The B.C. government is introducing a new speculation tax on residential properties in an attempt to deal with the ongoing housing affordability crisis in the province. The tax will be 0.5 per cent in the first year, and go up to 2 per cent in 2019. It is expected to bring in $87 million in first year and $200 million next year.
“This tax will penalize people who have been parking their money in our housing market simply to speculate, driving up prices and removing rental stock,” said B.C. Finance Minister Carole James. “People have been clearly hurt by this housing crisis. This is a major important step to end speculation in our market.”
There are still details missing on the new tax, but it will apply to homes in Metro Vancouver, Fraser Valley, Capital and Nanaimo Regional Districts and Kelowna and West Kelowna. New legislation will be presented this spring, and will target homeowners who do not pay income tax in British Columbia, with exemptions available for principal residences and long-term rentals.
The province is also increasing and expanding the foreign buyers tax. Starting on Wednesday, the tax will go up to 20 per cent, from 15 per cent, and will now be applied to houses in the Capital Regional District, the Fraser Valley, the Central Okanagan and the Nanaimo Regional District on top of the existing tax in Metro Vancouver.
The overall economic picture in British Columbia is rosy, putting forward the province’s sixth straight balanced budget. The province is projecting a $219 million surplus in 2018-19, $281 million surplus in 2019-20 and $284 million in 2020-21.
But the province says the surplus could have been bigger if not for a wildfire season that was more expensive than expected and runaway losses at ICBC. Fighting the unprecedented fire season cost the province $648 million. The public insurer accounted for a loss of nearly $1.3 billion in the 2017/18 fiscal year.
READ MORE: B.C. budget 2018: 11 things you need to know
“This shows the years of poor choices and neglect at ICBC that meant over a billion-dollar forecast loss gets built into our budget,” said James. “What is so frustrating about the issue of ICBC and the situation we are faced with could have been predicted.”
B.C. director of the Canadian Taxpayers Federation also weighted in on the Crown corporation: “ICBC fiscal dumpster fire is really weighing them down and we frankly think it’s an anchor around their necks they need to cut, they need to change ICBC into a co-op, open it up to competition,” said Kris Sims.
She said the “razor thin” balanced budget is thanks to ICBC weighing down the financial books.
Additional housing measures include targeting residential properties valued at over $3 million, increasing the property transfer tax on those homes from three to five per cent plus increasing the school tax on those homes.
WATCH: B.C. finance minister addresses affordable housing in budget speech
The province has also pledged to spend $1.6 billion on new housing units over the next three years, review the Home Owner Grant to include renters and close loopholes that allow for hidden home ownership and flipping pre-sale condos.
But there are concerns that there is nothing in the budget to require municipalities to approve housing projects more quickly.
Eliminating MSP by 2020
The B.C. Government is swinging big in the budget by targeting an elimination of Medical Service Plan premiums by Jan. 1, 2020. To make up for the lost revenues the province will implement an employer health tax.
The way the new tax works is that businesses with a payroll of more than $1.5 million will pay a rate of 1.95 per cent on their total payroll. Businesses with a payroll between $500,000 and $1.5 million will pay a reduced rate and businesses with a payroll under $500,000 will not pay the tax. The employer health tax will be implemented on Jan. 1, 2019.
“Where we are really quite concerned is the payroll tax. It is going to be disproportionally felt by our members who are the small business community in British Columbia who provide six out of 10 jobs,” said Iain Black of the Greater Vancouver Board of Trade. “It is about incrementalism. The small business community is also being hit with a 34 per cent increase to the minimum wage.
That means in 2019 small businesses will have to pay both the payroll tax and in many cases pay for their employees MSP premium payments. The tax will take in $1.85 billion starting next year that will make up for loss revenues associated with the elimination of the MSP.
WATCH: B.C. finance minister announces MSP premiums will be replaced by 2020
New affordable child care benefit
The other major tenet of the 2018 budget is child care. The NDP is introducing a new affordable child care benefit that will benefit an estimated 86,000 families across the province by 2020. The funding will go directly to licensed daycares with the savings being passed on to parents.
The province is also investing in building 22,000 new licensed spaces over the next three years. In her budget presentation, James told the story about a baby shower she attended where new parents were panicked about getting their unborn children into a licensed child care.
“It is important to recognize the kind of situation that families in British Columbia are facing when it comes to child care,” James said. “Parents are anxious to find child care, businesses are also feeling the impact of parents who can’t get into the workforce.”
The B.C. government has moved away from the $10-a-day child care slogan, a major commitment from the NDP platform, to focus instead on some instant relief. James says “it is going to take time to deliver” on a commitment to universal child care.
WATCH: Budget speech commits to ‘made in B.C.’ childcare plan
- Freezing fares on all major BC Ferries routes
- Investing $50 million to revitalize and preserve Indigenous languages in the province
- Pledging $18 million to provide outreach and counselling support for women and children affected by violence
- Carbon tax going up $5-a-tonne which works out to about $200 million in revenues for the government.
WATCH: B.C. government announces investment in Indigenous languages
~With files form Janet Brown