The tax proposal introduced recently by the federal government has ignited debate across Canada and led to a serious misunderstanding of how physicians across the country are paid for the care that they provide. It is critical that Canadians understand the negative impact the increase to the capital gains inclusion rate will have on their access to health care.
Physicians enter the medical profession to care for people and have a positive impact on the lives of patients in the communities where they live and work. Our highly skilled physicians are focused on bettering the health of those who have put their trust in them.
Sadly, we’re not seeing enough medical residents pursuing family medicine these days. More than 6.5 million Canadians don’t have a family doctor. People across the country have – for years – endured long waitlists and delays in care, resulting in late or missed diagnoses that can alter the course of one’s life. There are myriad reasons why the health system is in the shape it’s in today, but lack of access to primary care is a significant factor.
In a concerning twist of irony, the current federal government — which to its credit has made major investments into the health systems over recent years — appears ready to make the problem even worse for Canadians.
The federal government’s proposed increase to the capital gains inclusion rate will punish physicians who provide vital community-based services, threatening health care access for patients. The financial burden of managing a medical practice, which often takes up more than 40 per cent of a family doctor’s income, combined with the thousands of hours of unpaid administrative work must be considered. The consequences of raising the inclusion rate on the first dollar of capital gains earned in medical corporations is another financial burden.
Why? Most community-based doctors incorporate our medical practices as a means of saving for parental or sick leaves, life events, and retirement. In fact, we were encouraged to do so by governments. We are not provided benefits and pensions unless we invest after-tax personal income. Our self-funded retirement, parental and sick leave funds are held in our incorporated medical practices. We are prohibited from increasing our fees to pass the cost of additional taxation onto patients, the way other businesses can, yet we pay corporate tax, income tax and capital gains tax. In addition, most medical professional corporations are not eligible for small business tax exemptions, and none are eligible for the $250,000 capital gains exemption offered to individuals.
It is highly likely the capital gains tax proposal introduced in the 2024 federal budget will compel family and community-based physicians who have poured their talents, time, smarts, and souls into their practices, to leave their practices or the profession to look for work elsewhere. This change could be the final blow to make the existing model no longer sustainable.
The government is billing the proposal as “generational fairness.” In reality, these changes will undermine the significant investment committed to health transfers and deny patients across all generations the care they will need.
An entire generation of physicians who have poured their life’s energy into providing significant health infrastructure while following recommended venues to shore up their retirement incomes will see a substantial clawback of those gains.
Young doctors currently finishing medical school with huge debt loads will inevitably change their professional calculus at a time when their generation is facing an accelerating cost of living. This is the first generation more financially disadvantaged than their parents. This is anything but “generational fairness.”
It's essential that medical professional corporations be exempted from the current capital gains proposal. Their business structure is unique and should not be treated as equivalent to all other corporate structures. At the very least, physicians should be able to share with the corporations they operate the $250,000 capital gains exemption threshold that is offered to individuals.
Physicians provide patients the care they need throughout the significant milestones of their lives and fund the necessary infrastructure out of our income, all in the name of the public good. By choosing a path of unfair taxation, the federal government risks further destabilizing health systems and denying the care that Canadians need and deserve. This proposal doesn’t seem fair to anyone.
Dr. Joss Reimer and Dr. Kathleen Ross are the presidents of the Canadian Medical Association.
Images courtesy of the CMA