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As you could tell from the editorial, I still think the capital gains increase is a hot topic. After all, they only gave us the details a week ago or so. And then the date, June 25th, when everything changes, the inclusion rate,
But one of the things I've been distressed about is how little attention the impact on the medical communities it's had. It's going to have a significant impact. That's why the Ontario Medical Association warned five seconds into this, Canadian Medical Association. And I'm going to bring on Dr. Kevin MacLeod. He's an internal medicine specialist. Kevin, first of all, thank you for taking the time.
And I want to just bring people up to speed and make them aware of the impact. And there's several other things I'll get to, but we're just going to talk about that sort of thing that, you know, it's not only a love to do medical care and a love to treat patients, but there's a practical reality of it's my lifestyle, it's my business, et cetera. So let's start with this. Tell me the first reaction when you heard that they were going to change the inclusion rate, you know, up to 66%, in other words, raise the capital gains taxes.
Well, Mike, thanks for having me on. I mean, there's a few things with it, right? I mean, my first thought was, you know, this is actually going to affect patient care. And bear with me with explaining this. But, you know, if...
There was sort of this grand bargain made years ago, you know, more than 20 years ago that government came to physicians and said, we're not going to give you a pension, but you guys can incorporate. And, you know, you save some money in that corporation and then you pay that money out in retirement. Right. So you save within your corporation. But in exchange for that, taxpayers aren't on the hook for a pension for you.
And so now that the rules have changed at the 11th hour for a lot of people and they're going to be taxed at a much higher rate on what they've saved. And, you know, you hear governments say, well, there's a $250,000 threshold. That's just not accurate. Right. I mean, that's only accurate for individuals. It's not for physicians who are incorporated or other small businesses who are incorporated.
So they're going to pay the higher rate right from the get go. So, you know, in effect, some of their pension savings have been now wiped out and they're going to have to earn more. And I really think that has an impact on patient care because I've seen it as our tax rates have gone up. What do physicians do? They say, well, I've got to maintain a certain income. So, you know, if my fees that I get paid from the government are fixed, I either work more
or I start doing private care, right? So you see the number of physicians who will do Botox on Tuesday, Thursday afternoons, or, you know, there isn't an incentive to look after the complicated medical patient. There's a incentive to, okay, well, you know, if I got to pay 10% more tax and I got to do, I've got to do some other work that, you know, brings in that income to maintain that sort of level, if that makes sense. And that really impacts patients.
Well, the other point that you've made that, again, I think you have to work in it to appreciate, as you say, the incentive is not to treat people who are complicated cases. They may have several things wrong with them, you know, at the same time. So the incentive, especially, again, people should understand if you're seeing your family doctor, there's sort of a fee schedule.
you know, there, and there's an appointment time, a 15 minute appointment time. Well, you know, you're going to get paid the same, whether you treat four in an hour or one in that hour. So I think that's an important thing for the public to be aware of.
Yeah, I mean, you're sort of right with that. I mean, you get a set fee. So I'm not a family dog, but you know, the family dogs get $33 or something to see you as a patient if you go into their office. So, you know, if business costs have gone up, if property taxes have gone up, if rent's gone up, if your, you know, your marginal tax rate has gone from 42 to 53 and a half percent, if your capital gains tax has gone up,
But your fee hasn't really kept up with any of that or inflation. Well, then what do you have to do? You've got to see more people an hour because you're paid per patient. So instead of four people an hour, you're trying to cram in six or seven, right? You're going to be able to pay your staff like you run in a business, right? You've got to be able to pay the nurse and other things out of that.
So your take-home pay goes down, but your throughput's going up and that decreases quality of care. You know, but you're not really left with another option. You can't see two people an hour and take the time because you can't run a business at 66 bucks an hour. You're not,
going to pay your secretary, let alone the property tax and the rent and everything else, right? I mean, your hourly costs are in certainly in the lower mainline, at least 120, 130 bucks an hour. You got to see four patients an hour to break even.
and let me add, you know, back, you just slightly alluded to it, but, you know, then we had, we have to remember that in 2016, the government raised the top tax bracket, you know, significantly, you know, it was a new tax bracket from 29% to 33%. Well, if I'm a medical specialist,
you know, and by the way, another thing that people don't understand is your skills are in demand. Your skills are in competition. And I, again, anecdotal, I know, but I, I happen to know a couple of people who moved down South because they thought the opportunity is better. They weren't suffering with the same weight lifts. They wanted to practice their orthopedic surgery in one case, you know, that kind of thing. So I can't see that raising the top income tax bracket, uh,
was helpful either to attract, you know, specialists or, or anyone else for that matter. Well, it wasn't right. So if, if,
You know, and I don't think there's been enough attention paid to how our tax system impacts our healthcare system. I mean, everything's interrelated in this world, right? So, you know, if I earn $1,000 in a day, I'm paying about 40% of that in overhead to cover my staff and rent. So there's $600. But if I'm losing 53.5% of that in income tax,
Right. I mean, I'm keeping like three hundred dollars of that. Right. And eventually time becomes more valuable than money. You know, you sort of step back and say, well, why? I don't I don't want to work this Friday. Like I want to spend time with my kids. And, you know, so that the incentive to work has really diminished. And you see this. I mean, everybody will give you anecdotal stories of.
