The Transit Tax Vote – 62% Vote No! Here are my thoughts.

Yesterday the transit plebiscite results were announced with a resounding No result. What was the No vote for? Was it a vote against Translink (as the mayors are saying), was it a vote against Transit (maybe bike lanes but probably not), or was it a vote against ANOTHER tax. In my view, it was the latter, a vote against yet ANOTHER Tax but phrased in a way that focused on Translink. While the head of the Canadian Taxpayers Federation argued it was a vote against Translink, to most people they probably knew little about Translink at the start of the plebiscite and did not have strong opinions about it. In addition, this argument prevented an argument around the tax which is much harder to articulate, without simply saying I don’t want to pay anymore.

As we are accountants let’s talk about the tax…

The tax would have been a 0.5% increase in PST. It should be noted that this is actually a 7% increase in PST as it would go up from 7% to 7.5%. Interestingly, not that long ago PST was 7.5% in BC. This tax was reduced to 7% October 21, 2004. There are pros and cons of consumption taxes. They are harder to avoid (pro) and force tourists to pay for it too (pro) but can also be regressive (con) and deter capital investments (con). Ironically, if we kept HST we may have had enough funds to pay for Transit – where were the ‘Yes’ campaigners then… that is a digression though.

From a tax person perspective though, there were also number of questions that were being asked about the tax to which there were no real answers and only ‘just trust us’ responses.

For example, if someone purchased an item in Kelowna and paid 7% PST, would they have to self-assess PST of 0.5% when they brought it in to Metro Vancouver? Or the government made it clear that the extra 0.5% would primarily follow the existing PST, so which items would be different? How about those on the border, how would they be impacted – why buy a car from someone in Metro Vancouver when you can buy from someone outside of it?

Another key concern was who would monitor the funds? Does Jim Pattisson really have the time to do this and do we trust him too? A gripe I have always had with the Carbon Tax is its supposed revenue neutrality, this is true and not true as the surplus each year is used by government to pay for existing spending promises and make new ones without referencing that this is coming from the carbon tax. (See page 69 of the 2015 Budget here: http://bcbudget.gov.bc.ca/2015/bfp/2015_budget_and_fiscal_plan.pdf)

While it is true that Transit upgrades are important for the city and a 0.5% PST tax would have been helpful to fund it, there are significant funds that go to the BC Government, Municipalities and Translink on a regular basis from the normal income taxes to the various consumption/user fee taxes which include Property Transfer Tax, Hydro, PST, Gas Tax, Carbon Tax, Tolls, Property Taxes and the various fees/permits which are visible and not visible. In short, life in Metro Vancouver is expensive, why not use the existing revenue of the government (municipal and provincial) to find a solution to fund transit, but please do not be coming to taxpayers saying we need more money from you when building a new bridge for over a billion dollars is not also up for discussion.

As for Translink itself, I am not sure if it is doing a good job or not, it is a big organization and was set up to be the scapegoat in case this referendum did not succeed (and it is being used as a scapegoat by the municipalities now). Let’s also remember that it is set up the way it is because there were issues with politicians in charge of Transit.

Going forward, I expect that some of the more important transit initiatives will go forward regardless and some of the more superfluous and hard to identify ones will be dropped. The government will get its money somehow, by cutting costs, reallocating funds or raising other taxes and fees. My guess is the latter. With a million new people expected in Metro Vancouver at least there will be more people to spread the cost around.

Full Disclosure – I voted YES. This is because I use transit on a regular basis and I am in Vancouver which probably has the best transit infrastructure in the region and I would have liked to have seen less crowded Canada Lines, and a consumption tax I believe will cost me less than potential other tax increases.