A 2022 survey of 9,000 Canadians found that more than one in five adults do not have a family doctor. The share of the population without a regular place of primary medical care ranges from a low of 13 per cent in Ontario to 27 per cent in British Columbia to a whopping 31 per cent in Atlantic Canada and Quebec.
That means the long-term health forecast for a whole lot of Canadians is: worse health. Early detection of medical problems – cancer, high blood pressure, whatever – can’t happen without regular access to a family medicine. It’s like smoke detection without smoke detectors. You sleep until the bed’s on fire.
Which explains why not having a doctor is top of mind for millions of doctorless Canadians, and the fear of losing your doctor is a gnawing anxiety for everyone else.
Which brings me, inevitably, to capital-gains taxes.
According to the Canadian Medical Association, if you think it’s hard to get a doctor now, just wait until the Trudeau government raises the capital-gains inclusion rate to 67 per cent from 50 per cent.
An April 23 news release from the doctors’ lobby group says it is concerned that a higher capital-gains tax “will have adverse effects on physician recruitment and retention,” and “could jeopardize ongoing efforts across Canada to recruit and retain a high-quality health work force.”
The CMA says that “many community-based physicians have incorporated their practices as a means of efficiently delivering health services to Canadians,” and the tax advantages allow for “saving for retirement, since most do not have access to employer retirement plans.”
“Increasing the capital gains inclusion rate for corporations will create another barrier to retaining and recruiting physicians in a time when our health system and the providers within it are already under constant strain.”
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“The risk of already over-stretched physicians leaving the profession or reducing their hours in response to heightened taxation is real.”
That’s an interesting diagnosis. Allow me to offer a second opinion.
I’ll start with something positive: Whoever wrote this news release deserves a gold medal for political PR. Implying that if doctors have to pay somewhat higher taxes you may no longer have a doctor is a stroke of marketing genius.
Because capital-gains taxes are complicated, many people may be under the impression that the Trudeau government is planning is to raise the tax rate to 67 per cent. So if you have a capital gain, two-thirds will go to the taxman.
That is not what’s on the table. Capital gains are currently subject to a 50 per cent inclusion rate. It means only 50 per cent of a capital gain is taxable – and the other 50 per cent attracts no income tax. In other words, capital gains are currently subject to a tax rate half that of regular income.
A person in Ontario who earns of a salary of $300,000 a year (putting them in the top income-tax bracket) and gets a $1 raise will lose 53.5 cents of that extra dollar to federal and provincial income tax. But if that extra dollar was capital gains, they’d lose half as much – less than 27 cents.
Employment income, such as a salary, is generally subject to a 100-per-cent inclusion rate. Ditto money from an RRSP. Ditto a retirement pension.
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Capital gains get preferential tax treatment. The Trudeau government is proposing to make that treatment less preferential, by increasing the inclusion rate to 67 per cent. The government is also proposing to soften the blow – for many taxpayers, the higher rate will only kick in after $250,000 of annual gains, and some small businesses will get a $1.25-million lifetime exemption, up from $1-million.
But the basic story is that Ottawa aims to tax capital gains at a higher rate – but still a third lower than the 100 per cent inclusion rate the doctor’s office receptionist pays on her salary.
And if physicians had those “employer pension plans” of the CMA press release? They’d be facing a 100 per cent inclusion rate, just like everyone else.
But that’s not my main beef with the insinuation that higher capital-gains taxes equals fewer doctors.
Reasonable people can debate what is the appropriate capital-gains tax rate, and the economic pros and cons of higher or lower taxes on certain investments. What reasonable people can’t disagree about is why Canada has a doctor shortage. It’s not about taxes.
Let’s say we eliminated all taxes on physician income. No capital-gains tax, no income tax. Would we suddenly have many more doctors? No.
Canada has a doctor shortage because governments and licensing authorities have long restricted the number of seats in medical schools, the number of residency spots for med school graduates, and the number of foreign-trained doctors licensed to practise – including thousands of Canadians trained overseas, and who want to come home.
In normal supply-demand models, raising supply lowers prices and raises the customer’s bargaining power. Our governments – the customer in a public-health care system – spent decades practising the opposite. The main concern was the high cost of “too many” doctors.
Behold the result.
Tony Keller