Goodbye MSP, hello payroll tax

Oct 29, 2018 | 41-3, Blog, Governance, Video

British Columbians are the last people in Canada paying a highly regressive medical services plan premium. They are regressive because no matter your income you pay the same amount.

Andrew Weaver has been working to try to get government to change their approach and create a more progressive system. Shortly before the 2017 election all three parties came out with promises to change the system.

We have to pay for the healthcare system somehow. You can’t just get rid of billions of dollars generated through MSP without having a way to collect the revenue needed to run the system. The BC Greens believe we should split the cost between personal income taxes and a payroll tax.

The BC NDP have moved to remove the MSP but their program is to shift the entire weight of the cost onto business in British Columbia in the Employers Health Tax.

I spoke to this initiative at second reading and talked about how it could have an impact on businesses in Saanich North and the Islands.

[Transcript]

Today I rise to take my place in the second reading debate of Bill 44, the Budget Measures Implementation (Employer Health Tax) Act.

I must say that up front, this bill is something that I have struggled with. I’ve struggled with different aspects of this bill. On one hand, there is an urgent need to eliminate medical services premiums, or MSP. On the other hand, I know that businesses in my riding and other parts of B.C. are facing a number of challenges. For many of them, this shift that’s proposed does not help.

I’m also uncomfortable with the process the government undertook to get to this place. I’ll touch on a few of these pieces briefly in this speech today.

Good riddance MSP…

First and foremost, I want to speak to the need to eliminate MSP. Eliminating MSP in British Columbia is long overdue, something that’s been ignored for more than a decade now. MSP is a regressive tax. It’s a tax that hits seniors and others on fixed incomes particularly hard.

For almost four years, my colleague from Oak Bay–Gordon Head has been pressuring government to eliminate MSP. He’s made the argument, supported by tax experts and economists, that making everyone pay a flat fee each month is regressive, unfair and an administrative burden. MSP put a huge burden on individuals, and it disproportionately hurts those that can afford it least. So despite having some disagreements with the chosen solution, I fully support the government’s move to finally eliminate MSP.

But I’ve been struggling with the fact that the government chose to simply shift the lost revenue from eliminating MSP to a payroll tax, placing all the burden on business. Why? I’m struggling with this choice. Since becoming an MLA, I’ve heard repeatedly from businesses in my riding about the challenge they face.

Saanich Peninsula is home to business

The Saanich Peninsula has one of the largest areas of industrial land in the region. Businesses in my riding employ thousands of our constituents. They commute from all parts of the CRD to work because it’s one of the only places in the region that manufacturers can set up shop. As a result, we benefit from having many mid-sized businesses in manufacturing, retail, food, tourism — businesses like Butchart Gardens, Viking Air, Epicure, Morinwood, Sherwood Industries, Schneider Electric.

But because of skyrocketing housing costs on the Saanich Peninsula, many employees cannot afford to live near the businesses, so they commute. On top of this, there are major transportation problems with getting to the peninsula, which makes the commute a frustrating and time-consuming task.

In this environment, a number of businesses on the peninsula are telling me that they’re facing challenges in keeping their operations sustainable. These challenges are not new. These challenges are ones that have been inherited by this government, that had been perpetuated by the government before, the so-called government that was in favour and supportive of business. These are challenges that they’ve faced for more than a decade. These challenges are challenges that they’ve brought up repeatedly to former MLAs, going back a very long time, and have been ignored. They don’t feel like government is helping now or in the past.

There isn’t adequate workforce or workforce housing or public transportation in the region, and these are issues that they’ve been asking local and provincial governments to act on for more than a decade. What have they got? They’ve got silence — silence from all levels of government, frankly, until we want something. It’s very frustrating.

EHT a burden on business

You can imagine how the provincial government’s decision to implement a new payroll tax went over. You can imagine how thrilled they were to try to balance that tax shift with everything else on their plate. Don’t forget that these managers have a close relationship with their employees. They’re responsible for their employees, making sure their children have clothing and food and building a stable, resilient business to sustain these families. That’s no small burden on the management or on the owners.

Let me focus for a few minutes on a medium-sized business, one of those home-grown success stories. From a basement in this very neighbourhood, right here in the Minister of Finance’s riding, right here in James Bay, Epicure was created. In 2003, Epicure moved its base of operations to North Saanich.

Their current CEO, a young woman by the name of Amelia Warren, is the inspired entrepreneur daughter of the founder, Sylvie Rochette. This is what we celebrate in this place. This is the story that we want repeated over and over again. But it gets better. Epicure employs 180 people from this region, and millions of dollars flow each year to the 10,000 direct sales agents across Canada, the No. 1 direct-sale company in the country. Their CEO and more than half of their executive team live on the Saanich Peninsula.

They generate $50 million in annual sales from a half million kilos of raw ingredients that are blended into four million jars and four million sachet packs. That’s one million orders picked, packed and shipped each year from the Saanich Peninsula. So if you’re wondering….

I think everyone in their operation understands the benefit to the individuals and families of getting rid of the highly regressive MSP premium. In fact, we had that discussion yesterday. On a very personal level, they quite likely are pleased. From a business perspective, I believe they also understand that we cannot simply make billions of dollars worth of health costs disappear.

