FIRST READING: The unintended consequences of the capital gains hike are starting to pile up
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Doctors are now warning it will accelerate Canada's acute shortage of primary care physicians Get the latest from Tristin Hopper straight to your inbox Published Apr 25, 2024 • Last updated Apr 25, 2024 • 4 minute read First Reading is a daily newsletter keeping you posted on the travails of Canadian politicos, all curated by the National Post's own Tristin Hopper. To get an early version sent directly to your inbox, sign up here. Article content When Finance Minister Chrystia Freeland first introduced a hike to Canada's capital gains tax, she promised that the measure would only affect an infinitesimally small proportion of wealthy Canadians. Advertisement 2 This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS Enjoy the latest local, national and international news. SUBSCRIBE FOR MORE ARTICLES Enjoy the latest local, national and international news. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Article content "Only 0.13 per cent of Canadians — with an average annual income of $1.4 million — will pay more on their capital gains," she said in her April 16 budget speech. But just a week later, the tax is yielding a raft of unintended consequences much larger than a few millionaires seeing a hit to their take-home pay. More than 3,500 entrepreneurs and tech managers have now signed their names to a petition forecasting that the change will push investment out of Canada and to the United States and crater Canadian productivity. Critics of the tax hike include the founder and management of Shopify, Canada's largest tech company. But perhaps most dramatically, Canadian doctors are warning that tax will further exacerbate the country's critical shortage of general practitioners. A Tuesday statement by the Canadian Medical Association (CMA) said many family doctors operate as corporations, and that the hike cuts into retirement plans that were disproportionately funded by capital gains. "The risk of already over-stretched physicians leaving the profession or reducing their hours in response to heightened taxation is real," it read. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Article content Advertisement 3 This advertisement has not loaded yet, but your article continues below. Article content Advertisement 4 This advertisement has not loaded yet, but your article continues below. Article content An estimated 6.5 million Canadians already lack access to primary care. And even before the hike to the capital gains tax and its potential reduction on working physicians, this figure was projected to spike to 10 million as early as 2027. One of the main reasons is that family doctors operate at razor-thin profit margins as a result of rigid compensation guidelines in Canada's health-care system. In Ontario, for instance, general practitioners are paid a set rate of $37.95 per patient visit, regardless of the complexity of the appointment. Michael Verbora, an assistant clinical professor at McMaster University, posted figures last week showing that the per-visit fee has risen just $1.10 since 2020, even as inflation rose by a compounded 15 per cent. Assuming 35 per cent overhead, that represents a 19 per cent decrease in take-home pay. "This is why you can't find a family doctor and why practices are closing. No business can survive losing 20 per cent income in 4 years," he wrote. What about the previous decade? 11% loss. Put it all together and family practice funding has decreased 34% in 20 years. So the clinics the public visits operated by physicians in the last two decades have been trying to make things work despite massive underfunding. pic.twitter.com/NRuMvVo9NJ Advertisement 5 This advertisement has not loaded yet, but your article continues below. Article content But even if family doctors have been consistently earning less than salaried colleagues working in hospitals, their financials were helped by the fact that they could incorporate and thus evade the top-level tax brackets they would pay if they simply reported their revenue as income. The CMA's warning was that a hike to the capital gains tax will disproportionately impact family doctors who have been reinvesting excess earnings into their corporation, usually with an eye towards saving for retirement. "It is completely unfair, late-in-the-game taxation for those physicians who did follow the rules of the day and save for their retirement inside of our professional corporations," CMA president Kathleen Ross told CTV News. The prospect of family doctors closing down en masse was put directly to Liberal Minister for Small Business Rechie Valdez in an appearance on CBC's Power and Politics. "We recognize that, but one of the things that we will continue to do is encourage foreign credential recognition … we're encouraging bringing talent from other countries," Valdez said. Advertisement 6 This advertisement has not loaded yet, but your article continues below. Article content Advertisement 7 This advertisement has not loaded yet, but your article continues below. Article content When Prime Minister Justin Trudeau was asked whether he would consider an exemption for doctors, he replied "we just don't think it's right that a student or an electrician or a teacher be paying taxes on 100 per cent of their income while others have the opportunity to use accountants and pay taxes on only 50 per cent." Parliamentary Budget Officer Yves Giroux — a perennial critic of Trudeau government fiscal policy — was among the first to publicly warn that Freeland's promise of a limited impact for the capital gains hike probably wouldn't hold. On Friday, Giroux told CTV that despite official pledges, the policy would likely spawn "collateral damage." Most provinces release annual lists of their most popular baby names, but Alberta makes a particularly big deal out of it, if only because their list is consistently the most unusual. Their 2023 name stats just dropped, revealing that Alberta is now home to two babies named God, and one Goy - a Yiddish term for a non-Jewish person. It's been a while since we mentioned the Green Party of Canada in this newsletter. Well, today their deputy leader, Rainbow Eyes, was sentenced to 60 days in jail for criminal contempt charges stemming from an extended illegal blockade of a B.C. logging site (that would be the same blockade that was repeatedly denounced by the local Pacheedaht First Nation as an encampment of "third party activists" that was not welcome on their traditional territory). Green Party Leader Elizabeth May said in a statement that Rainbow Eyes was "braver than all of us." Recommended from Editorial 'Good luck with that': Trudeau to Sask premier over carbon tax fight Carson Jerema: Toronto Star, CBC debase themselves with Poilievre hit job Get all of these insights and more into your inbox by signing up for the First Reading newsletter here. 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If the Liberals were hoping to restore their plummeting popularity with Budget 2024, the exact opposite appears to have happened. A post-budget poll by the Angus Reid Institute found the Conservatives with a 20 point over the Liberals - and a one point lead over the Liberals and NDP combined. According to one model, this would result in a 229 seat (out of 343) Conservative majority, with the Bloc Québécois in opposition (and the Liberals in fourth place). Photo by Angus Reid Institute