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New payroll tax to replace MSP will cost City of Surrey millions

Surrey South MLA Stephanie Cadieux pressed finance minister on the new tax in Question Period this week

The provincial NDP’s new “employer health tax” as part of a plan to phase out MSP premiums will cost the City of Surrey millions of dollars.

The City of Surrey told the Now-Leader the new tax is expected to cost city hall $4.7 million in 2019, and $3.35 million in 2020 when MSP premiums are completely eliminated.

In an emailed statement, Surrey’s General Manager of Finance Kam Grewal said “these figures are accurate in relation to our preliminary analysis…. Having said this, staff will need to analyze the entire budget announcement for overall impact to the City, (and) this will occur as part of our budgeting process for 2019.”

How will the city offset the costs?

“Staff will analyze the entire budget announcement and related impact as part of our 2019 budgeting process,” wrote Grewal. “There may be offsetting items - such as the planned elimination of PST on Hydro for businesses in 2019 that may partially offset the new Employer Tax costs.”

The new tax takes effect Jan. 1, 2019 and applies to businesses with annual payrolls of more than $500,000, some of which now pay MSP premiums on behalf of their employees. The tax rate is 1.95 per cent for businesses with payroll above $1.5 million, with reduced rates for payrolls between $500,000 and $1.5 million.

See more: BC BUDGET: Payroll tax replaces medical premiums

During question period in the legislature Tuesday, Surrey South MLA Stephanie Cadieux raised the issue, and asked Finance Minister Carole James why residents of Surrey should “pay the NDP’s new tax grab” which she claimed would be downloaded onto families via higher property taxes.

“I’m certain the people in Surrey were cheering when we removed tolls off the bridge,” replied James. “I’m certain the most recent announcement about the replacement of the Pattullo Bridge was also a success…. Mr. Speaker, we are eliminating the MSP, we are bringing in an employer’s health tax, we are protecting health care, and investing in health care and other programs and supports for the citiziens of Surrey and the rest of British Columbia.”

Cadieux shot back, saying the new tax materialized despite Premier John Horgan’s statement that the only tax increases were those outlined in the party’s election platform.

“So why do people in Surrey, Mr. Speaker, through you to the minister, have to pay higher property taxes because the government couldnt keep a promise?” Cadieux questioned.

James said those in Surrey that have been paying MSP are “saving 50 per cent, 2018, 2019. They will be saving all of MSP costs in 2020. Businesses, again, who make a payroll of under $500,000 will not be paying the employer health tax.”

After announcing the new tax in late February, James said the decision to recoup some of the revenues via tax is similar to what other provinces have done, and B.C.’s payroll tax has a lower rate than Ontario, Quebec and Manitoba. The tax is expected to raise $1.9 billion per year, compared to $2.6 billion collected when MSP was at its highest rate in 2016-17.

The NDP say the revenue from the new tax will help pay the $1.5 billion increase in health care spending over the next three years. That includes $548 million over three years to improve care for seniors and $150 million to provide primary care teams for people who don’t have a family doctor.

With files from Black Press