“Medical associations have correctly diagnosed that physicians are burnt out and in need of support. But their opposition to these tax changes is a blunt one. It is potentially tone deaf not only to some of their own members, but to Canadians,” writes Dr. Danyaal Raza.
“Medical associations have correctly diagnosed that physicians are burnt out and in need of support. But their opposition to these tax changes is a blunt one. It is potentially tone deaf not only to some of their own members, but to Canadians,” writes Dr. Danyaal Raza.
Doctors are getting burnt out. Nearly 40 per cent of family doctors are considering retiring in the next five years, while early career physicians are most likely to experience burnout.
Into this storm, a new controversy has emerged. Of all things, over a federal budget proposal to change the taxation of capital gains. The Canadian Medical Association has said, “[p]hysicians now find themselves confronted with the prospect of increased financial strain.” The Ontario Medical Association advises, “[t]his disincentive could force existing physicians out of practice.”
Is such alarm justified? Will this tax change be the straw that breaks the health system’s back? Not likely.
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A capital gain is the difference between the price you pay for an asset and the price you sell. Unlike income from work, all of which is eligible for taxation, only half of a capital gain is.
The recent budget increases this to two-thirds. For some physicians, this only applies if the capital gain is more than $250,000. For others, the 60 per cent who are incorporated for tax reduction benefits, there is no such exemption. For everyone, there is an included lifetime tax exemption of $1.25 million.
If the CMA and OMA’s public statements are to be taken at face value, then they are claiming that increasing the tax rate on profits from assets like second homes and non-registered investments will threaten the viability and sustainability of the health care system. Specifically, by clamping down on the ways that some doctors save for retirement or manage their offices.
However, this does not apply uniformly to all doctors.
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The physicians most likely to be affected are from the highest earning specialties. While it is true that some non-family physician specialists also operate and oversee their own offices, these specialists are predominantly hospital based and free of overhead responsibilities like rent, hydro and staffing. Not so for most family doctors, who are more likely to report burnout.
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According to the Canadian Institute of Health Information, medical and surgical specialists earn $382,00 and $507,000 respectively. For family physicians, that figure is $299,000 before overhead.
More than 60 per cent of people in Canada, like most doctors, also lack a job-based pension. This new capital gains inclusion rate is expected to primarily affect Canadians with an average annual income of $1.4 million, doctor or not.
Medical associations have correctly diagnosed that physicians are burnt out and in need of support. But their opposition to these tax changes is a blunt one. It is potentially tone deaf not only to some of their own members, but to Canadians.
In particular, to those having difficulty making ends-meet, for whom expected revenues will fund programs and many health care reforms medical associations themselves have been calling for.
To be fair, this budget is far from perfect. A government adviser resigned over reforms to the Disability Tax Credit that he called “a colossal failure.” Underwhelming financial commitments to Pharmacare leave it vulnerable to attack.
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Medical associations are influential and important stakeholders. Their leadership is needed, but not in opposition to these tax reforms.
Instead their voices should be raised for expanded health coverage, parental leave, and pension plans for all Canadians. How about medical student debt?
Even physician payment reform is on the table, something B.C. has done to dramatically increase the supply of family doctors. And of course, medical associations can and should continue their work on larger health system reform.
This would be a most-welcome change.
Dr. Danyaal Raza is a family physician with St. Michael’s Hospital, Unity Health Toronto and an assistant professor with the Department of Family & Community Medicine at the University of Toronto.
