Local governments across the province — including the Regional District of Bulkley-Nechako (RDBN) and the Village of Burns Lake — may soon be on the hook for a hike in expenses as the province rolls out its new health tax system.
The provincial government is phasing out Medical Service Plan (MSP) premiums over the next two years, replacing them with a new payroll tax paid by employers.
Businesses and organizations with payrolls amounting to less than $500,000 are exempt from the tax, which is based on a sliding scale that reaches up to 1.95 percent for payrolls exceeding $1.5 million.
Bigger bill for RDBN, village
The new system will increase expenses for the RDBN by more than $24,000 annually, compared to costs under the MSP system — an increase of roughly 50 percent — according to estimates by Kristi Rensby, finance and administration coordinator for the RDBN.
In 2017, the regional district paid $52,919 in health premiums on a payroll worth $3.4 million. Under the Employer Health Tax (EHT), the regional district will be paying an estimated $77,040 in health taxes by 2020 — $24,121 more than in 2017.
The regional district currently pays MSP premiums for permanent employees who don’t have coverage through their spouse’s employer — but not for the directors on the region’s board.
But under the new system, the region will likely be on the hook for directors’ contributions, according to the report.
“This has an added cost to the RDBN, and therefore, to the taxpayer,” said Rensby in an April 18 report to the RDBN’s board. However, it’s unclear whether a tax increase will ultimately be required — that will depend on a variety of budgetary factors that vary from year to year, said Melany de Weerdt, chief administrative officer for the RDBN.
The Village of Burns Lake has also said that costs will go up under the EHT. “We expect our costs to go up slightly with the implementation of the Employer Health Tax,” said Burns Lake Mayor Chris Beach in an email.
“Under the old program, our costs were $22,950 in 2017 for full rate MSP premiums,” he said. “Under the new program, assuming full elimination of MSP premiums in 2020, we expect our costs to be between $22,000 and $30,000 per year from 2020 onwards.”
UBCM finds higher costs
Many other local governments are expecting higher costs with the roll-out of the new employer tax, according to a new study by the UBCM, an organization representing local government in the province.
More than two-thirds of the 77 local governments surveyed for the study, which was published this month, indicated that costs would rise with the EHT’s implementation compared to 2017.
Among the respondents, 36 percent said their costs would rise by 25-100 percent, while 15 percent indicated that expenses would more than double.
Taken as a whole, the 77 communities — which account for 40 percent of all local governments in BC — will see their MSP-related costs double between 2017 and 2020 as a result of the new tax, from about $19 to $37 million, according to the study.