MSP is not only a tax, it’s a payroll tax for nearly half of those subject to it
Medical Services Plan payments have been a hot election topic since the BC Liberals reversed years of premium increases with a pre – election budget that vows to cut them by half next year.
In the recent TV debate ,BC Liberal Christy Clark boasted that the cut would bring Canada’s only dedicated health care tax back down to 1993 levels.
NDP leader John Horgan replied that Clark’s promised cut is after doubling MSP rates over the past 16 years, and Clark fired back that both Horgan and Green Party leader Andrew Weaver want to shift the burden onto income tax.
All of this campaign rhetoric is true, as far as it goes. But voters should also know what isn’t being said.
There are about two million MSP accounts in B.C., half of them paid directly by individuals and families, and the rest submitted by employers.
Reducing the rate by half, which both the B.C. Liberals and NDP promise to do next year, would be a personal tax cut for some and a business tax cut for others, unless businesses are treated differently.
Then there is the bureaucracy involved. MSP administration was contracted out in 2004 to U.S.-based Maximus Inc., which handles billing and collections.
It was given an initial 10-year contract worth $324 million. Cutting the rate doesn’t change this cost.
People who lose their jobs describe being pursued by bill collectors because their MSP rate is based on the previous year’s income. Low-income people are eligible for partial or full exemption, but they have to apply for it and many don’t, at least until the collection calls start coming.
Speaking to the Vancouver Board of Trade Feb. 22, Clark acknowledged how MSP and other taxes really work.
“Everybody in the room knows that MSP premiums don’t go to pay for health care, right?” Clark said.
“Anything more than school taxes go to pay for education or your income taxes go to pay for roads. It all ends up in one big pot of money and we just happened to give it that name.”