In the Ministry of Finance budget estimates today I had the opportunity to question the Finance Minister on the recently announced employers’ health tax. This tax is being proposed to replace revenue that will be lost due to the elimination of the regressive MSP premium.

Below I reproduce the text and video of our exchanges.

Text of Exchange

A. Weaver: I have six short questions to pose to the minister on this theme that’s being raised by the member for Prince George–Valemount and the member for Surrey–White Rock.

The minister has chosen to eliminate MSP premiums, which, of course, we support, because we, frankly, also had it in our platform. But she has chosen a way to do this which is through a payroll tax. Again, we support the government’s intention of doing it. It’s not what we would have done. We recognize we can agree to disagree.

Our approach would have been to mirror more what was done in Ontario, through the creation of a health care premium that was progressive and actually person-based, which would allow people to still recognize that there is a cost to health care. They’re see it on their pay stub, etc.

Again, I recognize that government had different priorities or ideas here. But with that said, I’d I like to ask a couple of questions, because there is definitely some concern out there within the employers of non-profit, local government, school board sectors, as well as small business and other business.

Some of it is not well grounded. I have some troubles with some of the estimated property tax increases that I’ve been seeing coming from municipalities, which suggests to me there’s a property tax gouge that’s going on there that actually is not representative of how much the real cost would be for their employees to….

With that said, I have a couple of questions. They’re with a focus on the MSP Task Force. The MSP Task Force was due to give its final report to the minister just a few weeks after the budget. My first question is: why did the minister make the significant decision that she did with respect to the payroll tax prior to the MSP Task Force reporting in?

Hon. C. James: Thank you to the member for the question. I think, as has been described, I received an interim report, and the member asks why we didn’t wait for the final report.

In fact, in putting together the budget, when we were taking a look at both the challenges and opportunities that were there, one of the challenges, as I mentioned earlier, that I was faced with that was not expected to be in this kind of severe situation was the issue of ICBC and the deficit at ICBC. So when we took a look at building the budget, we felt that this was the time to make the decision around both the ICBC issue and moving towards the MSP.

The other thing that was very clear — a task force certainly raised this issue as well — was the urgency for people to know that MSP premiums were going. That was a very clear message.

There were seniors groups and other organizations that had come forward to talk about the urgency of finding a time to let us know when they were going to be eliminated. “We know you say you’re going to do it by the end of your term, but we really are interested in making sure that we know a date so that we know it’s going to be gone, so that we have the time to plan but also that we know that commitment is there.” So it was also taking into account the urgency of people who really wanted to know.

It was the possibility, then, of looking at our three-year budget term and being able to do the planning that was necessary.

The member mentioned the issue of not-for-profits and school districts. I think, as the member knows, those issues are still being discussed. We’re gathering data, and I think it again points out…. We talk about getting information in government. I think we’ve had this conversation on a whole range of issues, mostly in housing.

It’s pretty obvious, across the board, that more information is needed for groups and organizations, like not-for-profits, to be able to gather the data that’s needed around everybody’s individual circumstances. So we’re finalizing that, and I certainly hope by summertime to have those issues resolved.

A. Weaver: Thank you for the answer. Through you, hon. Chair, to the speaker, to the minister. It’s the end of Thursday afternoon, and I think we’re all tired, especially the minister.

My question, then, is…. If, as alluded to there, there was a budgetary shortfall because of ICBC, surely that would have been realized early in the term of the government. My question: why did the government not then simply go to the task force and ask them to expedite their review so that they could provide the minister the recommendations that she needed prior to her making a decision, in light of the fact that I understand that no such request was actually given?

Hon. C. James: In discussions with the task force and their discussion about the pieces they were continuing to work on, they’re continuing to work on a number of pieces that they wanted time to complete and that, certainly from my perspective, I felt were worthwhile. So I did ask them to continue to do a final report. I felt that that was worth looking at. There are, obviously, future budgets to come, and there may be some really good ideas and good approaches that might be worth looking at and considering. That’s why we got an interim report from them and why I asked them to complete the final report.

On the ICBC, I have to say that the situation was deteriorating much more rapidly than I think anybody imagined, certainly more than the minister of ICBC imagined and certainly more than I, as Finance Minister, imagined. That created a real challenge when it came to the budgeting.

A. Weaver: To the minister, then, on this final report, I have two questions that I’ll put into one here. In the budget, and just now, the minister stated that the task force would still complete their final report and that she was looking forward to receiving it.

My questions, in one, here are: what did the minister direct the task force to look at for their final report, given that she’d already made a decision to implement the employer health tax? Secondly, has she received the final report? If so, when will she release it?

Hon. C. James: The task force, in the discussion we had around the interim report, said that they were still working on a few pieces. I know, certainly, that one of these is an issue that has come up, around the Select Standing Committee on Finance, for a number of years, which is the issue of a tax on sugary drinks. That was one of the pieces that they were interested in finalizing some work on. As I said to them: “Finish up the work that you’re doing, and bring it forward as your final report.”

The other piece that they were wanting to look at and that they’d started some work on but wanted some more time to look at was the issue of the homeowner grant: was there an opportunity, with the homeowner grant, to look at some more progressive kinds of changes to the homeowner grant? Again, I said, I certainly expected that that would be interesting to be able to review. So that’s another piece that’s coming.

I expect to receive…. I’m hoping to receive their final report shortly. Yes, it certainly will be public, once I receive it as minister.

A. Weaver: Thank you to the minister for a very helpful response. It actually dealt with one of my further questions, which was with respect to the issue of taxing sugary drinks, which I know the MSP Task Force had talked about considering in their interim report. I look forward to them providing more information in the forthcoming report and to see how the government responds to that.

My final question, then, is again with respect to the MSP Task Force. In the report, they specifically said, “We are leaning towards a combination of a personal income tax surcharge, a small payroll tax and additional ideas.” The additional ideas, as was mentioned, were like a sugary drink tax…. They said: “A payroll tax would reduce the competitiveness of B.C. businesses at a time when they are facing several competitiveness challenges.” This concern about the competitiveness of businesses partly informed why the task force was not leaning towards exclusively a payroll tax but towards a combination of measures to make up the revenues.

My question finally to the minister, why did she choose to implement a payroll tax, rather than go the route recommended by the MSP Task Force, which would have spread the burden of the tax across a variety of areas?

Hon. C. James: We had a little bit of discussion on this earlier, but I think it’s important to state again, as the member mentions, that the task force recommended looking at personal income tax and a payroll tax, as well as other measures that they’re still going to bring forward.

On the personal income tax, as the member knows, as government, we made a change, in September’s budget, on the high-income earners — on the income over $150,000 — and had taken away the tax break that the previous government had given. We felt we had already impacted and made a difference around the personal income tax. That was a piece that we had already moved on, in the September budget.

The other piece that’s important to recognize is that we aren’t actually recouping all of the MSP revenue with the payroll tax. We aren’t actually collecting the magnitude of the MSP. The MSP is at $2.6 billion. We’re bringing in $1.9 billion on the payroll tax. I think that’s another important piece to recognize and to look at when we’re looking at a payroll tax. It’s not actually looking at recouping all of the resources that were there, so we felt it was reasonable to do it as an employers health tax.

Video of Exchange