British Columbia's NDP government has presented its first full budget, expanding on the province's efforts to rein in the housing market with new taxes, taking the first steps toward its daycare plan and reforming the province's beleaguered public auto insurer.
The fiscal plan puts into place some elements of the party's election platform from last year's campaign, but abandons or significantly alters several high-profile promises.
Here's what you need to know about the budget.
The budget continues the province's focus on housing speculation, particularly from foreign buyers, also targeting purchasers and owners of expensive homes. At the same time, the government says it is pouring money into increasing supply with tens of thousands of units of affordable housing.
A tax will apply to homeowners who don't pay income tax in B.C., including those who leave their homes vacant and so-called satellite families, who have high worldwide income but pay little or no income tax in B.C. At first, it will apply to Metro Vancouver, the Fraser Valley, Kelowna and West Kelowna, Nanaimo and the Victoria region.
For a $2-million home, the tax will amount to $10,000 for the 2018 tax year and $40,000 in 2019. The tax will not apply to people who live in their homes (with the exception of satellite families) and owners can get out of the tax if they rent out their properties to long-term tenants. Unlike the province's existing tax on foreign buyers, the speculation tax will not hinge on whether the owner is a Canadian citizen or permanent resident. Finance Minister Carole James said the government has not decided how to approach Canadians from outside B.C. who own vacation homes in the province.
The foreign buyer tax, introduced in 2016 by the BC Liberal government, will be increased and expanded. Currently, the tax amounts to 15 per cent of the purchase price and applies only in the Vancouver region. As of Wednesday, the tax will increase to 20 per cent and be extended to the Fraser Valley, the Victoria region, Nanaimo and the Okanagan.
The budget also increases taxes on owners of expensive homes. Anyone buying a home worth more than $3-million will pay an increased property-transfer tax, as well as a higher school-tax rate. Despite the name, the school tax goes into general revenues.
The province plans to use some of the money generated through those taxes for $6-billion worth of affordable housing over the next decade.
The government appears to have abandoned an election promise to create a $400 a year rebate for renters. Instead, the budget increases subsidies for low-income renters by as much as $800 a year for low-income families and $930 for low-income seniors.
Other measures include additional resources to target tax evasion and fraud, end hidden ownership through bare trusts, and track pre-sale condo flipping.
The government is also killing a loan program for first-time buyers that the Liberals introduced. The program provided loans of up to $37,500 to help with down payments, but it had little pickup. From January to September last year, 1,395 loans were paid or approved, with about a third of those buyers getting condos or townhouses in Metro Vancouver.
Economy and taxes
The government is projecting relatively small surpluses for the next three years, with a $219-million surplus for 2018-2019 and surpluses of about $280-million for the next two years.
The economy is expected to continue growing, with GDP growth projected at about 2 per cent over the next several years. The budget notes the province had strong growth in employment and housing starts in 2017, although housing starts are expected to decrease by nearly 27 per cent this year, compared with last year. The unemployment rate last year was 5.1 per cent.
There are no major changes to personal income or corporate tax rates beyond what the NDP announced last September: a new tax bracket for people earning more than $150,000 a year and an increase in the corporate income tax rate to 12 per cent from 11.
The province is introducing a new health tax on employers, which will bring in $1.9-billion a year by 2019-2020 as the province eliminates its health-care premiums.
There is additional revenue from a new tax on short-term rental services such as Airbnb, and an increase to tobacco taxes. As the province prepares for the legalization of recreational marijuana this year, the government is already projecting revenues from its share of a federal excise tax. Ottawa has agree to give the provinces 75 per cent, which B.C. expects to add up to $50-million for the coming year and $75-million in subsequent years.
The province's carbon tax will continue to increase by $5 a tonne per year until it reaches the federal target of $50 by 2022.
During last year's election campaign, the New Democrats made $10-a-day childcare a central part of its platform. But the government appears to have backed away from the proposal, instead outlining a system to concentrate funding in programs for low-income parents. The $10 figure replaced with a "universal system."
Over the next three years, the government plans to phase in subsidies for parents who place children in licensed daycare services. The subsidies will be worth as much as $1,250 a month for parents of infants in families earning less than $45,000 a year, decreasing as children age and as family income grows. Families earning more than $111,000 a year will not qualify.
At the same time, the government plans to reduce fees at licensed childcare providers by as much as $350 a month for infant and toddler care. As well, the budget outlines a plan to create 22,000 new licensed childcare spaces.
The budget predicts 27,000 families will pay little or nothing for childcare.
To pay for the program, the government is relying in part on an agreement expected, but not yet signed, with Ottawa called the Early Learning and Child Care Agreement. The deal is worth $153-million, although an announcement planned for earlier this month was cancelled. The cancellation came amid a growing dispute over Kinder Morgan's Trans Mountain pipeline project, although both levels of government blamed a scheduling conflict.
The province's public auto insurer has been in financial crisis, with losses in the current year projected to reach $1.3-billion, as premiums have failed to keep pace with claims.
The losses at the Insurance Corp. of B.C. (ICBC) are having an immediate impact because the government covers them through its operating budget.
The government recently introduced reforms designed to bring claims costs under control, notably capping pain and suffering payouts and moving minor claims disputes out of courts and into a tribunal system. The government expects those changes to reverse ICBC's financial trajectory over the next several years, with ICBC projecting a net loss of almost $700-million for 2018-2019, a comparably small loss of $21-million in 2019-2020 and a surplus the next year.
The government is not saying how drivers' premiums could change, although the New Democrats have committed to keeping increases as low as possible.
British Columbia is currently the only province that charges residents directly for health care through Medical Services Plan premiums, or MSP. Premiums were $900 last year and $450 this year, following a cut first planned by the previous BC Liberal government. The NDP government plans to eliminate the premiums entirely by 2020.
To make up for those premiums, the province is introducing a health-care payroll tax on employers starting Jan. 1, 2019, that will eventually bring in $1.9-billion a year. The rate for large companies will be 1.95 per cent. Small companies with payrolls of less than $500,000 will be exempt, while companies with payrolls of between $500,000 and $1.5-million will pay a reduced rate.
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