Finance Minister Carole James left big tax exemptions like the home owners grant and restaurant meals alone in her first full budget. Preparations are underway for the 2019 budget. (Black Press files)

ANALYSIS: Tax breaks costing B.C. treasury $7 billion a year

Home owners grant now goes to people with $1.65M houses

Why does B.C. continue to give property tax breaks for owners of million-dollar homes and waive the sales tax for high-end bicycles and restaurant meals? And who pays to make up the lost revenue?

You hear a lot about government spending going up or down, but politically popular tax breaks accumulate over the years with little discussion of their impact. As of last year, the combined cost to the B.C. treasury was more than $7 billion annually, Auditor General Carole Bellringer notes in a new report.

Economists call them “tax expenditures,” to emphasize that they are in effect spending programs. According to the current B.C. budget, the biggest one is the provincial sales tax exemption for food, which includes restaurant meals as well as grocery store food items. That is foregone revenue totalling $1.18 billion.

The only other province that exempts restaurant meals from sales tax is Alberta, which has no provincial sales tax.

B.C.’s second biggest tax break, budgeted at $809 million this year, is the B.C. Home Owners Grant. Introduced in 1957 by then-premier W.A.C. Bennett as a populist measure to relieve rising home prices, the grant has grown along with housing prices. The most recent adjustment to eligibility for the grant raised it to homes up to $1.65 million, up from $1.6 million.

The grant is more controversial this year because Premier John Horgan campaigned on a promise to provide a renters grant of $400 a year, arguing that renters should get a break as well as homeowners. But the renter rebate has not been delivered, because it is opposed by B.C. Green Party leader Andrew Weaver and he holds the balance of power in the minority provincial government.

Among the home owner grant critics is Simon Fraser University economist Marvin Shaffer, who has called it “a crassly political, poorly designed grant program” that goes to more than 90 per cent of homeowners via a complicated regional application system.

His fellow SFU economist Rhys Kesselman has argued for a “progressive annual property surtax on higher-value homes” that exempts homes below $1 million in value.

B.C. dropped the sales tax on the food portion of restaurant bills in 2013 when the harmonized sales tax was scrapped. All other provinces except Alberta, which has no sales tax, charge either HST or provincial sales tax on restaurant meals, with the highest being 15 per cent HST in Nova Scotia.

RELATED: Extend sales tax to soft drinks, advisors urge

Bellringer isn’t recommending changes to the home owners grant or other tax expenditures. Instead she suggests that after 25 years, reporting of these policies should be improved to better show their effects on the economy.


@tomfletcherbc
tfletcher@blackpress.ca

Like us on Facebook and follow us on Twitter.

Just Posted

Would-be thieves strike Serious Coffee in Parksville

Shop’s front door smashed Saturday night, alarm scared off intruders

Tips and tricks for making a gingerbread house

Take your time and test your design, says Vancouver Island University instructor

Rotarians from Qualicum Beach Sunrise Club help homeless

Hot breakfast served to those in need

REPLAY: B.C’s best video this week

In case you missed it, here’s a look at the replay-worth highlights from this week across the province

Microscopic parasite found in Prince Rupert water affecting thousands

More than 12,000 residents affected by the boil water advisory issued Dec. 14

Trudeau lashes out at Conservatives over migration “misinformation”

Warning against the “dangers of populism,” Trudeau says using immigration as a wedge political issue puts Canada’s future at risk.

B.C. hockey coach creates ‘gear library’ to remove cost barrier of sport

Todd Hickling gathered donations and used gear to remove the cost barrier for kids to play hockey.

GoFundMe helps Vancouver Island teen battle a rare cancer

Nanaimo’s Michelle Reilly, 16, battling spinal cord cancer, seeking possible treatment in U.S.

Canada’s ambassador meets with second detainee in China

Global Affairs says John McCallum, Canada’s ambassador to China, met with Spavor Sunday

‘They’re coming:’ Flying cars may appear in urban skies by 2023

Air taxis will number 15,000 and become a global market worth $32 billion by 2035

B.C. VIEWS: Andrew Wilkinson on taxes, ICBC and union changes

Opposition leader sees unpredictable year ahead in 2019

5 tips for self-care, mental wellness this holiday season

Ministry of Mental Health and Addictions urging British Columbians to prioritize self care through festive season

Most Read