Why the most wealthy in B.C. are being hit with a higher income tax
People earning more than $220K a year will pay 20.5 per cent
The province has created a new income tax for B.C.'s highest earners, which goes a long way to help balance its budget.
People in B.C. will pay 20.5 per cent on all income earned after $220,000.
Finance Minister Carole James announced the new measure in her 2020 budget from Victoria on Tuesday.
In 2018/2019 the government hiked the rate from 14.7 per cent to 16.8 for incomes over $155,000.
The government is applying tax retroactively from Jan. 1 and officials said around 50,000 individuals in the province will pay it.
James said nearly half of the revenue from the tax increase will come from people with incomes above $1 million, and that the new top rate is comparable to those in other provinces including Ontario, Nova Scotia, New Brunswick and Quebec.
The new tax provides her budget $216 million in revenue for 2020/2021 — close to the projected surplus of $227 million — and a projected $219 million for 2021/2022
'Asking those at the top to contribute a little more'
"Now while we're asking those at the top to contribute a little more for services that everyone relies on, we're also making sure we're doing our part as government," she said.
Last fall, she instructed ministries to review their spending on things such as non-essential travel, consulting contracts and office expenses.
"And again, as part of budget 2020, we're redirecting a modest amount of funding to invest in key services and key priorities. Doing our part to ensure that we are being responsible budget managers."
She said the government belt-tightening was worth about one per cent of government spending, but that the amounts had been reinvested in programs for child care and housing and the Child Opportunity Benefit, which begins in October. It will provide up to $1,600 annually for families with one child under the age of 18.
She says people earning below $140,000 continue to pay the lowest personal incomes taxes compared to other provinces.
James said even with the new top rate, B.C. has the third lowest incomes taxes among the provinces for individuals earning up to $475,000 a year.
Chill on attracting talent
Meantime, business leaders in B.C. are worried about what the new tax on top income earners will mean for economic growth.
Jock Finlayson speaks for the Business Council of British Columbia and says the tax will make it harder to attract and retain talent in B.C.
"I mean this will become a very challenging place to convince people to put a head office and create head office jobs when the tax burden on skilled people is appreciably much higher than south of the border," he said.
The tax increase to the top tax bracket is the second hike in three years in B.C.