What I heard is the tax shift adding $160,000 onto their costs is a frustrating fact. All of this in the context of the challenges that I raised above — a lack of transit in their area, a lack of workforce housing in their area, the silence on these issues on top of the perceived insensitivity to the very real competitiveness issues that they face.

B.C. competing with other jurisdictions

What we, in this place, should be sensitive to is that Epicure is an entirely Canadian business, and next year they’re breaking into the American marketplace. Yesterday morning, in addition to meeting Lindsay at reception; Amelia, their CEO; their vice-president of human resources, Christine Magill; Jess Berlenbrach, the vice-president of operations; the vice-president of sales, Gail Gioffredi; and Crystal MacGregor, the director of innovation, research and development, I also met a gentleman called Brick Bergeson. Brick is leading the company’s expansion into the United States. He’s setting up their operations in Salt Lake City, Utah.

In normal circumstances, I think we would outright applaud this: a local multi-million-dollar success story going international. Normally, the story is how we are trying to attract business from elsewhere here. But in my riding, business retention is top of mind. This employer is one of many who are critical to the health and well-being of our community.

We all know how aggressive the United States is in trying to lure business to their hollowed-out cities. The tax and incentive packages are really quite attractive, so we should be acting in a genuine way to keep the investors, the entrepreneurs, the game changers in our community. We should be responding when they tell us that they cannot find employees because there is no workforce housing or transit is bad or that they can’t find skilled labour.

I’ve toured many businesses like Epicure in my riding over the last number of years, and the story is the same. To sum it up, I’ve heard from them. They feel ignored, and they feel taken for granted. This is not new. This is not 15-months new. This has been going back a long, long time. This has been going back more than a decade, where they’ve felt ignored.

Getting rid of MSP very popular

It is good for us, I believe — the last province to do so — to get rid of the regressive MSP premiums. I think that this is highly popular for people and for families. It is an important component to making life more affordable.

Now, I know that the impact of the tax is mitigated for small businesses. If you have a payroll under $500,000, you won’t be paying this tax. And I know that there are savings from eliminating MSP for individuals and for some businesses that currently pay these premiums. As I said before, eliminating MSP is a move that is long overdue.

We should not forget that for some companies, we are competing for their business with other jurisdictions. I’ve heard this concern echoed not only from businesses directly but from experts as well. In an environment of increasing costs and competitive challenges with our neighbours across the border, the employer health tax is just one more thing that businesses have to deal with. In the words of the MSP Task Force, a “payroll tax could reduce the competitiveness of B.C. businesses at a time when they’re facing several competitiveness challenges.”

This leads to my second concern about this bill: the process that we took to get here. In our confidence and supply agreement with the government, we committed to the elimination of MSP. We’ve been clear all along that what we would have done would have been different from what this government has proposed. We would have rolled MSP into a payroll tax and personal income tax system to ensure that revenue was being collected in a progressive way so as not hurt those who can afford it least and to reduce the tax burden on any one group.

For government to choose to strike a task force instead to advise them on the best way to make up revenue…. This task force was made up of respected experts in economics, in tax policy. They undertook significant consultation and extensive research on the best way to make up the revenues.

Government forged ahead

The problem is that government chose to forge ahead with this payroll tax, a payroll tax alone, before waiting for the task force to issue their final recommendations. This is a shame, in part because the interim recommendations of the task force aligned with the direction we would have gone, which I think, overall, would have been better.

I find this decision more troubling because I believe that when government makes moves like this, it undermines people’s trust in government. It makes people question the independence and validity of other expert panels and the use of evidence and expertise in informing government decision-making. I hope and trust that this was a one-off and that government will truly be led by the expertise of other panels who are currently undertaking their work on critical issues.

Overall, we would have chosen a different route to eliminating MSP. I remain concerned about the impact this payroll tax could have on businesses, especially given the other challenges that they’re facing, the challenges that were left over from the previous government.

The fundamental outcome that both we and the government agree on is the urgent need to eliminate the medical service premiums. It’s in this context that I support this bill. Over the next number of months, I will continue to meet with and listen to businesses in my riding, and I will be closely watching the state of business and the economy in B.C. I will be sure to raise their concerns, as soon as they arise, with the minister. These meetings are not going to be easy. I acknowledge, in this place now, that once this tax has been shifted to business, it’s going to be very difficult to get any government to shift any of it, even part of it, back to a progressive way, like a line in the income tax, like another jurisdiction. It was for years that the public was calling on the previous government to change this. While they claim that they are supportive of a change, they didn’t make those changes.

Monitor, be nimble and willing to adapt

We must monitor the impacts of this shift very closely, and the government must be nimble and willing to adapt if they see a need. The cost of losing those businesses to governments that are putting measures in place to be far more competitive, even from just a bottom-line perspective and maybe even to their own detriment, is very high to our communities, to our tax base, to the quality of life in our region, to innovation and to our confidence.

I strongly suggest that government look at the recommendations of their own task force, to tax items that we don’t want — items like sugar, which causes costly illnesses to our health system, like diabetes. These are opportunities for the government to offset some of these costs.

I’ll be asking the government questions and raising potential solutions to ensure that they govern in a progressive way that takes the burden off people while also ensuring that B.C. remains an attractive place to invest and do business.

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