The math is quite simple. Spending, by three levels of government, drives tax levels, and—as one comparison in the Lower Mainland demonstrates—drives economic outcomes as well.
Since taking office, the Stephen Harper government has increased program spending by 42 percent, more than three times the combined inflation and population growth rate. It is the largest five-year increase in spending since the Pierre Trudeau era. Deficit spending has sent the federal debt back over the half-trillion-dollar mark, from $458 million in 2007. By 2011, each person in Canada will owe almost $17,000 for their portion of the federal debt.
In B.C., spending restraint flew out the window in 2005. Spending ballooned from $30 billion that year to $40 billion in 2009. Deficit spending will drive the provincial debt to almost $53 billion by 2011, about $11,600 per person.
Of course these numbers are so ridiculously mind boggling as to be meaningless to the average taxpayer. What is not so meaningless, however, is the impact that will be felt when federal EI premiums go up in 2011 and provincial health and carbon taxes rise again in 2011 and beyond.
Yet these tax increases don’t tell the whole story. Because so much of federal and provincial government spending is done with borrowed money, the taxes to pay for that spending are deferred. Municipalities on the other hand—thankfully—don’t have that luxury. Local governments cannot run operating deficits and therefore must raise in taxes what they spend each year. The tax pinch is more immediately felt, as are the outcomes.
If we compare local government spending in the Lower Mainland’s two largest cities, Surrey and Vancouver, we find spending in Surrey, at $702 per person, is half that of spending in Vancouver, at $1,433. It seems unlikely local government services in Vancouver are twice as good as they are Surrey.
Vancouver’s taxpayers should take a look at Surrey’s spending priorities because Surrey had the lowest per capita cost of service delivery of all municipalities with a population over 25,000 in B.C.
Spending creates a very different tax burden, which is particularly acute when it comes to property taxes paid by business owners.
Unlike Vancouver, Surrey has done a good job of keeping business property taxes competitive. In fact, Surrey boasts one of the lowest business property tax burdens in the province.
This burden drives economic outcomes and as a result, Surrey is growing faster than Vancouver in terms of population, the labour force, and even school enrollment.
Will Surrey keep that advantage? Once again, spending tells the story. Between 2007 and 2009, Surrey spending went up by about 11 percent. Between 2009 and 2013, the city forecasts that spending will go up by another 22 percent; that’s more than four percent each year. Surrey citizens and business owners need to keep an eye out on what’s happening at city hall or Surrey’s tax advantage could be lost in the future.
So, the lesson here is clear. If a city can control its spending, it is reflected in a competitive tax regime that results in people moving there, setting up business there, sending their kids to school there and above all, paying taxes there. Provinces and the federal government could learn a similar lesson.
Maureen Bader is the B.C. director of the Canadian Taxpayers Federation.