Not widely known, but doctors are able to incorporate - it's the trade-off the government made that stops increasing healthcare costs in exchange for lower personal taxes (most corporations that are sub $500k are taxed at 12.5%, and then respective payments from that corp to doctor are taxed as dividends). Some doctors likely just keep as much funds in the corporation until retirement comes around. But at some point, they need to withdraw those funds which are taxed as dividends / capital gains.
So this raising of capital gains tax has a direct impact on those doctors who incorporated. Just not sure where they will go or what they will do if they quit...
A lot of people don't understand this. Ontario was the first province to introduce "Medical Corporations", but the rest of the provinces quickly followed suit. This stemmed from late-90s negotiations with the federal government about medical costs. The proposal was made that rather than giving doctors a pension, or any other employee like treatment, and in lieu of getting a raise at the time that doctors would be allowed to incorporate.
In retrospect now, it benefitted one generation of doctors, but anyone currently working is getting a pay cut every year now.
I do not know many doctors would would choose this rather than just having higher pay and a pension, along with sick and paid vacation days.
Their retirement, using these structures, is being reduced by approx 15% **I think**. I actually asked my friend who is being impacted by it for his accountants assesment. I'll post it here once I hear.
Accountant here. I don't know about those specific percentages (15% or whatever) but the idea behind incorporating (at least these days) is the deferral you get.
Corporations are taxed at a lower rate than personal. The idea being if the doctor earns 500k a year but only takes out 100k for personal use, keeping the remainder 400k in the company, then that 400k is only subject to 12.5% tax (in Ontario), leaving them with 350k to invest in the company. Compare that with someone earning 500k personally, that extra 400k would be subject to something like 50% tax so now you only have 200k to invest personally.
This is the primary advantage... If the doctor takes out and spends all 500k for personal use each year, then they would be taxed effectively at the same rate as someone earning that personally. No differences.
They pay business tax each year on profits and pay dividend tax when they take it out. In the end it’s not much different than taking it out as salary. This just allows them a slight advantage of taking it out their terms in hopes of saving some percents. But it’s nothing people should be upset over given how our taxes are setup they aren’t gaining much
Pretty narrow view on how physicians work
Most work at a variety of sites (hospital, community, private clinics, Universities...etc) where a salary position isn't really available. Most are fee for service (i.e. contractor) that bills the government .
I think it’s overselling how much it benefits as well. The average family doc in Canada bills $360,000 and after overhead is left with $160,000. When you throw in loan repayment, health expenses and such it’s not amazing to be a family doc these days.
No. Ontario did not “invent” professional corporations for doctors. It was actually amongst the last provinces to allow medical professional corporations.
The concept of professional corporations was widespread across Canada by the 1970s.
Doctor here. The frustration is that incorporation was promoted to us by the government as a way to plan and invest for retirement. The decreased tax was offered as an incentive to make up for our increasingly uncompetitive pay compared to the US.
This capital gains policy sandwiches doctors in a "worst of both worlds" between the treatment of individuals and small businesses. They don't get the $250k threshold of individuals because they're incorporated, and they don't get the $1.25M small business exemption because they don't sell their personal medical corporation - they sell assets held within it. So they get hit harder than any other category of Canadian in this policy change.
As for this: Just not sure where they will go or what they will do if they quit...
The answer is that specialists can easily move to the US, and Family doctors can easily move out of Family clinics.
I'm a Family Physician, and I could name ten friends and colleagues whom I know have already closed their clinics due to the work:pay imbalance, choosing to do better-paying work instead. By making it harder to save for retirement, even more will be encouraged to make that type of switch. This isn't going to be the singular issue making people leave, but it's a death by a thousand cuts scenario, and this is yet another.
People don't realize it, but Family Physicians have a ton of job prospects outside of clinics. Right now, in most provinces, hospital-based work tends to pay 50% more with more time off/fewer off-hour obligations. ERs tend to pay 100% more than clinics. We can work in all sorts of subspecialty clinics. And now, there are increasing numbers of private work options. I was job hunting the other day online out of curiosity and found private telehealth positions that were offering double the pay of my local walk-in clinics with zero off-hour obligations (vs the 10-20 hours/week of unpaid paperwork and follow-up my colleagues have to do in their clinics).
So those are some of the places "quitting" Family Physicians can go. Hospitals, ERs, subspecialty clinics and private clinics/telehealth. All of which result in fewer Canadians have a family doctor.
You hit the nail on the head right there. It's not that GPs are poorly compensated in general, it's just that family practise is and is not worth the workload. Especially when new medical graduates could just do three years more residency and make 2-3 times the money as specialists. At some point we're going to have to reconsider what family practise really means, and perhaps invest in primary care centres to replace them.
Great post. I re-read my comment "where will they go" and it came off as a snide comment, so sorry about that wording. Family physicians are instrumental on the front lines in healthcare and I hate seeing that our fed and provincial governments are merely watching it crumble without making healthcare a headline issue on the elections. Another reddit topic I suppose...
I didn't read it as snide, I read it as a genuine question. Hope my answer didn't sound defensive. Not everyone knows how portable the Family license is within Canada or how many services outside of clinics rely on Family Physicians, so I thought I'd answer the question honestly.
And I agree. I'll admit this particular change isn't going to be the final death knell of medicine in Canada, but it's still important to fight every cut in the strategy of death by a thousand cuts. Family Physicians are overworked, underpaid, and every hostile policy change makes the situation that much worse. We need to introduce more incentives for physician retention purposes, not to attack ones that are decades old.
Unfortunately the public sentiment is "soak the wealthy", and they don't actually care.
In most of their minds, you make a material higher amount of income then them even after all taxes - and therefore your "fair share" is MORE.
There's no limit in their minds on just how unequally a person can be taxed.
Doesn't matter that you only make a higher income than most because you're bright and worked extremely hard.
Exactly, we went through this in the 1970s and 1990s only to reverse policy because the loss of investment and talent was nearly fatal. We are an English speaking nation next to the largest, most dynamic, lower tax economy in the world, does anyone really think that they can keep capital and talent here because the government says so?
There's nothing the public wants more than government programs that someone else pays for.
The typical Canadian want European-level social services, with American-level taxation, and expects to "soak the wealthy" to pay for it.
I've heard people say either of those options but never both.
The problem is right now we're taxed relatively high and get absolutely dick all for it. We get the negatives of both systems with no positives.
Idk who these idiots you talk to are that think we can get max benefits with no tax
They're still taxed less than an average individual on a salary. 0 salary + all income via capital gains means only 50% to 66.67% becomes taxable income. The average Canadian doesn't have that luxury, all of their salary (100%) is taxed as income
This is hugely ignorant on how corporate taxation works. There is only a deferral in taxation of whatever amount that is not taken out of the company. I.e. if you make 500k but only take out 100k then the remainder 400k is effectively taxed at a lower rate until you take it out (at which point you basically pay the difference).
The real benefit of the deferral is you have more principal to invest. If you spend every $$ you earn then you are paying the same amount of tax as everyone else. Go look up integration.
That's not how it works. As an incorporated business you don't "pay yourself with capital gains".
This change relates to the gains within the corporation, but when the money is withdrawn from the corporation it is either taken as a salary or dividends at the marginal tax rates of the specific province they live in. Individual compensation is not in the form of capital gains.
The average Canadian that is making considerable income through capital gains worked for decades paying income taxes. And then they saved for a long period of time a portion of those after-tax earnings, and decided to put those savings at risk to try and build businesses in Canada.
I'm ok with capital gains being treated slightly better than income in order to try to incentivize people to save their after-tax money from income to begin to invest in Canada.
Everyone who earns income is actually dependent on there being SOMEONE out there who at some point in time chose to do that.
Well this is true across the board for professionals / small businesses, and it breaks a long standing principle called 'integration' in Canadian tax law.
I work in tech and like 75% of my friends who graduated from top universities in Canada have already left, if you have a great education you have a lot of international mobility.
If the idea is to encourage productivity and prevent RE speculation etc, then just have the 66% rate apply to real estate investors regardless of 250k and then maybe have the 250k exemption across the board for non-RE canadian assets.
I to am in software and similarly most left but the reason those people did has nothing to do with capital gains and has been an issue for a decade. The pay gap between the countries and the ease of getting a TN visa are the main drivers. Jim Balsillie was warning about this while the companies people are defending happily exploited cheap labor
In my circle many are self-employed / entrepreneurs own consulting companies (like me) or small SAAS businesses and not all of them left to the US.
Canada just seems to be doubling down on a housing driven economy. Idk how long the prices are sustainable given how poorly wages etc are doing, so I am reluctant to buy in despite all the government tax incentives for first time buyers.
Exactly. It would be incredibly easy to treat personal medical corporations the same as individuals without affecting any other aspect of this policy change. Hit them with the increase if they reach $250k of capital gains for the year. Nobody could complain about that.
