Thank you, Mr. Chair. Thank you for this opportunity to present to the committee.
I'm a health policy analyst and health researcher. I have listened to two previous committee sessions and will try to avoid repeating arguments ably made before.
I will focus on how the capital gains inclusion rate changes will and will not affect self-employed incorporated professionals, such as doctors and independent consultants like me. The changes will cost us some money, as they should. I will explain why and address some of the claims about the adverse effects of the changes.
First, tax regimes are grounded in, and should reflect, explicit values. The changes are designed to raise revenues, and, importantly, to make the tax system fairer. They will modestly reduce income and wealth disparities by taking more money from higher-income people. The math is simple. If you oppose the changes, you oppose reducing income disparities, at least by this measure. I would emphasize how important it is for participants in these policy debates to disclose their values transparently.
Second, all of us should avoid overstating the alleged impact of any single and relatively modest tax policy change. If any such measure could on its own either exacerbate or solve any of Canada's inequality, housing, productivity, infrastructure, innovation or other problems, there would be documented evidence by now. The tax code remains largely intact and still privileges people like me.
Capital gains remain more lightly taxed than earned income. For professionals, these gains accrue mainly from conventional investments. Few of us are venture capitalists rolling the dice on game-changing innovations. Our incentives are unchanged, and our actual tax rates will remain considerably lower than nominal rates. The system remains less progressive, in fact, than it is on paper.
Third, the measure, though positive, will not do much to address Canada's serious wealth concentration problem. The tax system still makes it easier for me to grow my wealth than an ordinary working person. I can keep some profits in my company indefinitely and pay only 10% to 12% off the top, depending on the province. I can invest the remainder, and until these assets are sold, their value grows untaxed. I can smooth out income over a number of years to reduce my annual tax bill. Some of my income will still be taxed lower than the income of a wage earner with no such options and predictably fewer capital gains.
Fourth, it has been argued that retained earnings in corporations are the retirement plans for professionals who don't have an employer or state-funded pension. Any prudent doctor or consultant like me has a powerful incentive to take enough money out of the company in income to maximize their annual RRSP contribution, currently about $32,000. The RRSP grows tax free until money is withdrawn and also generates about a $15,000 annual income tax refund. It is likewise simple common sense to maximize annual TFSA contributions. With conservative rates of return, over 30 to 35 years, these funds grow to several million dollars.
Fifth, if it is determined that, say, family physician incomes are too low to attract and retain full-time practitioners, the solution is to give them more money. For example, the B.C. government gave them a 54% increase as part of its November 2022 contract with Doctors of B.C. The tax system is a clumsy instrument for addressing a very particular problem.
Sixth, and perhaps most importantly, a fair tax system that eliminates some advantages for people like me and confers new benefits on lower-income people will do more to improve the health of the population than billions of new dollars poured into health care. Put simply, health status is better in countries with less income and wealth inequality. More equitable tax policy is excellent health policy.
That is why I support the capital gains tax policy changes, but they should just be the beginning of other changes that create more security and opportunities for lower-income people to realize their potential, increase their productivity, accumulate wealth and improve their health.
Thank you.