B.C.’s Medical Services Plan premiums are “grossly regressive” in the way they penalize lower-income British Columbians and should be scrapped in favour of higher taxes for all, says the B.C. director of the Canadian Centre for Policy Alternatives.

B.C. is the only Canadian province that bills people directly for universal health coverage, said Seth Klein, calling MSP payments a tax because they are mandatory and levied by government.

In a report released Tuesday, Klein and economist Iglika Ivanova outline a “revenue-neutral way” to scrap MSP premiums. They suggest increasing tax rates in all five provincial tax brackets by 20 per cent, as well as adding two new brackets, with rates of 20 and 22 per cent for those earning $150,000 and $200,000, respectively.

The changes would raise $2.2 billion in a “much more progressive” way that would have higher earners paying higher rates. Right now, all individuals earning more than $30,000 annually pay the same $798 per year in premiums.

A family of four with an average household income of $60,000 pays more in MSP premiums than it does in provincial income taxes — $1,526 versus $1,190. The B.C. Ministry of Finance says the provincial income tax paid by that family has declined from $1,835 in 2007 — leaving the family ahead by $405, despite the premium.

Klein calls that amount “piddly” compared with the overall tax shift in favour of corporations and upper-income households. “A household in the top one per cent, earning more than $300,000 per year, has seen a reduction in their total tax bill of $41,000 a year” since 2000, Klein said.

Even with the changes, B.C. residents with incomes up to $1 million would still pay less tax than in 2000 and B.C. would still have the third-lowest tax rate in Canada, Klein said. Yet anyone earning $50,000 or less annually — the majority of B.C. taxpayers — would benefit from the centre’s recommendations, he said.

The premiums are inconsequential for upper-income families but significant for modest-income ones, the report says, adding many higher-income people have MSP premiums paid by their employers, while lower-income earners often pay it themselves.

MSP fees have gone up 85 per cent since 2000, the centre says, but Health Minister Margaret MacDiarmid points out the health-care budget has almost doubled in that period.

MacDiarmid doesn’t anticipate any public consultation on MSP premiums before the May 14 election and stressed that in overall taxation policy, B.C. stacks up “very, very well against other provinces.”

Before comparing B.C. with provinces that roll health-care premiums into income tax, she said, it’s worth noting that Ontario has “a horrendous financial situation” and Quebec relies on billions of dollars in transfer payments from other provinces. However, the struggles of lower-income people to pay the premiums merit discussion, she said.

Alberta eliminated health-care premiums in 2009.

“I’d be quite prepared to look at this and I think our government would as well, but before we would make any sort of changes to taxation, there would need to be a very broad and deep consultation about what we would do differently,” McDiarmid said.

kdedyna@timescolonist.com

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WHAT YOU PAY

• On Jan. 1, Medical Services Plan premiums increased by four per cent for all individuals and families earning more than $30,000. Annual premiums now range from $798 for singles to $1,446 for couples and $1,526 for families.

• B.C. charges the same fee regardless of personal income above the cut-off for a subsidy.

• Premiums are forecast to bring in $2.02 billion this year. That pays for about 12 per cent of the total health-care budget.

• Under a Canadian Centre for Policy Alternatives scheme, B.C.’s five tax rates would rise by 20 per cent to 6.07 per cent, 9.24 per cent, 12.6 per cent, 14.75 per cent and 17.64 per cent. Someone earning $50,000 would see their income taxes increase by $574 but no would no longer pay MSP of $798 per year. Those earning $500,000 would no longer pay the $798 MSP premium but would pay $27,548 more in income tax. The same person would have paid $41,000 more in 2000.

• There are 4.6 million people enrolled in MSP. About 2.285 million are enrolled in MSP under group accounts, including employers — who sometimes pay the full premium for employees — First Nations and Ministry of Social Development clients, the Health Ministry says.

• MSP premium bills are sent directly to 2.3 million B.C. residents. Another 800,000 very-low-income residents are exempt from premiums. Almost two thirds of B.C. seniors are billed.

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