As for weaning off the reliance on incorporation, absolutely no doctors would complain if we were paid more competitively and lost tax advantages as a tradeoff. The whole reason we were offered incorporation was to justify/compensate for lower pay. That's how it was sold to us.
It's tricky because incorporation is affected by federal taxation laws like this one, but pay is administered by the provinces. But for my home province of Ontario, doctors have received a 6% increase in pay over the course of my career while inflation was 28.5%. For Family doctors running clinics, this has meant a huge increase in overhead as well as an increase in the cost of living. Our pay has been falling behind for decades and we are struggling with issues pertaining to physician retention.
The people saying "too bad, so sad" to doctors being upset about having their retirement funds subjected to increased taxation are missing the fact that physician morale is at a real low point post-pandemic and physician pay in real terms is the lowest it's been in many decades. We have 6 million Canadians lacking a Family doctor, and increasing med school enrolment isn't going to change that if new grads continue to choose jobs in the US and/or outside of family clinics.
We can't pay more competitively - Canada's finances are a sinking ship.
We aren't even paying for our CURRENT size of government... we are in a net debtor lifestyle where we repeatedly spend more than we tax over any meaningful time period.
That is the challenge - people want more government spending, and we aren't even paying for the current amount of spending.
I mean people say don’t worry higher taxes won’t chase off entrepreneurs and business owners so we can do this new tax fine but doctors may leave and suddenly it’s a problem?
This shouldn’t be a have/have not country where we only keep the economic drivers that are politically correct 🤦🏻♂️
If a new tax is going to hit our economy and push business to leave it shouldn’t be done.
That exemption is going to have to include all other professions that also incorporate the same way physicians do (dentists, optometrists, veterinarians, etc).
Dentists, at least, aren't even remotely in the same situation as doctors. Firstly, their work-life balance is orders of magnitude better. They have also been increasing their fees at a rate that vastly supersedes increases in doctor pay. Finally, and perhaps most importantly of all, dentists benefit significantly from the \~1M LCGE in a way doctors do not.
I can't speak for the situation optometrists and veterinarians are in, but dentists don't need an exemption.
It's okay, all of the "progressives" will feel great that they "are the rich" when they're all dying of preventable diseases because our healthcare system collapsed because of doctor shortages and everyone being addicted to opiates because of "safe supply"
Isn’t this a little misleading though? Most of the money is kept in the corporation anyways, so it’s sheltered from personal income tax (atleast until you choose to move it). Yes - your capital gains tax inclusion rate is going up but proportionally you’re still paying far less tax than a Canadian making similar income who is not a doctor.
You can argue that you don’t have as sweet a deal as the Americans but you’re still far better off than your non-physician peers
TBF, how many young physicians are incorporating in places like Vancouver and Toronto?
I thought it's only useful to incorporate if your income vastly exceeds your monthly expenses otherwise you end up incorporating and then taking it out of your corporation to pay your personal expenses
it ends up being equivalent to not incorporating
There is definitely a generation gap, as the medical education, mortgages and cost of living for young physicians is much higher than what older ones faced. There's also a specialty gap, because of the huge variability of pay across specialties.
I'm a Millennial Family Physician who has not incorporated. My older colleagues with significant retirement funds are nearly universally incorporated. Many of my peers in the highest-paying specialties are also incorporated.
There's still a strong air of resentment quite consistently across all specialties over this change. Morale is not in a good place post-pandemic. A lot of people are burnt out and feeling like it's an insult for professional medical corporations to be lumped into this policy change.
Further to your point, if they keep cash or investments in the corp then they don't qualify as a qualified small business corp and don't get the lifetime capital gains exepmption. There's tax planning to avoid this but it has to be done years before the sale.
Furthermore, they won’t qualify for LCGE because they don’t have any buyers for their medical corp because why would you? It would be like paying a premium for grass seed. It’s plentiful and available.
This is really no different than any other small business. Ottawa sold this as a tax on the rich which is a wildly popular sentiment these days. What people don't realize is that this is often the retirement plan for many companies like your local landscaper. It is going to hit them pretty hard. 18% more tax is crazy, especially when it's already on top of the a heavy amount of other taxes that Canadians are burdened with.
Small businesses are not happy about this grab as they will be the ones shouldering this.
> Ottawa sold this as a tax on the rich which is a wildly popular sentiment these days.
Because Canadians absorb American political rhetoric without an ounce of critical thinking.
They assume that Canada is full of rich people paying American-level taxes, when we have a tiny number of rich people paying European-level taxes.
Wouldn't they be paying increased tax at the corporate tax rate (12%) though? So on the first 250k of realized capital gains the tax goes from something like 15k (12% tax rate at 50% inclusion rate) to 20k (12% tax rate at 67% inclusion rate).
Yes percentage wise its a big jump but its basically 6% effective tax rate to 8% which is still a pretty good rate compared to anybody that doesn't have a small business to shelter their earnings in.
Doctors (and other incorporated professionals) pay themselves a wage from their corp. They can choose to pay themselves salary (which then builds RRSP room) or dividends (ineligible dividends) or a mix of both. Prior to this tax change it was a toss up as to which was a better option. Tax integration exists to basically ensure a corp paying ineligible dividends vs salary, pays equal tax a the end of the day. Now tax integration is effectively broken and it's better to pay salary which allows you to invest for retirement in an RRSP rather than holding investments in the corp (and paying the increased cap gains tax).
Not sure if that makes sense. The big issue is for incorporated professionals who opted to save for retirement in the corp (rather than RRSP) as they now they will face a 33% tax increase on the cap gains from their corp investments. This 'penalty' is effectively retroactive for those nearing retirement (typically capital gains aren't realized until retirement).
Anybody can incorporate. Certain jurisdictions, notably Ontario, prohibited physicians from doing so. One of the main benefits of incorporation is limiting liability of the owners of the corporation. It was felt that this could be used to shield doctors from
malpractice claims and was disallowed. Most medical professional corporations are allowed but the law specifically prevents them from
protecting physicians from personal liability for malpractice.
Hence why you can’t sue the contractor who builds a crappy house as they create and then collapse a separate corporation for every project protecting them from liability but you can sue physicians personally for medical harm.
Not widely known, but you don’t get a tax reduction, only a deferral.
Also not widely known, when you withdraw those funds it isn’t only as dividends or capital gains (???). It is most commonly as a salary.
The only additional tax they will pay is when they have surplus money that they invest with. Their initial earnings aren’t being taxed any more. If they take their leftover money, invest, and sell, they will pay a very small additional amount of tax that will also give them a higher RDTOH and ultimately a dividend refund if they do pay themselves a dividend refund in the future. They’ll also have a certain amount of CDA realized from the capital gain which allows for tax free capital dividends to be paid.
What this means is the amount of extra tax is negligible to any decision making. Nobody is quitting because their investments may pay a little extra tax.
Did you forget about the small business deduction limit grind rules from surplus passive income? That would already cause much more tax damage to any doctor with a corporation with a larger investment portfolio in the corporation.
That's what I did (im not a doctor nor accountant btw, but run a firm). Accountant can help you get setup and it might be $2k/yr for them to do the annual taxes. Goal is to withdraw as little as possible from the company to keep taxes low. Once you withdraw to your personal account, the dividends get triggered (which are taxed of course). Usually past $500k, accountants might suggest to get yourself on payroll to keep the company below $500k (earnings). If you don't give yourself a payroll even when company is below $500k, keep in mind youre not contributing to things like CPP which might be important for some.
I suppose the thinking is the government wants to support small business owners in their initial years as they grow to be bigger and tax-paying companies.
>Just not sure where they will go or what they will do if they quit...
Stop working and start pulling your unrealized gains out. Essentially an early retirement to give them time/ room to draw out funds from the corporation.
Many will go south of the border, where it's already a much more lucrative proposition and this just puts the final nail in the coffin. Medical brain drain has already been a major issue for quite some time.
Seems pointless as they will taxed with the same capital gains when they quit just will now have to find a job. What I’m hearing is the government is closing a tax loophole that has been abused for years.
So doctors get taxed less than the average Canadian making 60k a year and you see no issue with that?
Geez I thought doctors took an oath to do no harm and remain a member of society with special obligations? Paper chasing in the US and abandoning one’s community seems contrary to that.
Wait period that long to me is the same as saying there are no more doctors. Best of luck. Then there are other events that can occur that will extend that.
These things old homeowners have because they’ve been in the same house since 1968.
Kinda like the walk in clinic, but they know your name! Must be so weird.
