During the 2020 budget speech this afternoon, the provincial government announced it will establish a new top personal income tax bracket for British Columbia’s highest income earners.
The new tax rate will be 20.5% on taxable income above $220,000, with this new regime beginning January 1, 2020. The tax rate for these income earners was previously 16.8%.
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Revenues generated by this heightened tax level for the top 1% of BC income earners will more than triple the existing revenues from the tax bracket.
This group will generate $54 million in personal income tax revenue in the 2019/20 fiscal year, and with the new tax this revenue segment will rise to $216 million in 2020/21, $219 million in 2021/22, and $224 million in 2022/23.
The provincial government estimates approximately half of the revenue from this real tax increase will come from individuals with incomes above $1 million.
“This will help to deliver the infrastructure and services that create good jobs and keep BC’s economy moving while maintaining BC’s tax system as one of the most competitive in the country,” said BC finance minister Carole James in her speech.
Overall, the new income tax bracket for the 1% will increase the province’s total personal income tax revenue by 6.8% for the upcoming fiscal year. Total personal income tax revenue collected by the provincial government will rise from $11.022 billion in 2019/20 to $11.771 billion in 2020/21, growing to $12.294 billion in 2021/22 and $12.609 billion in 2022/23.
Excluding the effects of previous tax measures and adjustments, personal income tax revenue will increase by an average of 4.5% over the next three years.
According to the provincial government’s account, the new personal income tax for the 1% will be comparable to the top rate in provinces such as Ontario, Quebec, and New Brunswick.
Even with the new rate for the 1%, BC will still have the third lowest income taxes amongst the provinces for individuals earning up to $475,000. As well, individuals earning below $140,000 will continue to pay the lowest personal income taxes amongst provinces.
As for household income growth, the provincial government is forecasting a 3.8% increase for each of the next three calendar years, after experiencing a 4.4% increase last year.
Employee compensation income grew by 5.2% last year, with lower growth of 4%, 3.9%, and 4% for each of the next three calendar years, respectively.
Corporate income tax revenue is expected to fall by 5.4% in 2020/21, before rebounding with upticks of 3.9% in 2021/22 and 6.2% in 2022/23.