Budget 2026 threatens entrepreneurship in British Columbia
New tax measures and rising deficits could weaken entrepreneurship and investment while shrinking the province’s long-term revenue base
For the people deciding whether to hire, invest or build a business in B.C., Budget 2026 continues a pattern of rising costs that is pushing the province deeper into a tax trap that threatens entrepreneurship and growth.
Since the September 2017 budget update, B.C. has introduced or broadened a litany of tax measures: a new payroll tax, a new speculation and vacancy tax, higher property taxes on high-value homes, a new top tier of the property transfer tax, a higher top personal income tax rate and an increase in the general corporate income tax rate. Anyone running a business understands that when costs rise (including taxes), hiring weakens and investment projects get delayed. Over time, economic activity slows and the tax base grows more slowly, creating pressure for further tax increases if spending is not adjusted. Rinse and repeat. This is the tax trap.
Budget 2026 doubles down. It raises the province’s lowest personal income tax rate, freezes the indexation of income tax brackets for inflation, expands the provincial sales tax to cover professional services, including engineering, architecture, and accounting services, among others, and increases property taxes. Together, these measures are expected to generate $5 billion in gross additional revenue over three years.
These changes raise costs in several ways. Higher personal income taxes increase the compensation required to attract and retain skilled workers, directly affecting founders and growing companies. Expanding the PST to professional services raises the cost of core business inputs and, because B.C.’s PST does not provide input tax credits like an HST, the tax cascades through the production chain. Property taxes apply regardless of income, increasing the cost of carrying housing and development land.
Government revenues are generated by the private sector. When private sector growth slows, government revenues slow with it. The province does not have a revenue problem. It has a spending problem and a private-sector growth problem. That dynamic may already be showing up in the numbers. Corporate income tax revenues declined by roughly four per cent this year, reflecting weak economic activity and, without the new tax measures, overall revenues would have fallen by nearly one per cent. In a struggling business, that would trigger cost discipline and productivity improvements. But governments often do the opposite. If government spending continues to rise, the shortfall is financed through higher taxes or rising debt, setting up the next round of tax hikes.
Recent data suggests these pressures may already be showing up in entrepreneurial activity. Between 2015 and 2019, B.C. typically added roughly 3,000 net new businesses per year. The pandemic years produced unusually volatile numbers as businesses closed and reopened, but even in 2023 the province still recorded positive growth of about 1,300 net new businesses. In 2024, however, that pattern has reversed, with business exits consistently outpacing entries and producing a net loss of more than 3,300 businesses. The trend continued into 2025, with a further net loss of about 2,400 businesses in just the first five months of the year. Over time, persistent net business losses slow the growth of the tax base. That weakens the revenue base the government is trying to protect.
All of this is unfolding alongside an alarmingly deteriorating fiscal outlook. Budget 2026 projects record deficits and a sharp rise in debt over the next three years, even after-tax hikes. Taxpayer-supported debt will approach $33,000 per British Columbian by 2029, nearly triple the roughly $12,000 it was in 2021. As debt accumulates and interest payments climb, a growing share of revenue goes to servicing past borrowing rather than funding essential public services, increasing pressure for further tax increases. In fact, debt servicing costs are now the fastest growing line item in the budget. The province is entering a cycle of higher taxes, larger deficits and shrinking fiscal flexibility. For entrepreneurs and investors, that combination reads like a “closed for business” sign.
British Columbia has significant strengths. We have a highly skilled workforce, global market access and abundant natural resources. But our ability to compete globally requires discipline and not just living off our good looks. Stable revenues ultimately depend on a growing economy. Without spending restraint and a clear focus on making B.C. the easiest place in Canada to invest, the province risks deepening a fiscal doom loop that weakens the very economy it depends on.
Ryan Peterson is a local entrepreneur, tech executive, executive committee member of the Business Council of British Columbia and founding partner of BCBC’s Project Productivity.
Jairo Yunis is BCBC’s director of policy and Project Productivity Lead.
As published in Business in Vancouver on March 10, 2026.