The hoped-for revenues from personal and corporate income tax hikes proposed in British Columbia’s 2013 budget will be undermined by taxpayers’ reaction to the hikes, according to a report released today by the C.D. Howe Institute.
In “A Reality Check for BC: The Impact of Behavioural Responses on the 2013 Budget’s Proposed Income Tax Increases,” author Alexandre Laurin examines likely individual and corporate responses to the tax hikes, such as economically damaging reduced work effort and investment.
Laurin finds that revenues are unlikely to meet budget projections. “In the near term, personal tax revenues could fall short of expectations by as much as 40%. In the long term, B.C.’s corporate income tax revenues may fall below the level they would have been without the tax increases,” says Laurin.
In the paper, Laurin suggests that the B.C. government should have kept the HST and taxes on high-value homes and passenger vehicles.