A new speculation tax, a foreign buyers tax increase and a new child care benefit were just some of the highlights of the first provincial NDP budget in 17 years.
On Feb. 20, the Finance Minister Carole James delivered a budget that prioritized affordable housing and child care.
“In a very tight labour market, I think it’s important to recognize that child care and housing are two of the most important examples of the link between social programs and a strong economy and that the choices that we make today really put us on a path for what we want our province to look like in 10, 20 or even 50 years,” James said.
However, the renter’s rebate of $400-per-year and the $10-a-day daycare, which were both promised during Premier John Horgan’s election campaign, were not part of the budget.
James said the government is still exploring the renter’s rebate.
“Other ideas have come forward,” James said. “I mentioned the homeowner grant and looking at the homeowner grant in a more fair way so there’s discussions we’re going to continue this year. We’ve been government for seven months. We’re not going to do everything overnight.”
James also said child care is a 10-year plan.
“We are making a bold, significant move in this budget. You will see families receiving support on child care. You will see fees reduced for parents and as we go along there will be people in fact paying less than $10 a day.
According to the British Columbia NDP government, new legislation will be introduced this year to impose a new speculation tax on residential properties in the province.
The new annual property tax will target foreign and domestic homeowners who do not pay income tax in B.C., including those who leave their homes vacant.
The government said satellite families, which are households with high worldwide income that pay little income tax in B.C., will fall under the new property tax. The tax will be effective for the 2018 tax year and there will be up-front exemptions for most principal residences, long-term rental properties and certain special cases.
According to the budget, the majority of homeowners will be exempt. There will also be a non-refundable income tax credit to offset the new property tax.
This new property tax will initially apply to Metro Vancouver, the Fraser Valley, Nanaimo and the Capital Regional District, as well as the Kelowna and West Kelowna municipalities. In 2018, the tax rate will be $5 per $1,000 of assessed value. Then in 2019, the tax rate will rise to $20 per $1,000.
The tax will be administered by the province outside of the normal property tax system and the property tax cycle. The province will issue notices by mail that will direct residential property owners to a ministry website that will have a tax form and information on the exemption.
“What we are looking to do is moderate the market,” James said.
“We’re looking to end speculation. We’re looking at closing loopholes so there will be fairness so people will be paying their fair share of taxes and we want to moderate the market so that low and middle-income families can afford to live in the communities that they work in,” James said.
The provincial government also said in the budget that the additional property transfer tax (also known as the foreign buyers’ tax) rate will be increased from 15 per cent to 20 per cent. The tax will also be extended to the Capital Regional District and the Nanaimo Regional District, as well as the Fraser Valley and the Central Okanagan.
According to James, extending the additional property tax will mean speculation isn’t pushed into neighbouring markets.
“We expect that there may be other municipalities that want to come forward and say ‘we would like to be part of this. We believe there is a spill over into our municipality or our area’ so we are open to that,” James said.
“We just put forward these areas because we feel these are urban settings and they’re a good place to start but there may be an expansion later on.”
The changes will take effect on Feb. 21, 2018.
“If you’re bringing forward a tax, it’s important to make sure that you capture people immediately when the tax comes into play,” James said.
“We think that foreign buyers should contribute more to the quality of life they enjoy when they move to our province,” James said.
Also on Feb. 21, 2018, the property transfer tax payable on residential properties above $3 million will go from three per cent to five per cent. This applies to the fair market value exceeding $3 million of the residential component of a taxable transaction.
The provincial school tax will increase on most residential properties in excess of $3 million by 2019.
As for renters, the government will be increasing the Rental Assistance Program by approximately $800 per year and the Shelter Aid for Elderly Renters benefit by $930 per year.
James also said the government will review the province’s homeowner grant and strengthen protection for renters evicted due to renovation or demolition.
The government is also investing $1.6 billion in housing, including $453 million to support over 19,000 affordable units, $308 million for critical maintenance and energy performance upgrades for existing social housing and a new $450 million student housing program that will allow public post-secondary institutions to borrow from the government for student housing.
There will also be $178 million for 2,500 supportive housing units for people struggling with homelessness, $158 million to support 1,750 units for housing of Indigenous peoples and $141 million to support 1,500 units for women and children fleeing abuse.
The budget includes a $1 billion investment in child care over three years, the highest in the province’s history. This includes a new child care benefit of up to $1,250. Families can start applying online in the summer of this year and payments will go directly to providers by September 2018.
James said up to 86,000 families will benefit.
The government is also set to reduce parent fees in licensed group and family child care for children under the age of six through a child care fee reduction program. Licensed providers who opt in will lower the cost of child care fees by $350 a month per space.
