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Inequality in British Columbia : what role does tax policy play? Wallis, Kimberly Dawn

Abstract

In 2001 a new provincial government was elected in the province of British Columbia, the BC Liberal party. During their election campaign they promised that lower personal income taxes would stoke the BC economy. Although personal income taxes were lowered after their election, high income earners were given a much higher proportion of the tax cut (when looked at as a dollar value per person) than middle and lower income earners. Further, since government service fees increased in many areas, it is possible that middle and lower income earners may have found themselves paying more to the government in combined taxes and fees than before the advertised tax cuts. It is thus more realistic to suggest that the burden of taxes has shifted rather than to say that taxes were cut. Social services were also cut dramatically. It is suggested that inequality is likely to increase in the province as a result of these changes. The question of whether the changes to the personal income tax rates will have a positive effect on the BC economy, both in the short, medium and long term is considered. In the short term, it is questionable whether reducing personal income taxes will provide any stimulus to such component parts of the economy as the supply of labour and the supply of capital. It is noted that productivity, a key indicator that the BC Liberals sought to alter through changes to personal income taxes, has not improved. In the long term, a decreased investment in such social services as health and education may have a negative effect on the rate of economic growth in the province.

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