Small businesses and low income earners were rewarded with tax relief in the British Columbia budget delivered Tuesday.

“Small business drives this province, accounting for 98% of all businesses and the majority of private-sector jobs in British Columbia,” said Finance Minister Colin Hansen.

“When small business thrives, the whole province benefits. So we are announcing a measure today to strengthen small business.”

Effective immediately, the B.C. small business corporate income tax threshold will rise to $400,000 from $300,000, the second-highest threshold of its kind in the country.

Some 900 small businesses in British Columbia will now pay the significantly lower small business tax rate on earnings up to $400,000 each year.

The move will cost the government $10 million over the next three years.

In the budget, the B.C. government also announced plans to pay down the provincial the debt by a record $1.7 billion.

In terms of new spending, health and education both got top-ups.

The 2005 budget also offered personal income tax cuts to homeowner grants, vehicle tax exemptions, transportation improvements and a commitment to improving trade with Asia.

Effective this year, a new non-refundable personal income tax credit, the B.C. Tax Reduction, will reduce or eliminate provincial income taxes for about 730,000 British Columbians. Individuals earning up to $15,500 a year will pay no provincial income tax and those earning up to $26,000 will pay lower tax.

The total value of tax reductions in the budget is estimated at $484 million in 2005/06, $496 million in 2006/07 and $501 million in 2007/08.

Despite the increase the tax cuts and the increase in spending B.C. is also back in the black, reporting a $1.4 billion surplus.

The B.C. government is forecasting real economic growth of 3.3% in 2004, 3.1% in 2005 and 3.0% in 2006 and 2007.

It also forecasts surpluses of $220 million in 2005/06 and $200 million in each of 2006/07 and 2007/08.

“Overall, while this pre-election budget clearly represents a break with the recent past in B.C., the net new stimulus measures hardly pose a challenge to continued improvement in the Province’s rapidly strengthening fiscal position,” says BMO Nesbitt Burns.