Why BC Provincial Income Tax Rate Cut to Can’t Save HST

On October 29, 2010 BC Premier Gordon Campbell in a Television Advertisement announced 15% Provincial Income Tax Rate cut on an income up to $72,000, starting January 1, 2011.

Underlying assumption is this income tax rate cut will give people more money in hand to cover the cost of HST.

How much money people will be saving?

“Immediate savings of $354 for people making $50,000/year and up to $616 for those making $72,293 or more.”

Let’s do the math here. If you are making $50,000 this tax cut will save you 0.7% of your income and if you are making $72,293 you will be saving 0.85% of your income. As far as I am concerned, this tax savings is insignificant. People making over $50,000 do not care about saving 354/year.

People who would benefit from this will still pay 100% of HST. Over 80% of BC residents make less than $30,000 per year. How much savings are they going to get with this income tax rate cut? Is this tax savings going to cover the HST impact on their expenses?

Bottom line, HST is good for business and the province and Income Tax Rate Cut is a welcome relief. But HST is still going to hurt consumers. Now its time for businesses to stand up and announce the savings they are transferring to consumers.