New employer health tax is unhealthy for business

B.C. businesses aren’t being dramatic with their “startling cries” over the new employer health tax. It’s truly startling for three reasons.

First, the new tax will shift roughly $2 billion of the total $2.6-billion, annual MSP tab entirely onto employers by 2020-21. Second, the MSP task force, struck to find a sensible alternative to the regressive MSP, hadn’t finished doing its research. Third, there will be a full year in 2019 where a “double-dip” tax hit will occur, and business owners will be footing the bill for both the MSP and the EHT.

To be clear, the MSP was a regressive, outdated and cumbersome tax. The provincial government is wise to continue phasing it out. Our members have been open to the idea of its replacement being funded, in part, by a payroll tax. After all, businesses benefit from healthy employees and many of our members pay MSP premiums.

We live in a new reality today. Businesses are facing the cumulative effects of excessive tax increases both federally and provincially that will challenge their ability to invest and grow.

The EHT is simply too much for business, especially in conjunction with the loss of revenue neutrality on the carbon tax (and its lift to $35 per tonne from $30 on CO2 equivalent), increases to the minimum wage, increases to Canada Pension Plan contributions and the corporate tax hike.

The EHT could stall economic growth, which is why it must be adjusted toward a more equitable solution that works for employers and individuals. It’s becoming increasingly apparent that the new budget is being balanced off the backs of business owners.

At first blush, the $500,000 threshold for EHT exemption might sound fair. Government’s message is that the vast majority of businesses in B.C. are small and will therefore be exempt from this tax. In reality, tens of thousands of small businesses will be affected.

Nelson Stowe in Fort St. John is a perfect example. His company, Ideal Office Solutions, sells and services business machines. He employs 21 people and by every definition is a small-business owner. But because his payroll exceeds $500,000, EHT will cost him $17,600 a year. This represents roughly 50 per cent of the cost for an additional, full-time, entry-level employee.

Our members say the threshold for exemption needs to exceed $500,000 so small- to medium-sized business owners who are hoping to grow don’t get saddled with this excessive and unanticipated cost. We might consider taking a page out of Manitoba’s book by raising the threshold to $1.25 million. That would be a good place to start.

The process that brought us here is concerning, too. The MSP task force was struck by the current government, but was effectively pre-empted with the introduction of the EHT before it could complete its important work. Our hope is that this will not become a trend. We appeal to the government : when it comes to consultations with the business community and other stakeholders, let them run their course so British Columbians can be assured of a fair process.

While we support a model that removes the cost of health care from the cost of doing business, we recognize that businesses benefit from having healthy employees. However, it’s a reasonable request for the cost to be shared between the individual and the employer similar to the 60-40 ratio we have now.

Businesses already shoulder 40 per cent of the MSP under the current model, but the EHT would have them cover almost 75 per cent. Government will also “double dip” as the EHT is slated to kick in Jan. 1 and MSP won’t be eliminated until the following year. This contradicts the task-force recommendations, which cautioned against an overlapping approach.

Stowe says it best: “Good companies realize the value of healthy and happy employees, but the choice to cover the full cost of MSP or EHT should be ours and not government’s.”

Our economy needs government to get this new tax right. Let’s build something that enhances employee health, but doesn’t hold business back. As it stands, the EHT is unhealthy for business.

Val Litwin is president and CEO of the B.C. Chamber of Commerce.