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Referendum Myths: “It’ll cost you $258 a year”

The biggest myth being perpetuated by the Canadian Taxpayers Federation is that it will cost every Metro Vancouver household $258 every year in new taxes. That is completely incorrect, and here’s why.

First, the CTF’s math. The 0.5% Metro Vancouver Congestion Improvement Tax (which I’ll shorten to CIT from now on) will generate roughly $250 million per year to pay for the myriad improvements in Metro Vancouver’s transportation system. In 2011, the Vancouver census metropolitan area (which is pretty much the same thing as Metro Vancouver) had 891,336 private dwellings occupied by usual residents. That number increased by 9.1% between 2006 and 2011, so assuming a steady increase, that turns out to be a 1.76% yearly increase. That means that in 2015 there are roughly 955,762 households in Vancouver. Divide the $250,000,000 equally amongst all of those households and you get $261.57 per year, which is pretty close to the CTF’s $258 per year.

Now here’s why that number is wrong. The CTF is making the assumption that only households will be paying the CIT. That is wrong. Plain and simple, the CTF’s base assumption is wrong.

Visitors to Metro Vancouver will also pay the CIT. In 2014 Metro Vancouver had nearly nine million overnight visits, and tourism continues to increase (and will get better if the Canadian dollar remains weak against the US dollar). In BC, hotel stays are taxed and one can reasonably assume that the CIT will apply here as well. Total spending by overnight visitors was $4.4 billion in 2006, and if you assume that 75% of this is taxable (food isn’t, but tourists spend roughly 25% of their money on food (at least, domestic tourists in the UK do)), that works out to $16.5 million. Take that number, scale it up by 5.5% per year between 2006 and 2014 and you get about $25.3 million per year.

Okay, so 10% of the $250 million will be paid for by tourists.

What about businesses? They’re going to pay the CIT as well! I don’t have any good numbers, but the Mayors’ Council pegs this at 45%. That sounds reasonable to me, but if someone wants to make the case that this number should be substantially larger or smaller, there’s a comment form at the bottom of this post.

Put those numbers together and you end up with households paying roughly 45% of the $250 million each year, or $112.5 million per year, or $117.70 per household per year.

But! The CTF also says, of the $250 million, “…that’s a tax increase – visible and hidden – of $258 per household.” They try to sneak in this “hidden” cost, assuming that businesses will directly pass on any taxes they pay to people purchasing their products. Here’s a simple example showing that is wrong:

There is currently a gas tax of 17 cents per litre charged in Metro Vancouver. Metro Vancouver does not include the city of Abbotsford but does include Langley, which borders Abbotsford. If this gas tax is directly passed on to the consumer, one would expect that a gas station in Langley would charge 17 cents more per litre than a gas station in Abbotsford. Is that the case?

No. That image is gas prices from January 27, 2015. To the west of the red line is Langley, to the east is Abbotsford. The three gas stations in Langley average to 100.6 cents per litre, and the five in Abbotsford average to 89.9 cents per litre, a difference of 10.7 cents per litre. Either gas stations in Langley are eating six cents per litre or gas stations in Abbotsford are charging an extra six cents per litre. I suspect reality is somewhere between the two.

There are also a lot of businesses in Metro Vancouver that either don’t directly charge consumers (mining companies are a good example) or are national (such as banks) or multi-national (such as shipping companies and large software companies). How does a mining company pass on the 0.5% CIT to Metro Vancouver households? How does Microsoft pass on the 0.5% CIT to Metro Vancouver households? They don’t.

How much will Metro Vancouver households pay in CIT? Probably around $100-120 per year. That’s a far cry from the $258 per year that the CTF says they’ll pay. Again, they’re only interested in fear-mongering instead of presenting facts.

And that they use this as a major part of their campaign? Relying on weak and incorrect math to scare Metro Vancouver residents?

That’s pretty weak.

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