In question period at the British Columbia legislature this week, BC Liberal MLAs have repeatedly highlighted the costs a new payroll tax will add for employers. But Finance Minister Carole James has defended it as a fairer way to raise revenue.
"I understand the concerns but I also believe it's important that we all contribute to a health care system as other provinces have done," James told The Tyee.
With the Medical Service Plan, scheduled for elimination in 2020, B.C. is the last province in Canada to charge health care premiums. "It was a regressive tax," said James, who has noted that a family making $60,000 a year paid the same amount of MSP as a family making $600,000.
"Not all employers contributed, so we believe it's a fairer process," she said of the move announced in the February budget to eliminate the MSP and adopt the Employer Health Tax.
In the legislature, Liberal MLAs have focused on the costs the new tax will add for businesses, non-profits, schools and health authorities.
In one such exchange, Delta South MLA Ian Paton gave the example of Westcoast Vegetables, which he said will pay $100,000 a year with the new tax. The business never paid MSP premiums for its employees, he said. "Will [the agriculture minister] come to Delta and explain... if they should increase prices to consumers or lay off staff?"
James responded by saying that businesses with a payroll under $500,000 won't pay the tax, and the full rate of 1.95 per cent won't be phased in until a businesses' payroll exceeds $1.5 million. "We believe that will provide the opportunity to provide good, quality health care for all British Columbians and making sure we're getting rid of a regressive tax in British Columbia."
Eliminating MSP premiums will save individuals $900 a year and families up to $1,800 a year, James said.
When Paton said the tax threatens the viability of farms, James replied that the government had reduced the small business tax rate from 2.5 per cent to two per cent and is eliminating the PST on electricity for all businesses.
Speaking in the legislature hallway, James said the government is taking a year to make the transition to give employers time to adjust and that only five per cent of employers in the province have a high enough payroll to pay the full amount of the new tax. "I understand the change and I understand the pressure," she said.
In 2017-18, the last year the MSP was in place before the government started reducing it, the premiums raised $2.264 billion in revenue for the provincial government. Once the Employer Health Tax is fully in place in 2020-21, it is budgeted to raise $1.922 billion.
BC Liberal leader Andrew Wilkinson told reporters some employers have expressed concern that the Employer Health Tax will be raised in the future. "The concept of who pays taxes is an ongoing question of competitiveness," he said. "By simply labelling something as a speculation tax or a health tax doesn't mean it's going there. It means it's a way of generating government revenue."
Some businesses can be conducted from anywhere in the world, Wilkinson said. "If the taxes start to go up in British Columbia, businesses will start to move their work elsewhere, to shrink their business in B.C."
Asked if the new tax wasn't fairer than the previous patchwork where some employers paid MSP premiums for their employees and some did not, Wilkinson said, "Fairness is always a matter to be sorted out in the marketplace. That's what employers have to do is compete for good workers and pay them appropriately."
Under the new system, helping pay for health care will no longer be optional for employers with payroll over $500,000. As James put it, "It ensures that everyone contributes, which is the fair process, as I've been saying."