Life / Money

B.C. medical services premium cut a strategic 'bang for the buck,' Clark says

B.C Premier Christy Clark speaks to a crowd while attending an Erase Bullying in Sport event in collaboration with Pink Shirt Anti-Bullying Day in Burnaby, B.C., on Wednesday, February 22, 2017. THE CANADIAN PRESS/Ben Nelms

B.C Premier Christy Clark speaks to a crowd while attending an Erase Bullying in Sport event in collaboration with Pink Shirt Anti-Bullying Day in Burnaby, B.C., on Wednesday, February 22, 2017. THE CANADIAN PRESS/Ben Nelms

BURNABY, B.C. — Premier Christy Clark says slashing British Columbia's health premiums in half gives the "biggest bang for the buck" to taxpayers, but an economist says she should have replaced the fees with a fairer tax to avoid losing $1 billion in revenue.

Clark touted the Liberal government's fifth consecutive balanced budget on Wednesday at two events in the Vancouver area. B.C.'s economy grew faster than any other province in 2015 and 2016, driven largely by a real estate boom, and Clark said she had a $2-billion surplus to work with.

She told reporters in Burnaby that her government wanted to return the cash to taxpayers. It considered cutting the provincial sales tax, but decided slashing medical service premiums would keep more money in middle-class families' pockets.

"What I was looking for was a way to deliver a billion dollars in tax relief that would be focused squarely on people who are in the middle class. This is the one that had by far the biggest bang for the buck," she said.

Clark said a one-per-cent cut to the sales tax would have saved middle-class taxpayers $200 a year, while a planned 50-per-cent cut to medical premiums announced in Tuesday's budget will save them up to $900 a year.

The cut in medical premiums affects households with an annual net income of up to $120,000. It will take effect in January 2018 and reduce the government's income by $1 billion.

Clark's government has promised to eventually eliminate the medical premium, a fee that no other government in Canada imposes and which brought in $2.4 billion annually.

The premier later told the Greater Vancouver Board of Trade that she "hates" the medical premium.

"I just think it's a terrible tax. Nobody else in the country pays it. It's regressive. It's absolutely the worst way to tax people."

However, she refused to provide a timeline for its elimination, saying it will depend on how quickly the B.C. economy grows.

The pace of growth in B.C. is expected to slow this year. There has been a slowdown in the sales of detached houses in Metro Vancouver, a key source of property transfer tax revenue.

Carole James, finance critic for the Opposition New Democrats, said MSP rates have doubled since the Liberals took power 16 years ago, so the 50-per-cent cut would merely reverse those hikes.

"For 16 years, they've gouged people, they've taken money out of your pockets," she said. "So now, when we're just a couple of months away from the election, for them to say that they care is hollow and the public knows it."

NDP Leader John Horgan has said he would eliminate medical premiums. Asked if the party would consider replacing the fees with a fairer tax, James said it would consider all options.

"We're looking at other jurisdictions," she said. "Other provinces have moved it to the income tax system, which is a much fairer system."

Iglika Ivanova, a senior economist with the Canadian Centre for Policy Alternatives, said B.C. is not in a position to give up $1 billion in revenue.

"My concern is that we could have used this money for something that would have improved services much more than what people can buy with $37.50 a month, or $75 a month if you're a family."

Ivanova said the medical premium is unfair because it is not based on income. People who earn less than $24,000 do not pay the fee and people who earn between that amount and $42,000 pay a range of premiums, but all earners above $42,000 pay the same amount.

She said two provinces had similar fees and eliminated them. Ivanova called for B.C. to take Ontario's approach. It axed its health fees in 1990 and replaced them with a combination of a personal income tax and a business tax for companies that were paying the fees for their workers.

Alberta, on the other hand, was rich with oil revenues and decided to kill the tax entirely.

"We kind of know where that ended," said Ivanova, referring to Alberta's downturn in fortunes as oil prices dropped. "I'm surprised to see the B.C. government's taking the same approach at this point."

— Follow @ellekane on Twitter.

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