Local governments brace for new health tax’s sting

Most respondents expect higher costs when change goes into effect next year

A Union of B.C. Municipalities survey suggests property taxes will increase and at least a dozen local governments will see health costs double when a new provincial employer health tax replaces current premiums.

The survey, which in April gained input from financial officers for 77 of the province’s 189 municipalities, looked at how local governments will be affected by the new tax when it is implemented in 2019 and medical service plan premiums are eliminated in 2020. Businesses and organizations with payrolls under $500,000 will be exempt, but those with payrolls in excess of $500,000 will pay a 0.98-per-cent tax, which will gradually increase to 1.95 per cent for payrolls over $1.5 million.

UBCM researchers found 29 per cent of local governments that responded expect cost reductions or no change when the tax arrives, but 71 per cent will see an increase. More than a third will pay 25 to 100 per cent more than under MSP, and 15 per cent will see their health payments more than double. The wide variation of increases is due to payroll differences based on such measures as population served, levels of service, and how much work is contracted out, according to the UBCM.

“The savings for most of these communities are negligible,” the report said. “Conversely, the cost impacts for some larger communities are considerable.”

Among the worst hit is the City of Vancouver, which will see its payroll health costs triple to $15 million in 2020, up from $5 million under MSP in 2017. The District of Saanich will see the largest percentage increase when its costs soar by 336 per cent to $1.82 million, up from $417,420 in 2017. Councils and boards will need to fund the increased costs through service reductions, increased property taxes, or both. Most (39 per cent) expect up to a half-per-cent increase in property taxes. More than a quarter expect an increase between 0.5 and one per cent, and 15 per cent expect increases between one and two per cent.