B.C. government finally delivers on its 2017 MSP tax cut

Finance Minister Mike de Jong announced that the hated Medical Services Premium tax will be cut in half

Jordan BatemanCanadian Taxpayers Federation

 

They actually listened.

In his 2017-18 BC Budget Feb. 21, Finance Minister Mike de Jong announced that the hated Medical Services Premium tax will be cut in half, as the first step toward eliminating it completely.

Just one short year ago in the BC Budget lockup, de Jong gave an impassioned defence of the Medical Services Premium (MSP) tax.

“I know that some people have advocated eliminating separate MSP premiums altogether,” de Jong said in last year’s budget speech. “But burying the MSP into instruments of general taxation doesn’t make them go away. It merely hides them and may create for some the illusion that health care is free, which it certainly isn’t.”

Fast forward to this year’s BC Budget lockup, where de Jong was like a different man, cutting MSP taxes in half and promising to scrap them all together.

“As a first step … we’re going to roll back most premiums to about the levels that were set in 1993,” said de Jong. “Our objective over time is to completely eliminate MSP as an expense for British Columbians.”

You gotta love election years. But whatever the motive, pop the champagne corks – this 50 per cent MSP cut is the broadest tax cut for British Columbians since Gordon Campbell brought in a 10 per cent income tax cut a decade ago.

The Canadian Taxpayers Federation (CTF) has argued for years that the MSP tax was unfair, expensive to collect, and an unnecessary burden on BC taxpayers and small businesses.

Heading into last year’s budget, it seemed like Premier Christy Clark agreed with us, calling the MSP tax system “old and antiquated.”

Clark and the CTF argued with de Jong for another year, but finally convinced him.

For a family making $51,000 a year, that means a $900 per year tax cut.

Every household, under every income scenario of less than $120,000 per year, will save money. It’s a legitimate, billion-dollar tax cut.

Those who pay their monthly MSP bills will see the obvious difference starting with their January bill.

But even those British Columbians who have their MSP tax paid by an employer will still see some benefit.

First, city halls and other government agencies should save money paying their employees’ MSP, and that could be transferred back to taxpayers.

Second, lower payroll taxes translate into more money for employers to give raises or hire more help.

Third, leaving more money in people’s pockets means more money that can flow into the non-government economy.

Families can spend their extra $900 per year in their local shop.

To get the 50 per cent cut, MSP taxpayers will have to apply for it later this year.

This is actually another example of just how clunky the MSP tax is.

In the budget lockup, government officials told the CTF that the MSP collection system and income tax systems can’t connect to each other. MSP uses CareCard numbers; income tax uses Social Insurance Numbers.

They don’t necessarily match up on households.

MSP taxpayers will need to register for the discount and prove their income levels. One last reminder of MSP bureaucracy, but well worth it to keep $900 per year.

The NDP and BC Green Party were rolling into the May election hoping to make MSP taxes a wedge issue. Clark and de Jong have taken it up a notch by cutting the tax in half and promising to scrap it as the province’s finances allow.

It’s Clark’s signature tax cut as premier, and will provide plenty of fodder for the campaign.

And plenty of money for taxpayers.

 

Jordan Bateman is the British Columbia director of the Canadian Taxpayers Federation.