Economist Jon Kesselman refers to B.C. MSP fee as a head tax

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      Economist Jon Kesselman has two things to tell British Columbians about the six-percent increase to their Medical Services Plan premiums in 2010.

      “British Columbia is just about the last province to continue charging this flat rate,” Kesselman, a professor in SFU’s graduate public-policy program, told the Georgia Straight in a phone interview.

      He also said he couldn’t think of a more regressive tax than MSP premiums. Kesselman described these payments as a “head tax” since they must be paid regardless of income, with only those in the lower income brackets receiving partial or full relief.

      “In the [net] mid $20,000 [per-year income], the lower $30,000, they phase out this premium assistance,” Kesselman explained. “Above the $30,000 range, it is a head tax.”

      The increase to MSP payments—which takes effect January 1—was laid out in the budget update delivered by Finance Minister Colin Hansen on September 1, 2009, about three months after the last provincial election.

      Under the new rate system, a single individual earning more than $30,000 will pay $684 per year. A family of two with the same income will be charged $1,224, while a family of three or more will have to pay $1,368.

      This won’t be the end of it, according to Maureen Bader. The B.C. director of the Canadian Taxpayers Federation pointed out that the provincial government is tying future MSP rates to increases in the health-care budget. In his budget update, Hansen projected that the 2011 health budget will increase by another six percent. “If the premium goes up by six percent over the next 10 years, this poll tax will double,” she told the Straight by phone.

      Bader suggested that health budgets are likely to continue to increase in the future, and cited one area that’s putting pressure on costs. “About 14 percent of B.C.’s population is 65 or older now,” she said. “By 2032, say 25 percent of the population will be over 65. Right now, people over 65 account for 44 percent of the health-care spending. Without reforms, health-care costs will continue to accelerate, and so will the health tax.”

      Bader also noted that many people incorrectly believe MSP premiums are insurance premiums that pay for the health-care system. “It goes directly into general revenue,” she said.

      Health economist David Schreck recalled that Alberta used to have a similar system, which it eliminated effective January 1, 2009. The former NDP MLA explained that in 2002, Premier Gordon Campbell’s government jacked up MSP rates by 50 percent. “It is one more step in a long series of steps of the Campbell government shifting the tax burden from the top to the bottom,” Schreck told the Straight by phone in reference to this year’s increase.

      MSP payments amount to about $1.5 billion a year. According to Schreck, MSP premiums cannot be eliminated suddenly, but it could be done in steps, beginning with freezing rates and increasing premium subsidies over the course of five or six years.

      Comments

      8 Comments

      DJP

      Dec 30, 2009 at 9:56am

      MSP premiums are based on adjusted net (after tax), NOT gross (before tax) income. In 2010 persons with an adjusted net income less than $22,000 will pay no premium for MSP.

      anb

      Dec 30, 2009 at 10:55pm

      Premiums are based on your last years income. If you lose your job, or go back to school you still have to pay the full premium!

      wb

      Dec 31, 2009 at 11:51am

      This province is sucking us dry, with all the taxes we
      have to pay on gas, alcohol, MSP, home transfer taxes,
      increasing transit fares, etc. Other provinces don't charge MSP, and yes, I was very surprised and disturbed to learn it is straight tax, it doesn't cover insurance premiums. Where does our money go??
      Last year our MLAs voted themselves a huge pay hike. And for the next decade, the BC govt. will be
      taxing us into oblivion to cover for the outrageous
      debt we will have incurred to pay for the Olympics debacle (which, by the way, BC residents were never allowed to vote on). It's time to think about
      getting out of this province.

      0 0Rating: 0

      RodSmelser

      Dec 31, 2009 at 1:50pm

      I am just wondering why a MSP premium of around a $1000 a year is a tax equity issue, but the 12% HST is not?

      Rod Smelser

      0 0Rating: 0

      out west

      Mar 10, 2010 at 8:58am

      How can this government charge a fee for "medical services plan" and have all the money go into general revenue. Feels like another Gordo scam. They talk of the fee to help administer and pay for our health care but its actually going to general revenue. What's up with this BC government and why did so many people vote them back in. They really do nothing but take take take for themselves and corporations but don't give much back.

      Dyind in the Island

      Jun 2, 2010 at 6:36pm

      I made 22K and wife 16K. Alone neither of us would have to pay. Looks like I have to divorce her to save money? Lets see 20% income tax... fed/prov ... This is paid on after tax dollars, so my 1224 now = 1468... + paid with after tax $$ property tax = 2959 ... and adding 14.5cents gas tax ///// where does it stop .....

      Just retired

      Dec 31, 2010 at 12:04am

      Special exemptions based on radical change of income are not allowed for retiring because the govt says this is a "financial choice".

      Victor Wong

      Mar 20, 2013 at 5:43pm

      The Head Tax was two years of wages for a white worker at the time. MSPs are not a head tax. That said, it should be eliminated and income taxes be raised in a graduated basis in all brackets to pay for it.