the lowest tax bracket). The $76 figure reflects an average across all taxpayers, including those whose increased credits offset the higher rate. Based on Jay’s modeling, the break-even point for a single individual earning other income is around $35,000. Above that level, the higher 5.6% rate outweighs the enhanced credit – meaning the average masks the distributional impact.

 

The suspension of bracket indexation – for 2027 through 2030 – is particularly concerning.  Indexation exists to prevent fiscal drag – the phenomenon whereby inflation pushes taxpayers into higher brackets. When indexation is paused, nominal income growth generates additional tax revenue automatically.

 

Suspending bracket indexation is an indirect tax increase. It disproportionately affects lower and middle income earners whose wages rise nominally with inflation but whose real purchasing power does not meaningfully improve. Fiscal drag is politically convenient because it avoids headline rate increases while expanding revenue quietly. Other provinces have employed similar tactics in recent years, as has the U.K., where frozen personal allowance thresholds generated billions. This kind of indirect taxation increase is shameful.

 

The B.C. government also announced a broadening of its PST base to now include services like accounting and bookkeeping, architectural, engineering, and a bevy of others. It also is proposing to increase property taxes on certain homes and increase the speculation tax for certain foreign owners by 1%.

 

The amount of tax increases is shockingly tone deaf. With most Canadians struggling mightily with affordability matters, the B.C. government seems to have no problem asking its residents to pay more.

 

And how will all of this be “sold”?  Well, that’s where the second R, ‘riting, is applicable.

 

Jeremy Bentham, the English philosopher and founder of modern utilitarianism, wrote in the late 18^th century about what he called the “springs of action” – the linguistic and motivational forces that influence behavior. Bentham understood that words are often selected not to neutrally describe reality but to shape perception.

 

For example, the B.C. budget describes the capital project deferrals as “strategically sequencing the capital plan” and “adjusting the timing of delivery”. Nice sounding language. But in plain fiscal and neutral terms, this means that projects are being postponed because the province’s borrowing capacity and cash flow is constrained. Reframing the delay as strategy is managing political reaction.

 

The same applies to the tax language. A “pause in indexation” sounds technical and temporary.  In economic terms, it is a revenue measure that allows inflation to increase effective tax burdens without formally raising rates. The $76 “average” personal tax increase sounds modest but obscures the distributional reality.

 

Bentham understood that language shapes perception. In fiscal policy, carefully chosen words can make tax increases and other measures sound benign before their real impact is felt. Once that principle is understood, you can clearly see that the B.C. government is trying to balance elevated spending with broadened taxation and carefully calibrated messaging that softens the impact.

 

Next, the final R – ‘rithmetic. When the other provinces’ budgets are released in the coming weeks, most will be running deficits. But B.C.‘s trajectory – the size of its deficits, the pace of its debt accumulation, the breadth of its tax measures – most certainly places it among the most aggressive.  It’s not merely cyclical weakness but instead reflects structural imbalance. The arithmetic is not subtle. The trajectory is structural, not temporary.

 

As former U.K. prime minister Margaret Thatcher once observed, governments eventually confront arithmetic. When spending growth outpaces economic growth, there are only two choices: materially restrain expenditures or expand taxation, directly or indirectly.

 

B.C.’s budget does a measure of both – but primarily through revenue expansion and linguistic calibration (as Bentham pointed out).

 

Governments can frame a budget with reading and ‘riting. ‘Rithmetic is what ultimately judges it. And the arithmetic here is damning.

 

One Comment About Leadership – Are You Wearing a Backpack When You Lead?

 

I was in Vancouver this past weekend for a short getaway with my wife. We took the SkyTrain from the airport to our hotel. It’s an efficient way to travel.

 

One of the signs on the train caught my attention. It read:

 

“Please remove your backpacks to create more space for other passengers.”

 

I immediately thought about how many times I’ve been seated on a plane and watched someone shuffle down the aisle wearing a large, overstuffed backpack. As they squeeze past each row, the backpack inevitably swings into the shoulders or heads of those already seated. I can’t count how many times it has happened to me. Every time, I’ve found myself thinking the same thing: are they completely unaware of the impact they’re having, or do they simply not care? Either explanation is not flattering.

 

That small sign on the SkyTrain made me reflect on leadership.

 

How often do leaders walk around wearing their own metaphorical backpacks?

 

Most leaders carry things that they may not even realize are bumping into others – pressure, rudeness, impatience, ego, stress, overconfidence, or an assumption that their title entitles them to a certain way of behaving. None of those traits are rare, and none automatically make someone a bad leader. But when they go unchecked, they create friction. The consequences are predictable: teams adjust to avoid the “bump,” people withdraw, and energy gets wasted managing the leader instead of advancing the mission.

 

The problem is rarely intention. It is usually awareness.

 

Leadership requires the discipline to intentionally increase your self-awareness. One way to do that is by asking yourself some difficult questions: How is my style affecting the people around me? Is the way I lead enabling others to contribute, grow and perform at their best?

 

In many cases, the brutal and honest answer to those questions should cause you to pause and make adjustments.

 

Removing the backpack is about creating space for those tough questions and for your teammates to thrive. It means understanding that influence is strengthened by self-awareness, not diminished by it.

 

Leaders, stop bumping people and take off the backpack. Create some space.

 

One Comment About Economics  – The Journalism Tax Credits Need to End

 

I’ve been historically vocal about how I feel about the Canadian government’s support of the journalism industry through the tax system by providing refundable credits.  For those that need a reminder, I don’t like it. Not a bit. It’s a horrible use of Canadian tax dollars.

 

First introduced in the 2019 federal budget, the credits provide lucrative cash to certain eligible news organizations. In 2023, the credits were enhanced even further. Those enhancements are scheduled to expire at the end of this year and return to the 2019 levels if not extended or further amended. It’s my hope that – at a minimum – such credits sunset back down to the 2019 levels, notwithstanding continued lobbying by self-interested parties for the “supports” to continue. My overall wish is for the credits to disappear.

 

It’s my view – as I’ve stated many times in this newsletter – that legacy media sources have turned into government mouthpieces and continuous op-Ed’s which – when you “follow the money” – you can understand why. Gone are the days of neutral reporting.

 

I’d encourage Canadians to purposely seek independent newspapers and other sources who don’t rely on government funding for their existence. The quality is superior.

 

Bonus Comment – Paraphrased Idea From Carl Jung – Deceased Swiss Psychologist and Psychiatrist –  About Learning From Irritations

 

“Everything that irritates us about others can lead us to an understanding of ourselves.”

 

Exactly. Leaders, do you have any “airplane moments” like me where you can learn more about yourselves?

 

Amazon Books: https://www.amazon.ca/Making-Life-Less-Taxing-Attention/dp/B0GGTNMV2Q/ref=sr_1_1?

Apple Books: https://books.apple.com/ca/book/making-life-less-taking-version-2/id6758958890

Hope you enjoyed this edition of 1-1-1. If you’re not already part of the In the Mood Network, now’s the time. Please sign-up today.  Whether it’s through consulting, coaching, speaking, or writing, my work is about planting acorns: deliberate, principled actions that challenge the status quo and grow into something far bigger. The goal? Bold reform. Stronger foundations. And a country that values hard work and common sense.