Replacing MSP with fair taxes would mean savings for most BC families: economist

An economist with Canadian Centre for Policy Alternatives crunched the numbers on two options for getting rid of the unpopular head tax.

Canadian Centre for Policy Alternatives

 

Vancouver – The majority of British Columbians would come out ahead under a plan to scrap MSP and replace the $2.5 billion in public revenues it currently brings in with fair taxes scaled to income.

Iglika Ivanova, a Senior Economist with Canadian Centre for Policy Alternatives, crunched the numbers on two options for getting rid of the unpopular head tax. One calls for small increases to existing provincial income tax rates, along with new brackets at the top end of the income ladder. The second option combines small income tax increases with a new business tax, roughly in proportion to the share of MSP currently paid by individuals and employers.

Most households would see net savings under both scenarios, but Ivanova recommends moving ahead with the combined personal and business tax option. Under this plan:

•A family of four with household income of $60,000 would save $1,725 each year.

•A family of four with income of $90,000 would save $1,450.

•An individual with income of $80,000 would save $263.

•Families currently receiving MSP premium assistance would see modest savings or be unaffected by the change (since they already pay reduced MSP or no MSP).

•Only the top 6% of families would pay more in net taxes.

•All businesses would pay a percentage of gross wages and salaries, with lower rates for smaller businesses. The rate would depend on how the tax is structured but should be set to raise about $1.1 billion in 2017, or 40% of total MSP revenues – the approximate share currently contributed by those employers who cover MSP for their employees.

“Businesses already pay a significant portion of MSP.” says Ivanova. “Our plan would share costs more fairly, resulting in net savings for the ‘good’ employers who now cover MSP for their staff and forcing those who are currently free riding to pay their share.”

“MSP is an unfair and unnecessary tax,” says Ivanova. “A two-parent family with $40,000 income currently pays $1,800 per year — the same as a family making $400,000. The amount is inconsequential for well-off families but takes a significant bite out of the family budget for those with modest resources.”

“BC is the only province left in Canada to charge a head tax like MSP,” says Ivanova. “It’s time to eliminate MSP and replace it with fair taxes.”