doing some part-time hours or maybe reducing their hours, having more of a focus on that work-life balance. And that's good, right? But the pendulum sort of swings a little bit too far the other way if you remove the incentive to hard work. And that's not unique to doctors. I mean, that will be the same for anybody.
Right. I mean, if somebody knows that, that, you know, upwards of 70%, when you factor an overhead of your, of your paychecks kind of disappear, well, you know, you kind of say, forget it. I'm not working this other weekend. And, and I see this a lot. I mean, I, I,
do some administrative stuff for Vancouver Coastal. And it's really tough to get people to do night shifts and weekends and other things, right? And ultimately, it screws the taxpayer because, you know, as you, as the incentive goes down, well, then the physicians, when there's scarcity of them, are in a position to go and say, hey, you know, I want to be paid more.
And who does that impact? I mean, that, you know, taxes go up because you're paying these paying guys like me more and more to try to incentivize us. But then you're taking it back on the other side and in taxes.
It makes so much sense. I mean, everyone's experienced some decisions based on work-life balance. And it doesn't actually remember, you know, doesn't be determined directly by what income level. I mean, somebody may say, I want to go to that rock concert. I want to go to that sporting event. Yeah, I could get some hours at work, but I'm not going to take them. Let alone, as you say, as you go up and you realize how much of that next patient is going to go to government and
you know, depending on the province, but 54% plus the operations, you know, go on to that. And it's, I think it's very understandable that people say, you know, my kids are growing. I want to be part of that. I don't want to work on a Friday when they get a pro DJ, you know, all of those things. But, but the point is it impacts medical care. It impacts the availability for people to get medical treatment. And, and again, I'm going to come back to this to finish, but it's,
it's literally, you know, when I see the change to the capital gains without any
understanding that it impacted so many, you know, like 60% of, you know, family doctors, at least, you know, who had incorporated under the guise of the encouragement from government. I think that's another key component. They encouraged in order to avoid putting you part of a permanent pension plan. So they encourage you to do that and then change the rules. And as you say, yeah, the people I've heard from are four years away, actually from retirement. Well, they moved it up.
Right. And Mike, what's going to happen when physicians who, you know, governments have completely under-trained and underfunded the university positions, right? So you're, you know, there's scarcity of a product or service. And, you know, so they're in a good bargaining position and they come back to government and say, well, you've changed the rules, we want a pension.
You know, that's going to cost taxpayers billions of dollars. Right. And so the federal government, in effect, has downloaded a cost onto the provinces. And I think that's not given enough attention either. Right. I mean, you know, this is going to ultimately cost patients and taxpayers money. I mean, I'm not sure you're going to bring in a lot of revenue with this.
Yeah. Well, in fact, the revenue projections, I think just for two years out are like $360 million. You know, I mean, it's, they think it's all front loaded as people scramble to sell stuff before that January or sorry, rather the June 25 deadline. So that's what their projections, but man, people better have a long look on a broader scale. Is it worth it? But in this particular case, you know, people tell me they care about our healthcare system. Well, if you care, you at least have to address this issue. You have to be aware of this issue.
And as I say, it's enough problems. And I worry, Kevin, last word though, I worry this will be the last straw for a lot of people.
They've seen their working conditions more difficult. It's been more expensive. They've seen other changes like you can't sort of income split with your wife working in the office near as easily, things like that, the raising of the top personal tax. And I just wonder if this won't be a last straw for several people, let alone trying to attract somebody to come here. I think so. I think you're right with that. You'll see people move away. I mean, it's not going to be huge numbers, but it is going to have an impact, right? And
I mean, I'm a big believer in, hey, you earn more, you pay more. That's fair in my view, right? You know, not everybody's given the same deck of cards in life. But, you know, there has to be some limits with that. Because if you take away the incentive to work, you ultimately weaken your economy. And you weaken your ability to have public services, right? I mean, you need a robust economy to be able to provide these public services. And
And by doing things like this, you take away that incentive to invest. You take away that incentive to take risk. And that's really like the countries where people take risk tend to do better economically, right? The countries where it's all controlled and everybody's the same, you know, they don't tend to do as well, right, over the long term. That's well put. Dr. Kevin MacLeod, thank you for finding time for us. Appreciate it very much. Mike, anytime. Thank you.
