Finance Minister Carole James announced a raft of new tax measures Tuesday to help pay for major investments in child care and affordable housing and cover the cost of eliminating Medical Services Plan premiums.
In her first full budget since the NDP took power last summer, James slapped big businesses with a new payroll tax, high-end homeowners with higher property transfer taxes, speculators with a new levy on residential properties, and foreign buyers with higher taxes that now apply in more areas of the province — including the capital region and Nanaimo.
James said a number of the new taxes will help stabilize the housing market and curb demand, while bolstering a $54-billion budget that includes “historic” investments in a child care plan and affordable housing.
MSP premiums, which were cut in half at the beginning of this year, will be eliminated as of Jan. 1, 2020.
“We are economic leaders in Canada, but I do not believe that we can consider ourselves leaders if we’re not sharing the prosperity of our province with the British Columbians who helped create it,” she said. “This budget is balanced in its approach and it’s fiscally balanced.”
Business groups, however, pushed back against the plan to replace the revenue lost by eliminating the MSP premiums with a new employer payroll tax that takes effect Jan. 1, 2019.
Businesses with a payroll of at least $1.5 million will pay a tax of 1.95 per cent on the total payroll, while those with payrolls from $500,000 to $1.5 million will pay a reduced rate. Businesses with payrolls under $500,000 will pay no tax.
The tax is projected to bring in $1.9 billion in revenue by 2019-20. MSP premiums brought in $2.6 billion in revenue in 2016-17.
Iain Black, president and chief executive officer of the Greater Vancouver Board of Trade, said the payroll tax will have a significant impact on businesses already coping with increases in the minimum wage, a carbon tax hike and a higher corporate tax rate.
“So now to hit the small-business community with an additional two-per-cent payroll tax — there is only one thing they can do … hire less people or don’t give raises to the existing ones,” he said. “So this is a big deal for us and it actually took the shine off what was an otherwise, I thought, really progressive budget.”
James said the budget marks the beginning of a universal child care plan, but she made no mention in the legislature about the NDP’s campaign promise of $10-a-day child care. Instead, she said the province will spend $182 million this year and more than $1 billion over the next three to make child care more affordable and create 22,000 new spaces.
“Our made-in-B.C. plan sets us on a path to universal child care,” she said. “It represents real transformational change in our society.”
The plan includes a new affordable child-care benefit that the government says will reduce costs by up to $1,250 a month per child for a family earning less than $45,000 a year.
Licensed child care providers will be eligible for payments of up to $350 per space each month to reduce fees for families.
Irene Lanzinger, president of the B.C. Federation of Labour, said the child care plan will benefit working families.
“It will create spaces,” she said. “It will reduce costs. It will eliminate costs for low-income families. I think it’s a bold first step and we totally support it.”
B.C. Green Party Leader Andrew Weaver said he was happy to see James drop references to $10-a-day child care, which was a catchy campaign slogan but poor public policy. “We are thrilled with the plan towards the child care that has been introduced,” he said. “It’s going to people who need it, so we’re very supportive of that.
“I’ve made the case many times before — somebody who’s earning $2 million a year clearly doesn’t need to pay $10 for child care. Why would we support a program that would diffuse the limited resources we have to provide a one-size-fits-all [approach]?”
The government’s affordable housing plan includes $243 million this year and $1.6 billion over the next three for more rental units, rental assistance, student housing, Indigenous and supportive housing, and preserving existing buildings.
The budget also includes a number of tax measures designed to stabilize the market and curb demand, James said.
“B.C.’s real estate market should not be used as a stock market. It should provide safe and secure homes for families, renters, students and seniors. That’s why we’re cracking down on speculators who distort our market.”
The government will introduce legislation this year to create a new speculation tax on residential property aimed at foreign and domestic owners who don’t pay income tax in B.C.
“This will penalize people parking their capital in our housing market simply to speculate, driving up prices and removing rental stock,” James said.
The tax, which will apply in the Capital Regional District and Regional District of Nanaimo and other major centres, will be $5 per $1,000 of assessed value in 2018 and rise to $20 per $1,000 in 2019.
In addition, the government will increase the foreign buyers tax to 20 per cent from 15 effective Wednesday and expand it beyond Metro Vancouver to the Capital Regional District, Nanaimo, the Fraser Valley and the Regional District of Central Okanagan.
“Extending it to other communities ensures that we don’t simply push the speculation into neighbouring markets,” she said.
The property transfer tax on properties above $3 million will increase to five per cent from three effective Wednesday.
“Soaring housing prices have benefited many people,” she said. “We think it is fair to ask those who have benefited from those high prices to give a bit more back.”
Thom Armstrong, executive director of the Co-op Housing Federation of B.C., said he was thrilled by the housing announcements. “We were calling for a 10-year strategic investment in affordable housing with a balance between supply and affordability measures and this is exactly what the budget delivers,” he said.
B.C. Liberal finance critics Shirley Bond and Tracy Redies accused James of tabling a “tax-and-spend” budget that could hurt the very businesses that help pay for new programs.
“I guess my question is: How is this going to affect property development?” Redies said. “Property development has been one of the biggest industries and tax generators for the British Columbia. So I’m very concerned about what the impact will be.”
Bond said the budget lacks a plan to grow the economy and generate revenue — other than to raise taxes.
“Yes, we’re willing recognize the government has made important investments,” she said. “Our question is: How on earth are they going to pay for them not just today, but into the future?”
In other spending announcements, James said the government will invest:
• $50 million to revitalize and preserve Indigenous languages in B.C.
• $17 million to expand legal aid services, hire more court sheriffs and support other justice initiatives
• $78 million to improve seniors residential care
• $2 million to help the University of Victoria begin an Indigenous law program
The budget also increases the fuel tax on clear gasoline and diesel in the Capital Regional District to 5.5 cents a litre, from 3.5 cents, effective April 1. The tax is expected to raise $7 million a year for the Victoria Regional Transit Commission.