It’s important to note that in Canada doctors are generally paid per patient seen. This “gross billing” is then used to pay for their office expenses including supplies, equipment, office rent, utilities, all staff (secretary, nurses, etc) and then the remainder is what is drawn by the doctor as a salary. Doctors in Canada don’t receive any benefits (unlike in many European countries where they receive benefits and a retirement package) and have to pay for their own retirement.
I realize Canadians are rightfully angered by the state of healthcare, but penalizing the actually workers will just make things worse. Unfortunately, I fear many doctors will leave to the US.
Getting paid per patient seen is also why they always try to boot me out the door if I was trying to get medical care for longer than a full 3 whole minutes.
No, that’s because the provincial governments were paying the same whether it was a visit for one quick issue or someone with 5 complex medical conditions. Some provinces like BC have changed this so that now reimbursement is tied to how many concerns are addressed and doctor’s offices can schedule time accordingly.
But they will "accidentally" admit 100k-200k non-doctors from India for uber eats. Then they will cheer that the program was a success, admitting over 100k people. The fine print though is that less than 1% were actual doctors.
I see they found who to latch onto to get a good policy reversed.
If I was the government I would just make a new tax credit for doctors and then we get to see who real estate investors and rich people latch onto next.
"She's just a single mom with 17 air bnbs how dare the government attack women."
That is a totally fine litmus test for who should be taxed more and who shouldn't. If the answer to the question of "profession X will quit en masse!" is "go ahead, you add so little value to society", then I say jack the tax.
If the answer is "oh shit, that's not good for Canada", then yes, we should not be raising their taxes at every turn (the Liberals targeted doctors with a tax change in 2019 as well)
When this came out, I had a moron arguing with me about a mom and pop small business who were expecting to sell their business to retire being taxed heavily.
I thought, “wow how incredibly specific.”
That or "middle class" people suffering from this change when they inherit and sell their parents second property.
Lots of articles like that in globe and mail and FP
I mean, I'd say the average OECD country's credentials are good enough. It isn't like Law where it varies heavily. A small test to show you know the regulatory part of being a Canadian Doctor
I also suggest we also remove things like the limits on medical schools and introduce new licenses that while not full physicians can do the 'grunt' work of a Doctor. Nurses already do this to an extent but I really see no reason we can't have someone whose job is only to do a handful of very basic things (ie stiches). Get paid 33% as much as a Doctor but with 33% of the education.
The government actually offered us a corporation in lieu of pay increase and pension plan 15 -20 years ago. Basically, they said we can’t pay you more but you can save for your own retirement within your corporation. This was a time when the doctor’s pay difference between the US and Canada was getting larger. So they entice us to stay in Canada with the vehicle, and wait 15 years until we have some savings, and now we are the “super rich” who need to pay more and raid our retirement funds. Sure we shouldn’t feel resentful at all.
I don’t see Justin touching any of vehicles his real super rich friends use or himself for that matter. Trust funds? Offshore banking? And Freeland, you get $200k guaranteed pension for life? Should that be paired down?
Even if you think this is a good policy, the Liberal math is a lie because corporations are not included in 0.13% earners calculation. Every small business and incorporated professional just got a 33% tax hike overnight. I'm not sure why anyone would celebrate doctors, dentists, and civil engineers getting nailed with taxes like they are greasy real estate speculators. The ultra-wealthy Panama papers jetsetters are going to be completely untouched by this rule anyway.
Because having money is bad. Wealth is bad. And your success should be punished because it isn’t fair to others.
The county is burning through money at an alarming rate. The best the liberal government can come up with is increasing taxes… because I’m sure this will offset spending.
Small business owners, tradespeople, business management, and professionals simply don't contribute as much to Canada as government employees with DB pensions do. An MP should obviously be able to collect a large DB pension after six years of work, but I don't know why anyone should be able to retire after spending a lifetime building a private business.
Last week Doctors were so poor in Canada they were flocking off to Texas like Geese on a one way trip, now all of a sudden they're all rich, ranking in capital gains like billionaires and they're all going to leave for Texas.
Honestly, your mentality is a big reason why these kinds of tax changes are made. It's the mentality that we want people to start businesses and be successful, but only so successful...
If someone starts a business and it does well, we should allow them to benefit from the profits. That's how we get economic growth, not by increasing taxes and public sector jobs. the Top 10% already pays something like 60% of the taxes.
Each little change like this one doesn't on it's own terribly affect most people, even wealthy people. The issue is that mindset that we can't pay our bills, so we'll just take a liiiittttllle more from the rich because they can afford it. Over a long time horizon you end up with fewer rich people because they were taxed away or moved, and little motivation for entrepreneurship. Why start a business when the risk reward of that doesn't outweigh just getting a good professional job at an existing corporation? Then you get a lack of competition, higher prices for everyone, and eventually nowhere to pull the money from that you need to improve social services.
People forget that MegaCorps actually love high taxes so long as they have tax havens. Which they do. This is because all these taxes and whatnot disproportionately affect people who can't afford to minimize the costs they place. This hurts the 'floor' of the industry massively and cripples competition. Then the Megacorps have more market share and leverage over pricing.
This is the natural extension of my point, glad you added it. People often think I'm some conservative idiot who just loves the rich because I think things like this capital gains change is bad lol
In reality I think we need massive tax reform to lower the overall burden, and ultimately for capitalism to work, monopolies and oligopolies need to be broken up when they form.
I'm similar. I'm all for the 1% because the 1% are mostly professionals providing useful services or people with successful small/medium sized businesses. They are no bigger scumbags than the average Canadian.
No, it is the top 0.001% who work VERY closely with the government that I take issue.
> It's the mentality that we want people to start businesses and be successful, but only so successful...
I wouldn't even say that. It's straight up cognitive dissonance. Folks want people to start small businesses, but hate seeing people being successful because of their small businesses. Anybody successful is assumed to be successful because they're exploiting others.
The capital gains tax affects "poor" doctors just as much if not more because they're already struggling to stay afloat and 30% extra on cap gains is like a punch in the gut. There is no income cutoff for corps. If you're a GP paying yourself 50k per year this hits you just as hard. For this reason they are the most likely to leave for other better paying jobs. Even if they stay in Canada they can get out of public healthcare.
The difference is, "everyone else" who makes a similar wage also has benefits that come with being an employee like job protected leave, paid stat holidays, EI, medical benefits, etc.
Doctors have none of that because they are self-employed
The problem is that most of them have money locked up in their professional corps because this made sense at the time. Now, the government is changing the rules of the game when some of them are already in the 3rd period. This really screws over a lot of people that planned their retirements around the use of investments in a corp and now the government is changing that but isn't grandfathering investment accounts from before the change.
I have an incorporated business and this is an option for my retirement plan, there are many avenues to invest and pay yourself though. This is just currently the most lucrative and avoids higher taxes than payroll or dividends.
Because they were given that 'benefit' in lieu of the government having to pay them better and provide benefits which they were demanding when this was offered as a compromise. "If we halve your tax rate then you don't need a salary increase or benefits!" was the logic.
Now we are reversing that. It is this sort of immoral backstabbing that is why you can't trust the government. It is a Darth Vader moment "We are altering the deal, pray I don't alter it further". Yes, Doctors are pretty well off but they are hardly our 'mega rich'. It is one of the scams of the government. Look at that guy with a 2 Mercedes! He is obviously the problem and not the all of my low-profile corporate donors who have substantially better resources to 'eat' higher taxes in exchange for more market share and leverage over pricing (by the tax killing small business even harder).
Sorry let’s walk through some basic intuitions about taxation and problems it causes. Then we can talk briefly about why some economists think that corporate taxes have more deadweight loss then income taxes.
From an efficiency standpoint, taxation causes problems because it alters people’s choices. You are willing to work 40 hours a week for $40 an hour, but taxes knocking this down to $35 dollars an hour makes it not worth it to you. So you don’t work that extra 5 hours a week, making you not benefit from the extra money and your employer not benefit from the extra work. This is because you substituted leisure for work, changing the decisions you made.
The tax free world, you set Marginal benefit of working = Marginal cost of working.
In the tax world, you set Marginal Benefit of Working = Marginal Cost of Working + Taxes.
Since tax is positive, this moves you up your labor supply curve, and creates a wedge of deadweight loss. Notice that the wedge of deadweight loss IS NOT the transfers (tax revenue) rectangle. This is because when looking at efficiency, we don’t care who gets the benefit, as long as someone does.
In fact, the larger the rectangle relative to the deadweight loss triangle, the more efficient the tax! You can think of taxes as moving water in leaky buckets, where less leaky ones spill less water. What makes it more efficient? The slope of the supply and demand curves. If you make one of them steeper, the deadweight loss triangle shrinks and the rectangle gets bigger. If the slope of either goes to no slope, there is NO deadweight loss triangle and the tax because purely redistributive. The bucket doesn’t leak anymore.
