` Columbia Journal - Cost Shift
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Cost Shift
New Study from the Canadian Centre for Policy Alternatives

Well, so much for getting ahead with the help of provincial tax breaks, says a new comprehensive study. In fact, the new report by the BC Office of the Canadian Center for Policy Alternatives says that the Liberal regime's recent tax increases, privatization schemes and added user fees have wiped out the Liberals' original tax break and put most people further behind.

Although the Liberals insisted during last year's election campaign that their tax cut plans would pay for themselves in increased economic activity. However, this has not happened, according to the CCPA study, which is calling Cost Shift: How British Columbians are Paying for the Tax Cut.

It says instead of raising public revenues, the tax cuts, which went disproportionately to a wealthy minority, eliminated the $1.5 billion surplus left by the NDP government and produced a $4.5 billion deficit leaving the Liberal regime in a position of having to make drastic cuts in services and huge increases in taxes and fees.

This has supposedly produced what the study calls a "cost shift" from what was paid for publicly the government revenues on to individual taxpayers.

"Although the government promised that the tax cuts would pay for themselves, in reality they left a gaping hole in revenues," say the study's co-authors Sylvia Fuller and Lindsay Stephens. "Painted into a corner by their promise to balance the budget by 2004/2005, the government has now implemented numerous spending cuts to make up for the lost tax revenue.

"These cuts have set in motion a dynamic called 'cost shifting'- the transfer of costs off the government books and onto individuals, families, and in some cases employers. A year after the income tax cuts were first introduced, and after wave after wave of cost shifting, many people are asking if they are really better off."

Whether people are better off can be determined through the study's Cost Shift Calculator, a formula which, according to its authors, can approximately figure where a person is fiscally in relation to both the original tax cuts and the subsequent raises, especially to see if they are ahead or behind as a result.

But the study also offers nine general profiles of how people are faring under this new regime. These reveal:

A single individual earning $30,000 loses more than she gains if she requires a course of physiotherapy and an eye exam;
A senior couple with a combined income of $35,000 are net losers with MSP premiums alone. Changes to the Pharmacare program impose an even greater financial burden;
A family of four with a household income of $35,000 loses more than the value of their tax cut just with the MSP premium increase - if they have daycare expenses or require de-listed medical services they are deep in the hole;
A single parent with an income of $30,000 sees her MSP premiums go down. However, if she needs childcare the loss of her subsidy will leave her over $2000 in the red;
A UBC arts undergraduate student with an income of $13,000 receives a tax cut of $7, but pays $480 in increased tuition fees;
A family of four with a combined income of $60,000 remains ahead even after the addition of MSP, eye exams, and a course of chiropractic treatment, but not by very much;
Both the individual at $80,000 and the family of four at $90,000 find themselves with more money in their pockets than they had before the tax and spending cuts.

Liberal Finance Minister Gary Farrell-Collins responded angrily to the study, claiming that it is overly negative and detailed and is too harsh on the government. "They weighed and put together scenarios where all the possible negative impacts are piled on top of each other to get a scenario where people are worse off than they were before," he said, claiming that everyone is better off because of the Liberals' fiscal policies, regardless of the cuts, layoffs and tax a fee increases.

Fuller says Collins should read the study before drawing such inaccurate conclusions, adding that the report clearly estimates that some people, especially high-income earners are fiscally better off, while many middle and lower income earners have lost.

Furthermore, the study suggests that the situation is likely even worse for most people, since a wide variety of new, incremental and not yet implemented costs on the public have not been factored in.

"It doesn't include all new costs - higher drug costs as a result of changes to the Pharmacare program are not calculated, nor are the increases in sales or municipal taxes," Fuller said. "Incremental user fees (such as those for inland ferry service, or hospital amenities) are not included."

The Columbia Journal
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