Municipalities are raising taxes because of the Employer Health Tax – but will they reduce them next year when it disappears?
In the lead up to 2019, much was written about the new Employer Health Tax (EHT), and how it was going to impact BC businesses and local governments.
That’s because in 2019 employers, which includes most municipalities, are on the hook to pay for both a reduced Medical Services Premiums (MSP) charge and the new EHT.
In a city like Vancouver, they report the EHT resulted in them having to incorporate an additional 1.7% property tax hike to pay the new fees.
While Vancouver politicians may not have liked the prospect, it did help to deflect some attention away from the whopping 4.9% increase originally proposed for their 2019 budget.
There was no shortage of media headlines with Metro Vancouver mayors and councillors pointing fingers at Victoria for those skyrocketing property tax increases.
Putting aside for a moment whether cities should be exempt from the EHT, what few people have discussed is what will happen to property taxes come 2020.
Next January, every single municipality that currently pays MSP for its employees will see that cost disappear from the books.
One is left to wonder: how will local politicians message that cash windfall?
I’m advised in Vancouver alone they will save approximately $2.4 million when MSP gets wiped off the books. All things being equal, those funds could be returned to local ratepayers in the form of reduced taxes. But will they?
My bet is most cities will produce their annual budgets as they normally do, and recommend tax increases that far outpace the annual rate of inflation.
Unlike this year when they’ve been shouting at the top of their lungs about extra costs related to the EHT – they’ll likely be a bit quieter when the MSP charges disappear.
By way of example, you have to all the way to page 70 of the City of Vancouver’s budget documents to read the following statement:
“The provincial government has announced an Employer Health Tax, which will come into effect on January 1, 2019. This was accompanied by the elimination of Medical Services Plan (MSP) premiums, effective January 1, 2020. While this is an increased cost to the City in 2019, the City can expect a marginal positive financial impact in 2020 upon the elimination of MSP premiums.”
How this “marginal positive financial impact” is calculated, messaged and eventually incorporated into budgets of local municipalities is yet to be seen.
I can’t help but assume it won’t get anywhere near the same media attention and political interest the EHT garnered this year.
While I sympathize with city bean counters who raise a good point about the EHT in 2019 – the cynic in me thinks they’ll be less inclined to remind taxpayers about the windfall they’re accounting for next year.
Daniel Fontaine is the Chief Executive Officer for a non-profit seniors care organization based in Burnaby. A former weekly civic affairs columnist for 24 Hours Newspaper, Fontaine has been a political commentator on Global TV and CKNW radio. In 2008 he co-founded one of Canada’s most popular civic affairs blogs. In 2012, Fontaine was awarded the Queen’s Diamond Jubilee Medal for public service.