According to BC’s Government website Finance Minister Michael de Jong will present British Columbia’s fifth consecutive Balanced Budget.
The BC Liberals have delivered a pre-election balanced budget packed with goodies – both in terms of tax cuts and spending.
Finance Minister Mike de Jong announced that MSP premiums will be slashed in half for households earning less than $120,000 a year, though not until January 2018.
What’s more, the province is promising to phase the program out completely in the long term, but provided no details on how or when.
“The government has laid out what’s affordable at this time, and in the years to come if we can do better, we will do more,” says Minister Mike de Jong.
The government estimates the change will affect about two million people, saving the average person about $450 per year.
For context, the average British Columbian paid about $451 more per year in 2016 in MSP, Hydro, and ICBC rates than they did in 2013.
The threshold for who is exempt from MSP premiums has also been raised to people earning $26,000 per year, or families earning $35,000.
The Canadian Taxpayers’ Federation Spokesperson Jordan Bateman says this is the largest tax cut in B.C. since 2007.
“For 15 years, all we’ve seen is increase after increase after increase on MSP tax. Now they’ve cut it back in half. It’s a great first step and I’m hopeful that they’ll keep their word and eliminate it all together.”
Bateman says affordability is going to be a key election issue in the spring, and this cut could win the Liberals some votes.
“Cost of living is what we all talk about. Hydro, ICBC, property taxes CPP, EI, they’ve all gone up. At least the government is recognizing that and wants to fight it on a tax-cut turf.”
The province estimates this will save money for two million British Columbians.
The province is also raising the threshold for property transfer tax exemptions for first-time homebuyers, with homes worth $500,000 or less now being tax-free.
Businesses will see some tax breaks too, with the small business corporate tax rate dropping to two per cent from 2.5 per cent, and PST being phased out on electricity by 2019.
The MSP cut comes thanks to a 2016/2017 surplus of about $1.5-billion, lower than the previously anticipated $2.2-billion, thanks to substantial provincial spending in the last quarter.
This year’s budget forecasts a surplus of $295-million.
However, provincial debt is forecast to climb from $66.6-billion to $69.7-billion. By 2019, it’s expected to climb to a whopping $77.6-billion, driven by nearly $25-billion dollars worth of capital spending.
That spending includes the $8.7-billion Site C Dam and the $2.37-billion Massey Tunnel replacement project.
READ MORE: NDP slams incoming MSP hikes for B.C. couples
But while the debt is mounting, from the province’s point of view things are on track.
Operating debt, that is debt accrued to cover past program spending, is on track to be wiped out by 2021.
And the taxpayer-supported debt to GDP ratio is forecast to drop from 16.1 per cent to 15.9 per cent.
Election-year tax relief
The MSP move is expected to cost the province about $950 million, and comes after widespread speculation about how the government would “give back” its surplus – many arguing the province might shave a point off of the PST or alter other rates or fees.
The move, removing a key revenue stream from the province’s coffers, could cause political trouble for the opposition NDP, who’s centrepiece $10-a-day childcare program is estimated to cost about $1-billion over the next 10 years.
However, NDP leader John Horgan has also previously hinted he may be willing to foray into deficit territory in an interview with Global News:
“I think the fixation on balanced budgets might well be misplaced in 2017. And we have to look not just at the bottom line fiscally, but what are the social consequences of that balanced budget.”
The province did provide some MSP relief in last year’s budget, raising the threshold for to qualify for premium assistance. However, that move raised fees for many other users, including couples who no longer qualified for a discount rate.
It also scrapped a planned four per cent increase planned for the new year, though rates did climb that much to kick off 2016.
The province has also faced mounting criticism over ICBC rates, which have climbed by nearly 30 per cent since 2012 – including December’s 4.9 per cent bump.
And back in November, an ICBC report warned without action to reduce costs, they could rise byas much as 40 per cent more in coming years.
The province has maintained it is taking action to curb costs, including increased anti-fraud action and ending insurance for high-end luxury cars.
BC Hydro customers haven’t been spared either, with the introduction in 2013 of a 10-year rate plan which slated increases of nearly 26 per cent over the first five years. Under the plan, this year’s hike was capped at four per cent, with caps of 3.5 per cent and three per cent for the following two years.
Hydro has said the hikes are needed to accommodate a provincial population expected to grow by one million people in the next two decades. (sSource: BC website ,S. Little, CKNW)