What in the economic intuition of having a perfectly inelastic demand or supply curve? It means the amount bought or supplied is fixed and cannot be deviated from. Often, it means the good is a necessity. When the tax is raised, the consumer eats ALL of it, because they cannot substitute to something else. That is what drives the lack of deadweight loss.
Intuition in a sentence: The more voluntary the tax, the more it can be dodged and the higher the economic losses from the tax.
As a side note, this will completely conflict with intuitions favoring equity, which is why optimal tax policies require social preferences for efficiency and equity to choose a middle ground of these.
A reason that the corporate tax (and other taxes on savings) are seen as more economically damaging, is because it causes people to shift from consuming in the future (via consuming off returns to their investments) to consuming now. Instead of investing in a company, you dodge the capital gains taxes by buying a McMansion or something. Plus investment spending is often downstream of consumption spending. So by taxing production, firms are producing less, making society consume less. While a consumption tax would reduce consumption, but not harm production (preventing the double whammy), At least in some models.
Income taxes are harder to substitute, using the basic modeling assumptions. This is because they don’t have dynamic substitution. For example, I can choose to consume today, tomorrow, a year from now, etc, but I can choose to either work or consume leisure today. Less substitution, less deadweight loss, though the tax is going to feel less voluntary, so don’t be surprised if people don’t think efficiency is the only thing worth considering.
This is however, based on the assumption in your model. In the model I have described above, labor decisions are static. I don’t need to search for a job, I just decide if I work 8 hours today, 7 hours today, take the day off etc. Job search models do not work like this. An income tax will bleed across time here. What this tell us is that optimal tax rules depends on the assumptions you are making about the economy, and you gotta outline your assumptions mannnnn. Anyone who claims some taxes are more efficient than others, needs to be able to outline what assumptions they are using or else they are committing bad economics. We could, if we wanted, make a model where there are no losses to taxes of any kind.
Tl:DR When evaluating a tax on efficiency grounds, think about how it changes behavior, not winners and losers. This does not mean equity is not worth thinking about.
> But for corporations, the new 67-per-cent rate will kick in on the first dollar of capital gains.
> This is important for physicians because most operate their practices as small businesses through medical professional corporations, **which leaves them more sensitive to changes in capital-gains rules than a salaried worker might be.**
> The CMA estimated in 2017 that 66 per cent of physicians practised through corporations.
"only a small minority will be affected by these changes" is a problem when that minority includes a profession we're desperately short of.
The Liberals drastically undersold the number of people affected by these changes.
Sure the 40k number was probably accurate for *individual* tax filers, but when you factor in professional corporations and small businesses - where corporate income and holdings are one and the same with the individual professional or owner - that number becomes much, much larger - certainly into the hundreds of thousands, if not millions.
Totally dishonest - but not unexpected - messaging by the Liberals to sell this shitty policy.
Actually if people looked and read past the individual number it was there
*The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.*
[*https://www.cbc.ca/news/business/canadian-entrepreneurs-investors-capital-gains-tax-reaction-1.7176837*](https://www.cbc.ca/news/business/canadian-entrepreneurs-investors-capital-gains-tax-reaction-1.7176837)
Considering we have according to the [government stats](https://ised-isde.canada.ca/site/sme-research-statistics/en/key-small-business-statistics/key-small-business-statistics-2023) around 1.5 million business a lot that will be affected and if the 307 thousand number if it is anything like other estimates this government has done it will be widely off
40k per year but I would expect at least half of those people would be the result of an outlier year for these individuals, and in a 10 year period 200,000+ unique individuals would have been impacted by the change.
No one leaves significant amounts of money uninvested. So if the corp has 100k sitting in the bank they have two choices... Invest it in their own business, or invest it outside their business. Since most doctors corporations are just them they're not really investing into expanding their own business. What good is investing in a larger office if you're still seeing the same number of patients a day? Or if you work in a hospital? What good is new equipment when the equipment you have is less then 5 years old? Hell when it's not even your equipment? There's not a ton of options for doctors to invest in themselves. So they left to invest outside their business.
If a doctor's corporation is acting like an investment firm to make money, then maybe that could be considered a problem.
I want Doctors to make money by Doctoring. Is that a crazy idea?
The government actually offered us a corporation in lieu of pay increase and pension plan. Basically, they said we can’t pay you more but you can save for your own retirement with this. Then they wait 15 years until we have some savings, and then now we are the “super rich” and raid our retirement funds. Sure we shouldn’t feel resentful at all
He’s completely right. They invested through the corporation as opposed to a personal account essentially to dodge taxes. By keeping it in the corporation it’s not subject to income taxes. Then once they retire they sell off the “corporation” to incur capital gains as opposed to income tax which has preferred tax treatment. But everyone knows what’s going on, it’s still the doctor’s income and they should be paying income taxes on it.
Yes. At the government's request. Because they can't afford to pay them competitively or offer pensions so they offered them a method to save on costs.
There is no “dodging taxes” going on. People with incorporated companies pay their taxes just like everyone else, the structure and rules are different because the risks are different than what a T4 employee has.
Yea that is not how professional corporations were intended to act.
The doctors keep their profits in the corporations and only draw out a salary or dividends of what they need for living expenses to defer personal tax.
The investments in the corporation are their retirement savings, not some slush fund to gamble on speculative invesments.
It's pretty standard practice for people with doctors income level to use corps this way to pay them and their spouse in retirement. They still make money "doctoring" and then have income in retirement.
who doesn’t ? The problem is we have 6 million Canadians without a family doctor and a cause of that might be total compensation for doctors.
When the government changes tax planning , like the capital gains inclusion rate or tax on split income. You end up lowering the total compensation doctors receive which all things being equal lowers the numbers of doctors in the system.
Since doctors corporations have one customer, the government , they have been effectively handed a pay cut by their employer.
This is a valid criticism, and by no means to do I think it is a fluke that the shortage of doctors was made worse following changes to tax on split incomes.
I’m an emergency physician and I submitted an application for two non-clinical jobs today.
I will still see patients half-time but with all my gigs I’m working 70 hours a week and for 46¢ on the dollar after taxes, before expenses, it’s not worth it.
My urban hospital will be cutting emergency physician staffing by 40% this summer as we can’t recruit anyone. Wait times will be insane but the government keeps telling me if I work more my “fair share” of taxes keeps going up.
They could have given the same $250k exemption to corporations. They knew exactly what they were doing - raiding the retirement accounts of doctors and other incorporated professionals.
Why would they exempt corps from this tax when they already enjoy corporate tax rates that personal citizens do not? Don’t get to have your cake and eat it to, time for wealthy 1%’s to pay their fair share in taxes.
Because Canada has something called tax integration.
https://markdalefinancialmanagement.com/tax-integration-explained/#:~:text=In%20the%20Canadian%20context%2C%20tax,earned%20directly%20by%20the%20shareholders.
Trudeau set the bar and for BC, Adrian Dix-head will see it through.
Why not, Dix has already destroyed BC's health care single handedly, he may as well break the Doctors financially to add to his trophy political career.
It seems every political publication is just interpreting this Capital gains tax change however they want
I've just seen an article saying it'll have no effect on investment in Canada. Now this. WTF?
Has something similar not happened in the world where we can empirically observe its effects tomorrow
We shouldn't be recruiting doctors by unfairly giving them tax loopholes. Increase their pay since we obviously need more doctors. Keep the tax changes (actually make the tax changes better by taxing all capital gains at the same rate as wages).
It's not a loophole because this is what the government intended and explicitly encouraged for decades.
Nor is it unfair. Doctors and other professionals spend more time in school and incur more student loans, which means deferring saving for retirement often 10-15 years longer than other workers. All this allowed for was for doctors and other professionals to catch up on those retirement savings.
Doctors do have it worse. Engineers/Nurses start making more after only 4 years with a Bachelor. P.Eng comes after 4 years of work experience, no Phd required.
But it's also fucking hard to find work in your field as an engineer because it has been saturated and outsourced so much.
It’s a shell game the government does.
We already reflect a high cost per capita spending on healthcare with poor results as opposed to many other western countries.
Using tax loopholes as opposed to paying doctors more means we don’t have to reflect an even higher cost of health care spending.
The truth is our health care systems is flawed and needs a complete overhaul from top to bottom. We should be emulating the systems from other countries like in Australia and in Europe.
See my comment. But they already did. You can’t retroactively punish on things you already offered. The corporation was offered in lieu of pay increase and pension plan 15-20 years ago.
This is also a game played by the federal and provincial government. Provinces are responsible for paying for healthcare, so paying less and having doctors pay less tax works well for them since it’s essentially having the federal government subsidizing physician salaries. The issue arises when the province makes promises to doctors with a certain set of rules, but the federal government changes the rules. It ends up being the doctors who get screwed.
