I always loved the three Rs of my childhood education — reading, ‘riting and ‘rithmetic — and I often apply them when reviewing budgets, which are starting to be presented by various Canadian governments since they have March 31 fiscal year-ends, although the federal government decided to go to a

fall presentation

rather than late winter as has historically been done.

First, the reading.

British Columbia

released its

provincial budget

last week. Most people were expecting a troubling fiscal position and that was confirmed. My reading draws six clear messages:

sustained multibillion-dollar deficits

(with excessive spending), rapidly rising debt, personal tax increases, expansion of the provincial sales tax base, suspension of personal tax bracket indexation and the deferral of previously announced capital projects.

B.C.’s projected deficit for 2025-26 is approximately $9.6 billion, rising to $13.3 billion in 2026-27, with deficits remaining in the billions thereafter. Interest on the rising debt is also climbing. That’s a fiscal train wreck.

On the spending side, the government said it is reducing its headcount by about 15,000 positions over the next three years and the budget also included “an estimated savings of $3.5 billion through expenditure management over the course of the fiscal plan.” With annual deficits approaching $10 billion and rising thereafter, those reductions are modest and do not materially alter the structural trajectory.

To fund its huge expenditures, the B.C. government is turning to the only place it can:

tax increases

. But instead of going after its usual targets — the so-called rich and corporations — it is now broadening the base.

The government said it will raise the personal income tax rate on the lowest bracket to 5.6 per cent from 5.06 per cent. In doing so, it said the “

average taxpayer

” will see an increase of $76 in income tax for 2026. To unpack this, I turned to my good friend,

Jay Goodis

of Tax Templates Inc., to scrutinize that claim.

He pointed out that a single individual earning $50,363 (the top of B.C.’s first tax bracket in 2026) will pay more than $200 in provincial tax each year, wiping out any benefit people might receive from the recent

one per cent federal reduction

of the lowest tax bracket. The $76 figure reflects an average across all taxpayers, including those whose increased credits offset the higher rate.

Based on Goodis’s modelling, the break-even point for a single individual earning other income is around $35,000. Above that level, the higher 5.6 per cent rate outweighs the enhanced credit, meaning the average masks the distributional impact.

Suspension bracket indexation — for 2027 through 2030 — is particularly concerning since it is an indirect tax increase. Indexation exists to prevent fiscal drag, whereby inflation pushes taxpayers into higher brackets even though their real purchasing power has not increased. Nominal income growth automatically generates additional tax revenue when indexation is paused, which disproportionately affects lower- and middle-income earners.

Fiscal drag is politically convenient because it avoids headline rate increases while expanding revenue quietly. Other provinces have employed similar tactics in recent years, as has the United Kingdom, where frozen personal allowance thresholds generated billions through fiscal drag. This kind of indirect tax increase is shameful.

The B.C. government is also broadening its provincial sales tax base to include services such as accounting and bookkeeping, architecture, engineering and many others. And it is proposing to increase property taxes on certain homes and increase the speculation tax for certain foreign owners by one per cent.

The amount of tax increases is shockingly tone-deaf since most Canadians are mightily struggling with affordability matters.

How will all of this be sold? Well, that’s where the second R, ‘riting, is applicable.

Jeremy Bentham

, the English philosopher and founder of modern utilitarianism, in the late 18th century coined the phrase “springs of action,” the linguistic and motivational forces that influence behaviour. He understood that words are often selected not to neutrally describe reality, but to shape perception.

For example, the B.C. budget describes the capital project deferrals as “strategically sequencing the capital plan” and “adjusting the timing of delivery.” Nice-sounding language, but in plain fiscal and neutral terms, this means that projects are being postponed because the province’s borrowing capacity and cash flow are constrained. Reframing the delay as a strategy is managing political reaction.

The same applies to the tax language. A “pause in indexation” sounds technical and temporary, but in economic terms, it is a revenue measure that allows inflation to increase effective tax burdens without formally raising rates. The $76 “average” personal tax increase sounds modest, but obscures the distributional reality.

Bentham understood that language shapes perception.

In fiscal policy

, carefully chosen words can make tax increases and other measures sound benign before their real impact is felt. Once that principle is understood, you can clearly see that the B.C. government is trying to balance elevated spending with

broadened taxation

and carefully calibrated its messaging to soften the impact.

Next, the final R — ‘rithmetic.

Most provincial budgets

over the next while will be running deficits. But B.C.‘s trajectory — the size of its deficits, the pace of its debt accumulation and the breadth of its tax measures — most certainly places it among the most aggressive. It’s not merely cyclical weakness, but instead reflects structural imbalance. The arithmetic is not subtle. The trajectory is structural, not temporary.

As former U.K. prime minister Margaret Thatcher once said, governments eventually confront arithmetic. There are only two choices when spending growth outpaces economic growth: materially restrain expenditures or expand taxation directly or indirectly.

B.C.’s budget does a measure of both, but primarily through revenue expansion and linguistic calibration.

Governments can frame a budget with reading and ‘riting, but ‘rithmetic is what ultimately judges it and the arithmetic in B.C. is damning.

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.

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