Liberals promise immediate one-year suspension of PST

By Shannon Waters September 29, 2020

If elected, a BC Liberal government would immediately suspend the provincial sales tax (PST) for a year — then set it at three per cent “until the economy recovers from the COVID-19 pandemic.”

Liberal Leader Andrew Wilkinson described the tax cut as “the kind of bold action that British Columbians are looking for.”

“This is designed to get everybody in the economy livened up and out there enjoying life again because it will benefit people with lower incomes the most,” he said in Richmond yesterday.

The Liberals project the pause on PST — currently seven per cent — would save a family of four earning $60,000 an average of $1,714 in the first year and $979 in subsequent years.

NDP candidate George Heyman countered that a PST cut will benefit big spenders the most. 
“It doesn’t help people with rent, groceries, car insurance or child care, because those are already exempt from PST,” he said in response to Wilkinson’s announcement. “It will however save a multimillionaire $70,000 on the cost of a yacht.”

Some PST-applicable purchases would not be affected by the Liberals’ proposed cut: anyone buying a luxury vehicle worth more than $125,000 would still have to pay 20 per cent PST, as would anyone purchasing vape products. The seven per cent PST on cannabis would also remain intact.
A pricey promise
Those savings would cost the government’s coffers $6.9 billion in the first year. That’s the amount the province projects the PST — its second largest revenue stream — will generate in 2020-21. 
Per the Liberals’ calculations, it will cost an additional $3.9 billion in revenues per year while the PST rate remains at three per cent. 
The province is forecasting a $13-billion deficit this year. Over the next two fiscal years, PST is expected to bring in $8.2 billion and $8.6 billion, per Budget 2020. 
According to Wilkinson, the PST pause will prevent B.C. from “getting bogged down in the economic doldrums.” He told reporters that provincial spending on health and education would not be cut in order to offset the revenue reduction but left the door open to cuts in other areas.

‘Old-school style of economics’ 
Green Party Leader Sonia Furstenau said the proposed tax cut reveals “an astounding lack of imagination” from the Liberal leader.  
“This old-school style of economics is not what B.C. needs to recover,” said Furstenau, who thinks the nearly $7 billion would be better spent on targeted economic recovery for hard-hit sectors of the B.C. economy and social programs.

Economist Jim Stanford, founder of the Progressive Economics Forum, gave Wilkinson’s pitch “high points for sheer audacity” but said it may not prove to be the economic dynamite the Liberals claim.

“Lower sales taxes will not spur COVID-fearing Canadians to suddenly rush to the malls,” Stanford wrote. “It would be much more effective to boost employment, incomes, and confidence through direct spending programs.”