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British Columbia’s new health tax will cost the average worker nearly $3,000 a year in foregone wages, according to a new study released by the Fraser Institute.

The health tax, which began gradually phasing out B.C.’s medical services plan premiums in January 2019, applies to employers with annual payrolls of $500,000 or more. In a news release from July 2018, the government said the transition to the new tax would result in savings of more than $50 million annually due to the costs of administering the current premiums.

The study, by Steven Globerman, professor emeritus at Western Washington University and senior fellow at the Fraser Institute, found employees will bear the burden of the new tax through lower annual wages, reduced work hours and fewer employment opportunities.

Read: B.C. to introduce employer health tax, remove health premiums

“While the government’s new tax targets employers, it’s actually employees who will suffer with lower wages and other negative consequences,” said Globerman in a press release. “When governments raise taxes on businesses, including small businesses, employers typically react by reducing their demand for workers, which in turn affects wages and the number of hours of work available. While B.C. workers no longer directly see the MSP, they will still bear the burden of the new tax, only in a more opaque way.”

According to the study, the B.C. government’s main justification for replacing the medical services plan with the employer health tax is that it would eliminate the tax burden imposed on individuals and families, effectively shifting that tax burden to employers.

“However, a large number of empirical studies show that between two-thirds and 90 per cent of payroll taxes are ultimately passed through to employees, primarily in the form of lower wages, but also as reduced employment,” said the report. “One might therefore expect workers in British Columbia to bear a substantial portion of the EHT, since the latter is effectively a payroll tax.”

Read: Employer-paid benefits to be subject to new B.C. health tax

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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