By The Canadian Press

B.C. hikes tax rate as budget delivers record $13 billion deficit

Feb 17, 2026 | 1:01 AM

VICTORIA — British Columbia Finance Minister Brenda Bailey has unveiled what she calls a “serious” budget for 2026 that raises the base income tax rate while failing to rein in the deficit as previously pledged.

The tax rate on the lowest bracket is being increased by 0.54 per cent, with government staff saying 60 per cent of tax filers will face higher bills, and the average taxpayer will be hit with a $76 hike.

The budget says increasing the bottom tax rate to 5.6 per cent means a maximum impact of $201 on people earning more than $140,000 without additional credits, while credits for some lower earners are being raised.

Construction of long-term care facilities, student housing and Burnaby’s hospital and cancer facility are being delayed to curtail costs.

The deficit is projected to spike by a hefty 38 per cent to a record $13.3 billion next fiscal year, compared with an updated forecast for the current year of $9.6 billion.

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Bailey’s budget speech says she is delivering the plan with a “heavy heart” after the “horrific tragedy” of last week’s mass shootings in Tumbler Ridge, B.C.

She had earlier told reporters on Tuesday that the budget was “serious work for serious times.”

“It’s our time to take a pause on some of the things we want to do, to do the things that we need to do,” she said.

Bailey said the budget implements “disciplined measures,” including a “leaner” public sector that is forecast to shrink by 15,000 full-time employees over the three-year fiscal plan.

While the deficit is forecast to increase $3.7 billion year on year, Bailey said a “guiding principle” was that the deficit would decrease “over time,” with the ongoing impact of structural changes such as the tax increase and public sector cuts.

“Nobody worries about the deficit more than I do,” she told reporters, adding that “nothing could be further from the truth” than that she had given up trying to cut the deficit.

Shannon Salter, deputy minister to Premier David Eby, said in a recent email that the deficit was “unsustainable.”

Bailey said B.C. would continue to have the lowest income taxes of any province for people earning less than $149,000, while 40 per cent of taxpayers will see a tax saving in 2026 and the lowest earners “will come out ahead.”

She said the budget was not about “new, shiny programs.”

Capital spending is being wound back to $18.7 billion next fiscal year compared with the previous forecast of $20.4 billion, and it is projected to keep falling to $16.1 billion by the 2028 fiscal year.

Bailey said that would involve “re-pacing” construction of several long-term care facilities, Phase 2 of the Burnaby’s redeveloped hospital and student housing at the University of Victoria.

“These are not cancellations, this is a recognition that the province needs to strategically resequence projects to address fiscal pressures,” she told reporters.

This report by The Canadian Press was first published Feb. 17, 2026.

Wolfgang Depner, The Canadian Press