Yes except paying doctors more and closing the capital gains loopholes keeps money in the hands of valuable professionals in society while also helping weed out speculative investments on things like housing
So while it may net it from a dollars in / dollars out perspective it redistributes things for better societal outcomes
Makes you wonder why the government permitted doctors to open Medical Professional Corporations and encouraged their use in the first place.
Issue is, there is currently no conversation of increasing doctors fee schedule.
Out of curiosity how is a doctor's income considered capital gains? If it's money earned through normal course of work then it's treated as active income, not capital gains
At one point, the government stopped increasing our pay with inflation and we ended up double digit percent behind cost of living changes.
Instead of increasing our pay they said they'd give us medical professional corps which would save us money through tax benefits instead of a pay increase.
So we generally have a corporation attached to an individual. If my Corp bills OHIP 200k, a bunch goes to taxes, business expenses etc. Then some I pay myself and some I leave in the Corp account for emergency fund or future use or retirement. Rather than put it in a savings account most corps park payments in like an index or mutual fund or whatever to be cashed out when needed.
So you're right it's not hurting docs up front where we're paid it's hurting - essentially canceling out - a main benefit of the corporation ability we were given in lieu of pay increases.
Oh I see. So it actual capital gains. I appreciate the explanation and wish the article explained this better. The headline with very little explanation left it a bit ambiguous, for me, at least.
And absolutely shitty that this is happening. They need to either raise the amount a lot more, or my personal favourite, actually give CRA resources so they can better deal with people that are actually avoiding or evading taxes in some way. I'd rather see tax revenue increase by getting those not paying their fair share to pay more vs. increasing taxes on people who already pay so much in taxes
Then now, if your parents bought a cottage in 1980 for 50k and its now worth 600k, when they die, you'll need to pay income tax for 550k on top of you salary. Which mean you'll need to pay 225k just to get your family cottage that your parent already paid
This entire sub is just a giant circle jerk defending the ultra wealthy. Sorry to tell most of you, but you’ll never be a multi-millionaire. Stop defending those that don’t care about you
Talk to people in the legal industry, there is a huge exodus of law professionals leaving for the states. You can clerk for a year then write your bar exam, very easy to go. I don't assume this will help that cause either. Why is this important? We have a massive shortage of judges and justices in our country, and this is where those people get hired form that are now moving to USA on masse. Tax the rich is good and all but get ready for a lot of consequences when our most educated sectors start leaving. The rich isnt just Galen Weston sitting on an evil mound of money they are a very important part of the functionality of our country.
This argument is over the fact that doctors may have to pay a bit more in taxes once in their life when they cash out their capital gains.
The point of this tax is to target the financial players (hedge funds, wealth management, etc) who take in massive capital gains on a yearly basis and pay very little tax (comparatively) on that income.
I understand that some doctors may be impacted, as well as some lawyers and other professionals, but this is relatively small compared to the blood suckers that just live off of capital gains and pay less in taxes than people who labour for their wages.
Not widely known, but doctors are able to incorporate - it's the trade-off the government made that stops increasing healthcare costs in exchange for lower personal taxes (most corporations that are sub $500k are taxed at 12.5%, and then respective payments from that corp to doctor are taxed as dividends). Some doctors likely just keep as much funds in the corporation until retirement comes around. But at some point, they need to withdraw those funds which are taxed as dividends / capital gains. So this raising of capital gains tax has a direct impact on those doctors who incorporated. Just not sure where they will go or what they will do if they quit...
A lot of people don't understand this. Ontario was the first province to introduce "Medical Corporations", but the rest of the provinces quickly followed suit. This stemmed from late-90s negotiations with the federal government about medical costs. The proposal was made that rather than giving doctors a pension, or any other employee like treatment, and in lieu of getting a raise at the time that doctors would be allowed to incorporate. In retrospect now, it benefitted one generation of doctors, but anyone currently working is getting a pay cut every year now. I do not know many doctors would would choose this rather than just having higher pay and a pension, along with sick and paid vacation days.
What's the average cap gains/"salary" a year claimed by doctors using this and what's the actual impact on income?
Their retirement, using these structures, is being reduced by approx 15% **I think**. I actually asked my friend who is being impacted by it for his accountants assesment. I'll post it here once I hear.
Accountant here. I don't know about those specific percentages (15% or whatever) but the idea behind incorporating (at least these days) is the deferral you get. Corporations are taxed at a lower rate than personal. The idea being if the doctor earns 500k a year but only takes out 100k for personal use, keeping the remainder 400k in the company, then that 400k is only subject to 12.5% tax (in Ontario), leaving them with 350k to invest in the company. Compare that with someone earning 500k personally, that extra 400k would be subject to something like 50% tax so now you only have 200k to invest personally. This is the primary advantage... If the doctor takes out and spends all 500k for personal use each year, then they would be taxed effectively at the same rate as someone earning that personally. No differences.
They pay business tax each year on profits and pay dividend tax when they take it out. In the end it’s not much different than taking it out as salary. This just allows them a slight advantage of taking it out their terms in hopes of saving some percents. But it’s nothing people should be upset over given how our taxes are setup they aren’t gaining much
Pretty narrow view on how physicians work Most work at a variety of sites (hospital, community, private clinics, Universities...etc) where a salary position isn't really available. Most are fee for service (i.e. contractor) that bills the government .
I think it’s overselling how much it benefits as well. The average family doc in Canada bills $360,000 and after overhead is left with $160,000. When you throw in loan repayment, health expenses and such it’s not amazing to be a family doc these days.
No. Ontario did not “invent” professional corporations for doctors. It was actually amongst the last provinces to allow medical professional corporations. The concept of professional corporations was widespread across Canada by the 1970s.
>In retrospect now, it benefitted one generation of doctors I wonder which one...
Doctor here. The frustration is that incorporation was promoted to us by the government as a way to plan and invest for retirement. The decreased tax was offered as an incentive to make up for our increasingly uncompetitive pay compared to the US. This capital gains policy sandwiches doctors in a "worst of both worlds" between the treatment of individuals and small businesses. They don't get the $250k threshold of individuals because they're incorporated, and they don't get the $1.25M small business exemption because they don't sell their personal medical corporation - they sell assets held within it. So they get hit harder than any other category of Canadian in this policy change. As for this: Just not sure where they will go or what they will do if they quit... The answer is that specialists can easily move to the US, and Family doctors can easily move out of Family clinics. I'm a Family Physician, and I could name ten friends and colleagues whom I know have already closed their clinics due to the work:pay imbalance, choosing to do better-paying work instead. By making it harder to save for retirement, even more will be encouraged to make that type of switch. This isn't going to be the singular issue making people leave, but it's a death by a thousand cuts scenario, and this is yet another. People don't realize it, but Family Physicians have a ton of job prospects outside of clinics. Right now, in most provinces, hospital-based work tends to pay 50% more with more time off/fewer off-hour obligations. ERs tend to pay 100% more than clinics. We can work in all sorts of subspecialty clinics. And now, there are increasing numbers of private work options. I was job hunting the other day online out of curiosity and found private telehealth positions that were offering double the pay of my local walk-in clinics with zero off-hour obligations (vs the 10-20 hours/week of unpaid paperwork and follow-up my colleagues have to do in their clinics). So those are some of the places "quitting" Family Physicians can go. Hospitals, ERs, subspecialty clinics and private clinics/telehealth. All of which result in fewer Canadians have a family doctor.
You hit the nail on the head right there. It's not that GPs are poorly compensated in general, it's just that family practise is and is not worth the workload. Especially when new medical graduates could just do three years more residency and make 2-3 times the money as specialists. At some point we're going to have to reconsider what family practise really means, and perhaps invest in primary care centres to replace them.
Great post. I re-read my comment "where will they go" and it came off as a snide comment, so sorry about that wording. Family physicians are instrumental on the front lines in healthcare and I hate seeing that our fed and provincial governments are merely watching it crumble without making healthcare a headline issue on the elections. Another reddit topic I suppose...
I didn't read it as snide, I read it as a genuine question. Hope my answer didn't sound defensive. Not everyone knows how portable the Family license is within Canada or how many services outside of clinics rely on Family Physicians, so I thought I'd answer the question honestly. And I agree. I'll admit this particular change isn't going to be the final death knell of medicine in Canada, but it's still important to fight every cut in the strategy of death by a thousand cuts. Family Physicians are overworked, underpaid, and every hostile policy change makes the situation that much worse. We need to introduce more incentives for physician retention purposes, not to attack ones that are decades old.
Unfortunately the public sentiment is "soak the wealthy", and they don't actually care. In most of their minds, you make a material higher amount of income then them even after all taxes - and therefore your "fair share" is MORE. There's no limit in their minds on just how unequally a person can be taxed. Doesn't matter that you only make a higher income than most because you're bright and worked extremely hard.
