British Columbia

NDP government introduces new speculation tax, eliminates MSP premiums in its 1st budget

The B.C. government delivered on a wide variety of promises from its election platform and throne speech in its first budget, forecasting a $219 million surplus for the upcoming fiscal year on the strength of a strong economy.

MSP premiums to be eliminated in 2020 and replaced with a new payroll tax, $210 million surplus forecast

B.C. Finance Minister Carole James delivers the NPD's first full budget on Feb. 20, 2018. (CBC)

The B.C. government delivered on a wide variety of promises from its election platform and throne speech in its first budget, forecasting a $219 million surplus for the upcoming fiscal year on the strength of a strong economy. 

"A budget shouldn't stand alone, because a budget is more than revenue and expenses. It's about people," said Carole James, outlining the first NDP budget in British Columbia since 2001. 

"The choices that we've made in this budget focus on a path to prosperity for everyone."

Finance Ministry staff Kim Manton, (left), and Finance Minister Carole James arrive at caucus before delivering the budget from the legislative assembly at the legislature in Victoria, B.C. (Chad Hipolito/Canadian Press)

Those choices include billions more in spending over three years, focused primarily on education, child care, health and social programs, along with freezing ferry fares on major routes and reducing them by 15 per cent on smaller routes.

But it also increases revenues through new taxes directed at the housing market, a new employer health tax and includes hikes to the carbon and tobacco taxes.

That, combined with strong GDP growth (predicted to be 2.3 per cent for 2018), allows the government to forecast a surplus, even with deficits still projected for ICBC in the years ahead. 

"The expectations that we will do everything in our first budget are huge. So it's even more important … to focus in on our priorities," said James.

"There is no time to lose."

MSP premiums eliminated

Perhaps the biggest surprise in the budget was the announcement that Medical Services Plan (MSP) premiums would be completely eliminated on Jan. 1, 2020 — over a year ahead of the government's self-imposed deadline. 

"It will take some pressure off people's pocketbooks. And it will help make our tax system more fair and progressive," said James. 

To replace the revenue lost from the premiums, which were generally paid separately by individuals, the government will create a new employer health tax.

It will charge companies a percentage of their payroll under a progressive taxation system. Companies with a payroll under $500,000 will pay nothing, and companies with a payroll over $1.5 million will pay 1.95 per cent of their payroll. 

"We believe we continue to provide supports to businesses in everything from lowering the small business tax rate to keeping the corporate tax rate competitive … we're putting the pieces in place that will support businesses," said James, who emphasized the vast majority of businesses would not be paying the full rate of the tax.

30-point housing plan

The government had long promised it would take action on housing affordability in this year's budget, and today announced a wide variety of taxes to curb speculation and decrease demand in the market, including:

  •  A new, provincewide "speculation tax," focused on vacant homes. The tax will be two per cent of the assessed value of properties in 2019.
  • An increase to the foreign buyers tax from 15 to 20 per cent and the expansion of the tax to properties in other major municipal areas in B.C. outside Metro Vancouver. 
  • An increase in the property transfer tax from three per cent to five per cent.for homes worth more than $3 million.

The government says the full suite of housing measures will be in place by the beginning of next year.

With the revenue it's forecasting, the government is planning to spend $1.6 billion in new housing units — all part of a 30-point detailed housing plan it unveiled as part of the budget.

"What we are looking to do is moderate the market," said James.

"We're taking some bold measures, there's no question." 

Surpluses contingent on ICBC reforms

The government projected a $151 million surplus for the current fiscal year and surpluses of $219 million, $281 million and $284 million over the next three years.

But those surpluses come with the task of restoring the fiscal health of ICBC, which has a projected $1.3 billion deficit for this fiscal year and has been described as a "dumpster fire" by Attorney General David Eby. 

The government's budget foresees savings from "ICBC product reform," which include caps on pain and suffering for minor injuries, saving $392 million this year and a $1 billion in 2020/2021, allowing them to forecast future surpluses.

But James said she remains cautiously optimistic. 

"We have included in this budget a very conservative estimate of the product reform," she said.

"I continue to be concerned about ICBC, and that's one we will continue to watch."

Split reaction

Not in the budget, but policies James said the government was still pursuing, were election promises of $10 a day childcare and a $400 renters' rebate.

The immediate reaction to the budget was generally complimentary from public sector unions and groups that have advocated for more investment in social services from the provincial government. 

"B.C.'s new budget offers younger British Columbians real reason to celebrate," said Paul Kershaw of Generation Squeeze.

"While it won't solve the … affordability challenges overnight, it makes more progress than we have seen in years on child care and housing."

"This is the most ambitious social policy budget in the last 30 to 40 years," said Michael Prince, a UVic political scientist. 

But there are notes of caution from economic-focused groups like the Greater Vancouver Board of Trade, which graded the budget as a C+ overall.

"We are concerned that the B.C. Budget will have a negative impact on our small and midsize business members," said president Iain Black.

"Employers are not some nebulous magical pot of money," added B.C. Canadian Taxpayers Federation spokesperson Kris Sims. 

And the budget was split along partisan lines, with the Green Party saying it would support it and the B.C. Liberal Party critical of the new taxes. 

"We see a budget funded on the backs of job creators in this province," said MLA Shirley Bond. 

"This is a government who continues the pattern of massive spending promises and very little attention paid to revenue generation in the province."

All responses the new government, with its new budget, likely expected. 

"Our goal is fairness," said James. 


Justin McElroy


Justin is the Municipal Affairs Reporter for CBC Vancouver, covering local political stories throughout British Columbia.


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