Premier Christy Clark and Finance Minister Mike de Jong had hinted there would be big news in their pre-election budget, generating speculation that a promise to cut the provincial sales tax was on the way.
The reality surprised the opposition and media: a promise to cut Canada’s only medical services premiums by half next year, and hold some sort of consultation before getting rid of MSP payments entirely.
The BC Liberal plan is to recover the $800 million of the first cut, and ultimately the whole $2 billion in MSP take, by growing the economy rather than increasing income tax rates.
This is the same method NDP leader John Horgan has suggested to finance a $10-a-day child-care program. Horgan was caught flat-footed by the governing party’s MSP bid, which steals one of the planks from his campaign platform-in-progress.
It wasn’t long ago that Clark and de Jong were defending MSP as an important signal to people that health care isn’t free. A better signal would be a modest user fee on visits to hospital emergency rooms and clinics, but that offends the rigid Marxist model of Canadian health care.
For employees of most large organizations, MSP sends no signal at all, because it is a payroll tax on their employers. A media narrative immediately began, asking if employers should be obliged to share the savings from reduced MSP with employees.
The B.C. Government Employees’ Union has in its contract that members receive all of this benefit. It’s the latest evidence that public sector employees inhabit a luxurious world of their own.
Outside the government-media bubble, the removal of this payroll tax makes it easier for a small business to extend some hours, add a staff member, or in the case of self-employed people, stay in business.
At this stage, all of it is campaign rhetoric. The Clark government’s latest real action was to increase MSP rates again on Jan. 1.
The other big move was lifting provincial sales tax from electricity bills charged to businesses. Home electricity is already exempt, but PST has long been applied to not just business and industry, but also municipalities, hospitals and school districts.
Energy Minister Bill Bennett tells me he encouraged a group of resource community mayors to press for this change, to give a break to struggling forest products companies, which include some of BC Hydro’s biggest customers.
It got into the budget because relieving business and industry of this burden costs the treasury a mere $160 million a year, much less than the ever-growing demands of education, health care, welfare and social services. Having an electricity surplus and a near-recession outside the prosperous urban southwest helped make the case as well.
This PST-on-power reduction is listed in the new budget as an offset to B.C.’s carbon tax revenues, helping to make the tax on fuels “revenue neutral” for business.
It replaces our lavish movie industry tax credits, which have been counted up to this year to support the principle that B.C.’s carbon tax is for the planet, not for government revenue enhancement.
At least lowering the cost of clean electricity encourages its use, potentially reducing greenhouse gas emissions.
The Fraser Institute’s Charles Lammam first noticed that it was not valid to use moviemaking credits and other business tax credits that pre-dated the carbon tax.
Lammam accepts the removal of PST from hydro bills as a valid offset for business costs. He says that would make B.C.’s carbon tax revenue-neutral again, after several years where the claim was questionable at best.
Tom Fletcher is B.C. legislature reporter and columnist for Black Press. Email: tfletcher@blackpress.ca Twitter: @tomfletcherbc