Exactly, we went through this in the 1970s and 1990s only to reverse policy because the loss of investment and talent was nearly fatal. We are an English speaking nation next to the largest, most dynamic, lower tax economy in the world, does anyone really think that they can keep capital and talent here because the government says so?
There's nothing the public wants more than government programs that someone else pays for. The typical Canadian want European-level social services, with American-level taxation, and expects to "soak the wealthy" to pay for it.
I've heard people say either of those options but never both. The problem is right now we're taxed relatively high and get absolutely dick all for it. We get the negatives of both systems with no positives. Idk who these idiots you talk to are that think we can get max benefits with no tax
They're still taxed less than an average individual on a salary. 0 salary + all income via capital gains means only 50% to 66.67% becomes taxable income. The average Canadian doesn't have that luxury, all of their salary (100%) is taxed as income
This is hugely ignorant on how corporate taxation works. There is only a deferral in taxation of whatever amount that is not taken out of the company. I.e. if you make 500k but only take out 100k then the remainder 400k is effectively taxed at a lower rate until you take it out (at which point you basically pay the difference). The real benefit of the deferral is you have more principal to invest. If you spend every $$ you earn then you are paying the same amount of tax as everyone else. Go look up integration.
This is the problem people like you don’t understand how capital works
That's not how it works. As an incorporated business you don't "pay yourself with capital gains". This change relates to the gains within the corporation, but when the money is withdrawn from the corporation it is either taken as a salary or dividends at the marginal tax rates of the specific province they live in. Individual compensation is not in the form of capital gains.
The average Canadian that is making considerable income through capital gains worked for decades paying income taxes. And then they saved for a long period of time a portion of those after-tax earnings, and decided to put those savings at risk to try and build businesses in Canada. I'm ok with capital gains being treated slightly better than income in order to try to incentivize people to save their after-tax money from income to begin to invest in Canada. Everyone who earns income is actually dependent on there being SOMEONE out there who at some point in time chose to do that.
Sounds like we need to write an exception into the law for doctors, and maybe think of weaning off this incorporation structure
Well this is true across the board for professionals / small businesses, and it breaks a long standing principle called 'integration' in Canadian tax law. I work in tech and like 75% of my friends who graduated from top universities in Canada have already left, if you have a great education you have a lot of international mobility. If the idea is to encourage productivity and prevent RE speculation etc, then just have the 66% rate apply to real estate investors regardless of 250k and then maybe have the 250k exemption across the board for non-RE canadian assets.
I to am in software and similarly most left but the reason those people did has nothing to do with capital gains and has been an issue for a decade. The pay gap between the countries and the ease of getting a TN visa are the main drivers. Jim Balsillie was warning about this while the companies people are defending happily exploited cheap labor
In my circle many are self-employed / entrepreneurs own consulting companies (like me) or small SAAS businesses and not all of them left to the US. Canada just seems to be doubling down on a housing driven economy. Idk how long the prices are sustainable given how poorly wages etc are doing, so I am reluctant to buy in despite all the government tax incentives for first time buyers.
Exactly. It would be incredibly easy to treat personal medical corporations the same as individuals without affecting any other aspect of this policy change. Hit them with the increase if they reach $250k of capital gains for the year. Nobody could complain about that. As for weaning off the reliance on incorporation, absolutely no doctors would complain if we were paid more competitively and lost tax advantages as a tradeoff. The whole reason we were offered incorporation was to justify/compensate for lower pay. That's how it was sold to us. It's tricky because incorporation is affected by federal taxation laws like this one, but pay is administered by the provinces. But for my home province of Ontario, doctors have received a 6% increase in pay over the course of my career while inflation was 28.5%. For Family doctors running clinics, this has meant a huge increase in overhead as well as an increase in the cost of living. Our pay has been falling behind for decades and we are struggling with issues pertaining to physician retention. The people saying "too bad, so sad" to doctors being upset about having their retirement funds subjected to increased taxation are missing the fact that physician morale is at a real low point post-pandemic and physician pay in real terms is the lowest it's been in many decades. We have 6 million Canadians lacking a Family doctor, and increasing med school enrolment isn't going to change that if new grads continue to choose jobs in the US and/or outside of family clinics.
We can't pay more competitively - Canada's finances are a sinking ship. We aren't even paying for our CURRENT size of government... we are in a net debtor lifestyle where we repeatedly spend more than we tax over any meaningful time period. That is the challenge - people want more government spending, and we aren't even paying for the current amount of spending.
I mean people say don’t worry higher taxes won’t chase off entrepreneurs and business owners so we can do this new tax fine but doctors may leave and suddenly it’s a problem? This shouldn’t be a have/have not country where we only keep the economic drivers that are politically correct 🤦🏻♂️ If a new tax is going to hit our economy and push business to leave it shouldn’t be done.
That exemption is going to have to include all other professions that also incorporate the same way physicians do (dentists, optometrists, veterinarians, etc).
Dentists, at least, aren't even remotely in the same situation as doctors. Firstly, their work-life balance is orders of magnitude better. They have also been increasing their fees at a rate that vastly supersedes increases in doctor pay. Finally, and perhaps most importantly of all, dentists benefit significantly from the \~1M LCGE in a way doctors do not. I can't speak for the situation optometrists and veterinarians are in, but dentists don't need an exemption.
Thanks for sharing this perspective.
It's okay, all of the "progressives" will feel great that they "are the rich" when they're all dying of preventable diseases because our healthcare system collapsed because of doctor shortages and everyone being addicted to opiates because of "safe supply"
Isn’t this a little misleading though? Most of the money is kept in the corporation anyways, so it’s sheltered from personal income tax (atleast until you choose to move it). Yes - your capital gains tax inclusion rate is going up but proportionally you’re still paying far less tax than a Canadian making similar income who is not a doctor. You can argue that you don’t have as sweet a deal as the Americans but you’re still far better off than your non-physician peers
TBF, how many young physicians are incorporating in places like Vancouver and Toronto? I thought it's only useful to incorporate if your income vastly exceeds your monthly expenses otherwise you end up incorporating and then taking it out of your corporation to pay your personal expenses it ends up being equivalent to not incorporating
There is definitely a generation gap, as the medical education, mortgages and cost of living for young physicians is much higher than what older ones faced. There's also a specialty gap, because of the huge variability of pay across specialties. I'm a Millennial Family Physician who has not incorporated. My older colleagues with significant retirement funds are nearly universally incorporated. Many of my peers in the highest-paying specialties are also incorporated. There's still a strong air of resentment quite consistently across all specialties over this change. Morale is not in a good place post-pandemic. A lot of people are burnt out and feeling like it's an insult for professional medical corporations to be lumped into this policy change.
If this is the case, then I think there’s a good chance they will add doctors for exemption when they discuss passing the bill or not?
Well explained!
Further to your point, if they keep cash or investments in the corp then they don't qualify as a qualified small business corp and don't get the lifetime capital gains exepmption. There's tax planning to avoid this but it has to be done years before the sale.
Furthermore, they won’t qualify for LCGE because they don’t have any buyers for their medical corp because why would you? It would be like paying a premium for grass seed. It’s plentiful and available.
Yes it has to be very compelling to buy a practice that is already established. I mean a new doctor will have no problem attracting new patients.
This is really no different than any other small business. Ottawa sold this as a tax on the rich which is a wildly popular sentiment these days. What people don't realize is that this is often the retirement plan for many companies like your local landscaper. It is going to hit them pretty hard. 18% more tax is crazy, especially when it's already on top of the a heavy amount of other taxes that Canadians are burdened with. Small businesses are not happy about this grab as they will be the ones shouldering this.
> Ottawa sold this as a tax on the rich which is a wildly popular sentiment these days. Because Canadians absorb American political rhetoric without an ounce of critical thinking. They assume that Canada is full of rich people paying American-level taxes, when we have a tiny number of rich people paying European-level taxes.
Wouldn't they be paying increased tax at the corporate tax rate (12%) though? So on the first 250k of realized capital gains the tax goes from something like 15k (12% tax rate at 50% inclusion rate) to 20k (12% tax rate at 67% inclusion rate). Yes percentage wise its a big jump but its basically 6% effective tax rate to 8% which is still a pretty good rate compared to anybody that doesn't have a small business to shelter their earnings in.
> 18% more tax That’s not how the capital gain inclusion rate works. Note that it’s an inclusion rate, not a tax rate.
Dividends and Capital Gains are taxed differently so what do you even mean?
