Small business is the backbone of B.C.’s economy — a fact that governments love to acknowledge when it’s convenient, and forget when it’s not convenient.
It apparently wasn’t convenient in the creation of the province’s latest budget, which removed Medical Services Plan premiums for British Columbians and replaced them with a tax on employers with payrolls over $500,000 a year. The tax will make up $1.9 billion of the $2.6 billion a year the government will lose by abolishing premiums.
Many businesses already paid MSP premiums for their employees, so the new tax will be a wash. But those that didn’t pay the premiums get slapped with a new cost that could hurt when margins are tight.
The pain will likely be worst for businesses such as restaurants and bars, which have lots of staff and low margins. The $500,000 threshold will catch many such enterprises.
Although each business might be small, taken together, they are huge. Small businesses employ 44 per cent of B.C.’s 2.38 million workers.
Forty-seven per cent of the province’s 404,000 businesses have fewer than 50 employees; another 51 per cent are self-employed individuals. Only two per cent of businesses in B.C. have more than 50 employees.
A tax that cuts into already thin profits leaves employers of those workers with a dilemma: Accept smaller returns, reduce staff or pass the cost to customers. None of those is appealing, and in competitive industries, passing the cost to customers might not be a realistic option.
The government created a tax based on the size of a company’s payroll, not on its bottom line or its ability to pay.
That will hurt businesses our economy needs.
