Financial analyst Kim Moody emphasizes that while governments may attempt to present budgets in a favorable light, the underlying mathematics remains inescapable. When government expenditures consistently outpace economic growth, Moody argues there are fundamentally only two viable solutions: implement spending restraints or expand taxation.
British Columbia's Troubling Fiscal Position
Moody applies his analytical framework to British Columbia's recently released provincial budget, which confirms widespread concerns about the province's fiscal health. His examination reveals six critical findings from the budget documents: persistent multibillion-dollar deficits driven by excessive spending, rapidly accumulating government debt, increases to personal income tax rates, expansion of the provincial sales tax base, suspension of personal tax bracket indexation, and postponement of previously announced capital projects.
The Deficit and Debt Reality
British Columbia projects a substantial deficit of approximately $9.6 billion for the 2025-26 fiscal year, with that figure expected to climb to $13.3 billion in 2026-27. Moody characterizes this trajectory as a "fiscal train wreck," noting that deficits are projected to remain in the billions for subsequent years while interest payments on the mounting debt continue to increase.
Modest Spending Reductions
The provincial government has announced plans to reduce its workforce by approximately 15,000 positions over the next three years and implement expenditure management measures estimated to save $3.5 billion throughout the fiscal plan. However, Moody contends these reductions are insufficient to meaningfully alter the structural trajectory given the scale of annual deficits approaching $10 billion and continuing to rise.
Taxation as the Primary Revenue Solution
To finance its substantial expenditures, the British Columbia government has turned to taxation increases. Rather than targeting traditional revenue sources like high-income earners and corporations, the province has opted to broaden its tax base.
Personal Income Tax Changes
The government will raise the personal income tax rate on the lowest bracket from 5.06 percent to 5.6 percent. Officials claim this will result in an average increase of just $76 per taxpayer in 2026, but Moody consulted tax expert Jay Goodis of Tax Templates Inc. to scrutinize this assertion.
Goodis's analysis reveals that a single individual earning $50,363—the top of British Columbia's first tax bracket in 2026—will actually pay more than $200 in additional provincial tax annually. This increase effectively eliminates any benefit taxpayers might have received from the recent one percent federal reduction of the lowest tax bracket.
The Distributional Impact
According to Goodis's modeling, the break-even point for a single individual with other income sources is approximately $35,000. Above this threshold, the higher 5.6 percent tax rate outweighs any enhanced credits, meaning the government's "average" figure masks significant distributional impacts across different income levels.
The Fundamental Budgetary Choice
Moody concludes that British Columbia's approach represents a clear example of choosing taxation expansion over meaningful spending restraint. The province's attempt to balance elevated expenditures with broadened taxation, while carefully calibrating its messaging to soften the impact, cannot ultimately escape the mathematical reality that governments face when spending consistently outpaces economic growth.
The analysis underscores Moody's central thesis: governments confronting this fiscal dilemma must ultimately choose between restraining expenditures or expanding taxation, as British Columbia has done through its combination of tax increases and relatively modest spending reductions.
