Things need doing, and that means tax hikes
U
nderlying all the arguments about the new employer health tax the NDP government is bringing in next year is an emerging fact: For better or worse, the “low tax” era in B.C. is over.
The B.C. Liberals were as adept as any government at maximizing revenues. Even when they recognized the unrest about medical services plan premiums and exempted children in 2016, they couldn’t help hiking the premiums another four per cent.
But they always left the impression they were loathe to increase general-application taxes. They set the tone in 2001 with a dramatic 25 per cent cut in personal income taxes. They reinforced it with other tax cuts later on. Fees and other charges went up, but tax hikes were usually the last resort.
The NDP, so far, isn’t the slightest bit shy about raising taxes. The previous government prided itself on all the savings it was creating for taxpayers. The NDP sees that as tax room, to be used while making up for all the shortages in services that have built up over the Liberals’ 16-year run.
In her September budget update and her February full budget, Finance Minister Carole James has: making more than $150,000. income-tax rate. - bon tax by two-thirds and end the legal requirement for corresponding tax cuts elsewhere.
$3 million-plus homes. certain home buyers. tax that will bring in almost $2 billion a year.
The 50 per cent cut in medical services plan premiums this year and the planned elimination of them in 2020 make up for a lot of those increases.
But there is a lot more to do on the NDP agenda, and they need a lot more money to do it. So the philosophical resistance to increasing taxes is a thing of the past.
The Liberal Opposition has seized on the employer health tax as a rallying point, and the legislature is full of stories of municipalities and medium-sized businesses that will be paying big new taxes next year. And those who pay their employees’ premiums will face a double hit. They’ll pay both the premiums and the new tax for a year before the remaining premiums are eradicated.
So the NDP is facing a renewal of the traditional suspicion that it is anti-business.
It’s not. The government just desperately needs a lot of new revenue, and big business is the most obvious place to collect it. It’s been clear since unrest about the MSP took hold that the government was going to have to replace the lost billions with money from somewhere else.
Business groups were skittish when the employer health tax was announced. But they couldn’t have been surprised to find themselves the main target.
The gradual changeover from levying a direct charge on individuals to help pay for health care to raising taxes generally instead is a complex move. The biggest knock against the MSP was the unfairness of charging middle incomeearners and multimillionaires the same fee.
It’s further complicated by the steady whittling of the population getting charged.
Scope reductions over the years have exempted an estimated two million people from paying any premiums at all.
Theoretically, the exempted people will resume paying, in a different fashion. Businesses will most certainly pass their tax increases on to customers. So the final payers will be who it usually is – the public at large.
It will be more proportional and much more indirect, which solves the other problem with MSP – the high visibility, inyour-face nature of the fee that prompted resentment.
The big downside is that the biggest employer group is the broad public sector. Local governments, school boards and institutions will pay hundreds of millions through the employer health tax, much more than the cost of covering employees’ MSP. As an example, Liberal MLA Sam Sullivan said the city of Vancouver pays $2.5 million in MSP premiums, but the employer health tax will cost $13.1 million.
Easy to guess where that will come from.
The new government is raising taxes out of conviction, and local governments will be following suit out of necessity.
Business groups were skittish when the employer health tax was announced. But they couldn’t have been surprised to find themselves the main target.