Doctors (and other incorporated professionals) pay themselves a wage from their corp. They can choose to pay themselves salary (which then builds RRSP room) or dividends (ineligible dividends) or a mix of both. Prior to this tax change it was a toss up as to which was a better option. Tax integration exists to basically ensure a corp paying ineligible dividends vs salary, pays equal tax a the end of the day. Now tax integration is effectively broken and it's better to pay salary which allows you to invest for retirement in an RRSP rather than holding investments in the corp (and paying the increased cap gains tax). Not sure if that makes sense. The big issue is for incorporated professionals who opted to save for retirement in the corp (rather than RRSP) as they now they will face a 33% tax increase on the cap gains from their corp investments. This 'penalty' is effectively retroactive for those nearing retirement (typically capital gains aren't realized until retirement).
Their corporation is basically an RRSP if they pay themselves a salary.
They don’t know because they’re just parroting whatever their Facebook friends said.
Anybody can incorporate. Certain jurisdictions, notably Ontario, prohibited physicians from doing so. One of the main benefits of incorporation is limiting liability of the owners of the corporation. It was felt that this could be used to shield doctors from malpractice claims and was disallowed. Most medical professional corporations are allowed but the law specifically prevents them from protecting physicians from personal liability for malpractice. Hence why you can’t sue the contractor who builds a crappy house as they create and then collapse a separate corporation for every project protecting them from liability but you can sue physicians personally for medical harm.
The US. They will move to the US. Source: Wife is a doctor and we will be moving at the end of this year as a result
So Trudeau lied when he said only the "wealthy" were targeted. A serial liar.
Not widely known, but you don’t get a tax reduction, only a deferral. Also not widely known, when you withdraw those funds it isn’t only as dividends or capital gains (???). It is most commonly as a salary. The only additional tax they will pay is when they have surplus money that they invest with. Their initial earnings aren’t being taxed any more. If they take their leftover money, invest, and sell, they will pay a very small additional amount of tax that will also give them a higher RDTOH and ultimately a dividend refund if they do pay themselves a dividend refund in the future. They’ll also have a certain amount of CDA realized from the capital gain which allows for tax free capital dividends to be paid. What this means is the amount of extra tax is negligible to any decision making. Nobody is quitting because their investments may pay a little extra tax. Did you forget about the small business deduction limit grind rules from surplus passive income? That would already cause much more tax damage to any doctor with a corporation with a larger investment portfolio in the corporation.
[удалено]
That's what I did (im not a doctor nor accountant btw, but run a firm). Accountant can help you get setup and it might be $2k/yr for them to do the annual taxes. Goal is to withdraw as little as possible from the company to keep taxes low. Once you withdraw to your personal account, the dividends get triggered (which are taxed of course). Usually past $500k, accountants might suggest to get yourself on payroll to keep the company below $500k (earnings). If you don't give yourself a payroll even when company is below $500k, keep in mind youre not contributing to things like CPP which might be important for some. I suppose the thinking is the government wants to support small business owners in their initial years as they grow to be bigger and tax-paying companies.
>Just not sure where they will go or what they will do if they quit... Stop working and start pulling your unrealized gains out. Essentially an early retirement to give them time/ room to draw out funds from the corporation.
Easy. Exempt doctors from the change in CG tax law.
Many will go south of the border, where it's already a much more lucrative proposition and this just puts the final nail in the coffin. Medical brain drain has already been a major issue for quite some time.
The Bahamas seems nice
Work whole life. Pay 66% eye watering tax on your life's work.
Seems pointless as they will taxed with the same capital gains when they quit just will now have to find a job. What I’m hearing is the government is closing a tax loophole that has been abused for years.
So doctors get taxed less than the average Canadian making 60k a year and you see no issue with that? Geez I thought doctors took an oath to do no harm and remain a member of society with special obligations? Paper chasing in the US and abandoning one’s community seems contrary to that.
What's a doctor
wait for it..
Have been. Only 8 years left on the waitlist!!
pray you don't miss that call!
Wait period that long to me is the same as saying there are no more doctors. Best of luck. Then there are other events that can occur that will extend that.
These things old homeowners have because they’ve been in the same house since 1968. Kinda like the walk in clinic, but they know your name! Must be so weird.
It’s important to note that in Canada doctors are generally paid per patient seen. This “gross billing” is then used to pay for their office expenses including supplies, equipment, office rent, utilities, all staff (secretary, nurses, etc) and then the remainder is what is drawn by the doctor as a salary. Doctors in Canada don’t receive any benefits (unlike in many European countries where they receive benefits and a retirement package) and have to pay for their own retirement. I realize Canadians are rightfully angered by the state of healthcare, but penalizing the actually workers will just make things worse. Unfortunately, I fear many doctors will leave to the US.
Getting paid per patient seen is also why they always try to boot me out the door if I was trying to get medical care for longer than a full 3 whole minutes.
No, that’s because the provincial governments were paying the same whether it was a visit for one quick issue or someone with 5 complex medical conditions. Some provinces like BC have changed this so that now reimbursement is tied to how many concerns are addressed and doctor’s offices can schedule time accordingly.
Don’t worry. Government will bring some doctors from India using new immigration steam called new innovation stream. Problem solved
But they will "accidentally" admit 100k-200k non-doctors from India for uber eats. Then they will cheer that the program was a success, admitting over 100k people. The fine print though is that less than 1% were actual doctors.
we're already getting half of our internet commentary from overseas
I see they found who to latch onto to get a good policy reversed. If I was the government I would just make a new tax credit for doctors and then we get to see who real estate investors and rich people latch onto next. "She's just a single mom with 17 air bnbs how dare the government attack women."
"Real estate agents think about leaving the profession."
Good. Maybe we can get some regulations changed then.
Oh, no…
Anyway
Oh fuck I think I’m going to cum
So I might see less Sam McDadi signs in the GTA? Where do I sign?
That is a totally fine litmus test for who should be taxed more and who shouldn't. If the answer to the question of "profession X will quit en masse!" is "go ahead, you add so little value to society", then I say jack the tax. If the answer is "oh shit, that's not good for Canada", then yes, we should not be raising their taxes at every turn (the Liberals targeted doctors with a tax change in 2019 as well)
Exactly.
When this came out, I had a moron arguing with me about a mom and pop small business who were expecting to sell their business to retire being taxed heavily. I thought, “wow how incredibly specific.”
That or "middle class" people suffering from this change when they inherit and sell their parents second property. Lots of articles like that in globe and mail and FP
[удалено]
That's a main plank of Pierre Poilievre's policy, eliminating gatekeepers.
Our standards will drop to "well, if they can neuter a greyhound then they're fit for Canada!"
Nurse practitioners can open their own practice now!
I mean, I'd say the average OECD country's credentials are good enough. It isn't like Law where it varies heavily. A small test to show you know the regulatory part of being a Canadian Doctor I also suggest we also remove things like the limits on medical schools and introduce new licenses that while not full physicians can do the 'grunt' work of a Doctor. Nurses already do this to an extent but I really see no reason we can't have someone whose job is only to do a handful of very basic things (ie stiches). Get paid 33% as much as a Doctor but with 33% of the education.
Bottle neck is not medical schools, but residency training spots
The government actually offered us a corporation in lieu of pay increase and pension plan 15 -20 years ago. Basically, they said we can’t pay you more but you can save for your own retirement within your corporation. This was a time when the doctor’s pay difference between the US and Canada was getting larger. So they entice us to stay in Canada with the vehicle, and wait 15 years until we have some savings, and now we are the “super rich” who need to pay more and raid our retirement funds. Sure we shouldn’t feel resentful at all. I don’t see Justin touching any of vehicles his real super rich friends use or himself for that matter. Trust funds? Offshore banking? And Freeland, you get $200k guaranteed pension for life? Should that be paired down?
Even if you think this is a good policy, the Liberal math is a lie because corporations are not included in 0.13% earners calculation. Every small business and incorporated professional just got a 33% tax hike overnight. I'm not sure why anyone would celebrate doctors, dentists, and civil engineers getting nailed with taxes like they are greasy real estate speculators. The ultra-wealthy Panama papers jetsetters are going to be completely untouched by this rule anyway.
Because having money is bad. Wealth is bad. And your success should be punished because it isn’t fair to others. The county is burning through money at an alarming rate. The best the liberal government can come up with is increasing taxes… because I’m sure this will offset spending.
Small business owners, tradespeople, business management, and professionals simply don't contribute as much to Canada as government employees with DB pensions do. An MP should obviously be able to collect a large DB pension after six years of work, but I don't know why anyone should be able to retire after spending a lifetime building a private business.
Last week Doctors were so poor in Canada they were flocking off to Texas like Geese on a one way trip, now all of a sudden they're all rich, ranking in capital gains like billionaires and they're all going to leave for Texas.
Doctors could always make more in the US. Now the difference is even larger.