With the benefit and the program, approximately 27,000 families with annual incomes under $45,000 will pay little or nothing for licensed child care.
A total of $237 million over three years is being put toward creating over 22,000 new licensed child care spaces.
Impact of ICBC on the budget
While the budget is balanced, the government is relying on ICBC product reform for 2018/19 and the following two years. A surplus of $903 million is included in the budget for 2018/2019 but there is also a net loss of $1.1 billion for ICBC before product reform. Product reform is set to bring in $392 million, which would then put the budget surplus at $219 million.
The product reform has already been announced, including a limit on pain and suffering payments by April 2019, increased accident benefits, which came into place by January 2018, and more minor claims being reviewed through the BC Civil Resolution Tribunal instead of the court.
ICBC has reported a $1.3 billion loss for 2017/18.
James said this financial burden should have been dealt with under the previous Liberal government.
“This shows the years of poor choices and neglect at ICBC, which meant that over a billion dollar forecast loss gets built into our budget in the third quarter of this fiscal year,” James said.
James said she remains cautiously optimistic that the NDP government will balance the budget this year despite the challenges faced ICBC and an unprecedented wildfire season.
The government has announced Jan 1. 2020 will be the specific date when MSP premiums will officially be eliminated.
According to the NDP, this will result in a total annual savings of up to $900 for individuals and $1,800 respectively.
Much like in other provinces, premium elimination will be funded by a new employer tax. James said this will be the lowest payroll tax in Canada.
The tax will not apply to employers with a payroll under $500,000. Employers with a payroll over $1.5 million will pay the maximum rate of 1.95 per cent on their total payroll.
For employers with a payroll between $500,000 and $1.5 million, the tax rate will phase in gradually until it reaches 1.95 per cent at $1.5 million in total payroll.
In the budget, the government committed to collect new information to stop tax evasion in pre-sale condo reassignments, introduce a new beneficial ownership registry to end hidden ownership, strengthen provincial auditing and enforcement owners, move to close property tax loopholes and expand the collection of information, as well as sharing that information with the federal government to prevent tax evasion.
Fares will be frozen on three major routes: Swartz Bay-Tsawwassen, Duke Point-Tsawwassen and Horseshoe Bay-Departure Bay. Additional funding will be provided to BC Ferries to these fares can be frozen instead of increasing on April 1, 2018 and April 1, 2019.
There will be a 15 per cent fare reduction for non-major routes as of April 1, 2019. The 100 per cent seniors’ discount, which will be in effect from Monday to Thursday, will be restored. The ferry changes were previously announced in 2017.
A total of $214 million in the budget will go toward the bus pass or transportation supplement for more than 100,000 people receiving disability assistance.
And the PST luxury surtax rates on passenger vehicles between $125,000 and $150,000 will increase to 15 per cent by April 1, 2018. The rate on a passenger vehicle with a purchase price over $150,000 is increased to 20 per cent. The new rates will apply to new and used vehicles.
In the budget, $201 million over three years is allocated for Indigenous housing, Indigenous Skills and Training Program and Aboriginal Friendship Centre.
There will also be $50 million to support the revitalization of Indigenous languages.
Education and other Services
There will be a $409 million increase to the K-12 budget, including $72 million more for the Classroom Enhancement Fund to bring the number of new teachers to over 3,700 and $207 million for enrolment growth.
There will also be $51 million to improve family law services, increase legal aid and reduce court delays, as well as $18 million for outreach and counselling support services for women and children affected by violence.
More than $1.5 billion is going toward health care, including $548 million for improved senior care, $150 million to help those without a family doctor get team-based primary care and more than $800 million in additional funding for other health services.
As previously announces, the B.C. carbon tax rate will increase annually by $5 per tonne of CO2 equivalent emissions until rates are equal to $50 per tonne in 2021. The first increase takes effect on April 1, 2018.
Total revenue growth is expected to average four per cent annually over a three year period. Increasing revenues from taxation, federal government contributions and net income of Crown corporations are expected partly offset by declining revenues from natural resources and MSP elimination.
Taxation revenue is forecast to average 7.6 per cent annual growth while natural resource revenue is forecast to average a 5.5 per cent decline. The taxation growth comes from the employer health tax, speculation tax and property transfer taxes. The natural resources declines comes from declining revenues from mineral tax on coal mine operations, forests and bonus bids and rents on drilling licences and leases. However, there is set to be higher natural gas royalties compared to 2017/2018.
“Budget 2018 is balanced with surpluses forecast each year,” James said.
“Our debt remains affordable and it incorporates several layers of prudence including robust forecast allowances and contingencies. We are economic leaders in Canada but I do not believe we can consider ourselves leaders if we’re not sharing the prosperity of our province with the British Columbians who helped create it.”