The recent British Columbia budget introduced a subtle tax increase that will cost British Columbians millions. The Eby government has paused the indexation of the personal income tax system, meaning British Columbians will pay even more to provincial government coffers in the coming years.

Put simply, indexation ensures that the income thresholds for various tax rates automatically increase with inflation. It helps to ensure that B.C.’s progressive personal income tax system—where British Columbians pay higher tax rates at certain income levels—only taxes real gains in income, rather than inflationary gains.

But effective the 2027 tax year, personal income tax brackets and non-refundable tax credits (e.g. the basic personal amount below which no income taxes are paid) will be frozen at 2026 income levels. Again, this constitutes a tax increase for British Columbians.

In fact, over the next three years, this tax change will cost British Columbians an estimated $959 million. And the cost of deindexation only compounds over time because every year that goes by, more British Columbians are subjected to higher personal income tax rates. Put simply, the tax increase only grows as inflation continues.

For perspective, deindexation will cost $60 million in 2026/27 growing to $590 million by 2028/29. While the budget states “indexation will return for the 2031 and subsequent years” governments have a hard time undoing tax hikes once they’re implemented. So there are no guarantees.

It’s easy to see why politicians might favour eliminating indexation—it raises revenue while being a somewhat obscure and difficult-to-understand tax increase, particularly compared to more visible changes such as tax rate hikes.

But the Eby government actually did both. Specifically, it increased the lowest personal income tax rate from 5.06 per cent to 5.60 per cent. In 2026, this change will cost some British Columbians up to $201. Overall, British Columbians will pay $1.5 billion more from 2026/27 to 2028/29 due to this change.

The Eby government has hiked taxes—and some changes are more transparent than others. While freezing indexation of personal income tax brackets and non-refundable tax credits may attract less attention, it will cost British Columbians, increasing their tax bill over time. Paired with an increase in the lowest personal income tax rate, this budget delivered bad news for British Columbians.