The 2008 B.C. budget delivers $407 million in targeted tax reductions and $428 million in new investments, says the B.C. Ministry of Finance.

According to the ministry, today’s budget reduces the bottom two provincial personal income tax rates for the 2008-09 and subsequent tax years. The rate reductions will result in a tax cut for all taxpayers of about 2% in 2008 and 5% in 2009 on income in the first two tax brackets, up to about $70,000 in taxable income.

The provincial general corporate income tax rate has been reduced from 12% to 11% effective July 1, 2008. This rate has been reduced from 16.5% to 11% since 2001, according to the government. As well, the small business corporate income tax rate has been reduced 22% to 3.5% from 4.5% effective July 1, 2008.

The major focus of the budget was climate change and carbon emissions, and virtually all measures were related back to this theme.

B.C. will introduce a fully revenue-neutral carbon tax with built in protection for lower income British Columbians, effective July 1, 2008 and subject to approval by the legislature, says the ministry. The tax will begin at a low rate and increase gradually to give individuals and businesses time to adjust, according to a release. It will apply to virtually all fossil fuels, including gasoline, diesel, natural gas, coal, propane, and home heating fuel.

“This budget marks a turning point,” said B.C. Finance Minister Carole Taylor, in a release. “It overturns the notion that you have to choose either a healthy environment or a strong economy. It will help keep British Columbia vibrant and growing, it takes a big step toward meeting the challenge of climate change, and it strengthens key public services like health care and education.”

According to the new budget, legislation will require a plan to be tabled in the legislature each year, showing how the revenue raised will be returned to businesses and individuals. None of the carbon tax revenue will be used for expenditure programs, said the Ministry.

The carbon tax is forecast to generate approximately $1,849 million over three years. The plan calls for this revenue to be returned to businesses and individuals through a new Climate Action Credit for persons with lower incomes ($395 million) and reductions to personal income tax rates ($784 million), the small business income tax rate ($255 million), and the general corporate income tax rate ($415 million).

As well, every B.C. resident will receive a one-time, $100 Climate Action Dividend, which is intended to help people adopt greener lifestyles. The dividend payments will be issued in June, before the new carbon tax takes effect. The government says it hopes B.C. residents will use the money help reduce their greenhouse gas emissions and, by doing so, the amount of carbon tax they would otherwise pay.

The budget also provides, over four years about $1 billion to encourage energy efficiency, implement new regulatory requirements, undertake research and make low-carbon investments. These climate action initiatives include: new funding for home energy audits and retrofits; sales tax exemptions for ENERGY STAR appliances; up to $2,000 in reduced sales tax on the purchase of fuel efficient vehicles; a new biodiesel production incentive; an expanded venture capital program aimed at clean technology companies; and funding to reduce emissions at B.C.’s ports and commercial truck stops.

“While the economic forecast sees British Columbia continuing to outperform Canada and the U.S., weakening conditions south of the border and international uncertainty show how important it is to maintain a prudent approach,” said Taylor. “It’s also a reminder that we must always explore new ways to make B.C.’s economy more competitive, innovative, and diverse.”

Other tax measures in the budget include: improvements to B.C.’s film tax credits; lower provincial property tax rates on major industrial properties; replacing the financial institutions capital tax with a minimum tax; improvements stemming from the Provincial Sales Tax Review; and changes to the International Finance Act to expand the types of patents and activities eligible for tax refunds.