B.C. Finance Minister Brenda Bailey.DARRYL DYCK/The Canadian Press
There is a silent tax increase lurking in the B.C. budget that landed last week – so silent that it did not rate a mention in Finance Minister Brenda Bailey’s speech.
The NDP government announced in its fiscal plan that it will stop indexing personal income tax brackets, and non-refundable basic tax credits, to inflation.
That announcement might feel mundane until a price tag – billions of dollars over five years – is attached. Then it becomes all too clear that the government is enacting a tax hike that will hit low-income earners, not just the government’s favoured target of better-off households.
Most governments in Canada index income-tax brackets to inflation, so that when a taxpayer’s income simply keeps pace with a rising cost of living, they are not pushed into a higher tax bracket. That policy also keeps the value of tax credits from being eroded by inflation.
But the B.C. NDP government will stop indexation starting next year, continuing through to the 2030 tax year. The revenue from that change will quickly mount, rising from $60-million in fiscal 2026-27 to $590-million in fiscal 2028-29.
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And it will keep on rising after that. The government has not provided forecasts for the two following fiscal years, but David Williams at the British Columbia Business Council said his forecasts indicates revenue rising by at least $1-billion the following fiscal year and $1.3-billion the year after that. All told, British Columbians will pay an additional $3.2-billion to $3.4-billion in personal income taxes over five fiscal years, he estimates.
Those numbers underscore the problem with the approach that the NDP is taking. The government’s tax take will rise every year, without any subsequent change in policy. There will be no headlines about a new tax hike, no troublesome press releases or budget footnotes. Just a silent raising of taxes, year after year.
And that is the accountability gap with deindexation: governments that indulge in the tactic can duck responsibility for their taxing ways. Unsurprisingly, Ms. Bailey did not feel the need to even mention that massive tax hike in her budget speech.
To be fair to the NDP in B.C., they are not the only government to take such a step. The only other NDP government in the country, in Manitoba, also halted indexation last year, until the provincial budget is balanced. Alberta’s United Conservative government also deindexed provincial rates and credits between 2019 and 2022. (To their credit, Nova Scotia and Prince Edward Island have recently moved to reindex their tax systems.)
One of the most pernicious effects of deindexation is that it pushes lower-income earners on to the tax rolls, simply because they got a bump in their already meagre wages to keep pace with inflation. Four years ago, the basic personal amount tax credit, the threshold at which provincial personal income tax kicks in, was $11,304. In 2026, inflation had increased that credit to $13,216.
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But over the next four years, that credit’s value will be frozen. Minimum wage earners (and everyone else) that squeeze out a small raise will find the government’s hand already in their pockets. It’s a similar story with tax brackets: Inflation-matching wage increases will drive up personal income tax bills.
Another insidious problem with deindexation is that it is almost always a permanent hit to after-tax income. If B.C. sticks to its professed schedule, tax brackets will start rising with inflation in the 2031. But the government has expressed no intention to then catch up to the effects of accumulated inflation. Instead, it will just keep pocketing the difference.
Ms. Bailey attempted to extend an empathetic vibe to financially stressed British Columbians. “But we know many families are struggling. People keep working harder but feel like they aren’t getting further ahead,” she said.
Her government’s policy of riding on the coattails of inflation make a mockery of those words. People in British Columbia will be working harder in the next four years, and may indeed find out that they are having trouble getting further ahead.
And part of the reason will be the NDP’s silent tax increase, steadily eroding the after-tax income of B.C. households. The very least that the finance minister could have done was to defend the need for such a policy in her speech. Her silence on her silent tax speaks volumes.