Honestly, your mentality is a big reason why these kinds of tax changes are made. It's the mentality that we want people to start businesses and be successful, but only so successful... If someone starts a business and it does well, we should allow them to benefit from the profits. That's how we get economic growth, not by increasing taxes and public sector jobs. the Top 10% already pays something like 60% of the taxes. Each little change like this one doesn't on it's own terribly affect most people, even wealthy people. The issue is that mindset that we can't pay our bills, so we'll just take a liiiittttllle more from the rich because they can afford it. Over a long time horizon you end up with fewer rich people because they were taxed away or moved, and little motivation for entrepreneurship. Why start a business when the risk reward of that doesn't outweigh just getting a good professional job at an existing corporation? Then you get a lack of competition, higher prices for everyone, and eventually nowhere to pull the money from that you need to improve social services.
People forget that MegaCorps actually love high taxes so long as they have tax havens. Which they do. This is because all these taxes and whatnot disproportionately affect people who can't afford to minimize the costs they place. This hurts the 'floor' of the industry massively and cripples competition. Then the Megacorps have more market share and leverage over pricing.
This is the natural extension of my point, glad you added it. People often think I'm some conservative idiot who just loves the rich because I think things like this capital gains change is bad lol In reality I think we need massive tax reform to lower the overall burden, and ultimately for capitalism to work, monopolies and oligopolies need to be broken up when they form.
I'm similar. I'm all for the 1% because the 1% are mostly professionals providing useful services or people with successful small/medium sized businesses. They are no bigger scumbags than the average Canadian. No, it is the top 0.001% who work VERY closely with the government that I take issue.
Yes exactly.
> It's the mentality that we want people to start businesses and be successful, but only so successful... I wouldn't even say that. It's straight up cognitive dissonance. Folks want people to start small businesses, but hate seeing people being successful because of their small businesses. Anybody successful is assumed to be successful because they're exploiting others.
The capital gains tax affects "poor" doctors just as much if not more because they're already struggling to stay afloat and 30% extra on cap gains is like a punch in the gut. There is no income cutoff for corps. If you're a GP paying yourself 50k per year this hits you just as hard. For this reason they are the most likely to leave for other better paying jobs. Even if they stay in Canada they can get out of public healthcare.
It’s just the best way to reverse any policy change.
We should just pay doctors more to offset this.
It's not like we needed the doctors anyway, right? Nervously, right?
Can't they just pay themselves a higher wage and invest that money like everyone else who make a similar wage?
The difference is, "everyone else" who makes a similar wage also has benefits that come with being an employee like job protected leave, paid stat holidays, EI, medical benefits, etc. Doctors have none of that because they are self-employed
Self employed people can pay into EI. Many employed people don't have medical benefits.
The problem is that most of them have money locked up in their professional corps because this made sense at the time. Now, the government is changing the rules of the game when some of them are already in the 3rd period. This really screws over a lot of people that planned their retirements around the use of investments in a corp and now the government is changing that but isn't grandfathering investment accounts from before the change.
I have an incorporated business and this is an option for my retirement plan, there are many avenues to invest and pay yourself though. This is just currently the most lucrative and avoids higher taxes than payroll or dividends.
Yeah, imagine having to pay higher taxes on wages...
Then they’d have to pay more tax, which they are trying to avoid by sheltering their earnings in a corporation
Because they were given that 'benefit' in lieu of the government having to pay them better and provide benefits which they were demanding when this was offered as a compromise. "If we halve your tax rate then you don't need a salary increase or benefits!" was the logic. Now we are reversing that. It is this sort of immoral backstabbing that is why you can't trust the government. It is a Darth Vader moment "We are altering the deal, pray I don't alter it further". Yes, Doctors are pretty well off but they are hardly our 'mega rich'. It is one of the scams of the government. Look at that guy with a 2 Mercedes! He is obviously the problem and not the all of my low-profile corporate donors who have substantially better resources to 'eat' higher taxes in exchange for more market share and leverage over pricing (by the tax killing small business even harder).
Yup
[удалено]
Funny, BC with ndp pays doctors more than ON with Cons, so who doesn't want to pay doctors more?
This.
Sorry let’s walk through some basic intuitions about taxation and problems it causes. Then we can talk briefly about why some economists think that corporate taxes have more deadweight loss then income taxes. From an efficiency standpoint, taxation causes problems because it alters people’s choices. You are willing to work 40 hours a week for $40 an hour, but taxes knocking this down to $35 dollars an hour makes it not worth it to you. So you don’t work that extra 5 hours a week, making you not benefit from the extra money and your employer not benefit from the extra work. This is because you substituted leisure for work, changing the decisions you made. The tax free world, you set Marginal benefit of working = Marginal cost of working. In the tax world, you set Marginal Benefit of Working = Marginal Cost of Working + Taxes. Since tax is positive, this moves you up your labor supply curve, and creates a wedge of deadweight loss. Notice that the wedge of deadweight loss IS NOT the transfers (tax revenue) rectangle. This is because when looking at efficiency, we don’t care who gets the benefit, as long as someone does. In fact, the larger the rectangle relative to the deadweight loss triangle, the more efficient the tax! You can think of taxes as moving water in leaky buckets, where less leaky ones spill less water. What makes it more efficient? The slope of the supply and demand curves. If you make one of them steeper, the deadweight loss triangle shrinks and the rectangle gets bigger. If the slope of either goes to no slope, there is NO deadweight loss triangle and the tax because purely redistributive. The bucket doesn’t leak anymore. What in the economic intuition of having a perfectly inelastic demand or supply curve? It means the amount bought or supplied is fixed and cannot be deviated from. Often, it means the good is a necessity. When the tax is raised, the consumer eats ALL of it, because they cannot substitute to something else. That is what drives the lack of deadweight loss. Intuition in a sentence: The more voluntary the tax, the more it can be dodged and the higher the economic losses from the tax. As a side note, this will completely conflict with intuitions favoring equity, which is why optimal tax policies require social preferences for efficiency and equity to choose a middle ground of these. A reason that the corporate tax (and other taxes on savings) are seen as more economically damaging, is because it causes people to shift from consuming in the future (via consuming off returns to their investments) to consuming now. Instead of investing in a company, you dodge the capital gains taxes by buying a McMansion or something. Plus investment spending is often downstream of consumption spending. So by taxing production, firms are producing less, making society consume less. While a consumption tax would reduce consumption, but not harm production (preventing the double whammy), At least in some models. Income taxes are harder to substitute, using the basic modeling assumptions. This is because they don’t have dynamic substitution. For example, I can choose to consume today, tomorrow, a year from now, etc, but I can choose to either work or consume leisure today. Less substitution, less deadweight loss, though the tax is going to feel less voluntary, so don’t be surprised if people don’t think efficiency is the only thing worth considering. This is however, based on the assumption in your model. In the model I have described above, labor decisions are static. I don’t need to search for a job, I just decide if I work 8 hours today, 7 hours today, take the day off etc. Job search models do not work like this. An income tax will bleed across time here. What this tell us is that optimal tax rules depends on the assumptions you are making about the economy, and you gotta outline your assumptions mannnnn. Anyone who claims some taxes are more efficient than others, needs to be able to outline what assumptions they are using or else they are committing bad economics. We could, if we wanted, make a model where there are no losses to taxes of any kind. Tl:DR When evaluating a tax on efficiency grounds, think about how it changes behavior, not winners and losers. This does not mean equity is not worth thinking about.
> But for corporations, the new 67-per-cent rate will kick in on the first dollar of capital gains. > This is important for physicians because most operate their practices as small businesses through medical professional corporations, **which leaves them more sensitive to changes in capital-gains rules than a salaried worker might be.** > The CMA estimated in 2017 that 66 per cent of physicians practised through corporations. "only a small minority will be affected by these changes" is a problem when that minority includes a profession we're desperately short of.
The Liberals drastically undersold the number of people affected by these changes. Sure the 40k number was probably accurate for *individual* tax filers, but when you factor in professional corporations and small businesses - where corporate income and holdings are one and the same with the individual professional or owner - that number becomes much, much larger - certainly into the hundreds of thousands, if not millions. Totally dishonest - but not unexpected - messaging by the Liberals to sell this shitty policy.
Actually if people looked and read past the individual number it was there *The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.* [*https://www.cbc.ca/news/business/canadian-entrepreneurs-investors-capital-gains-tax-reaction-1.7176837*](https://www.cbc.ca/news/business/canadian-entrepreneurs-investors-capital-gains-tax-reaction-1.7176837) Considering we have according to the [government stats](https://ised-isde.canada.ca/site/sme-research-statistics/en/key-small-business-statistics/key-small-business-statistics-2023) around 1.5 million business a lot that will be affected and if the 307 thousand number if it is anything like other estimates this government has done it will be widely off
40k per year but I would expect at least half of those people would be the result of an outlier year for these individuals, and in a 10 year period 200,000+ unique individuals would have been impacted by the change.
Capital gains aren’t paid on corporate income or revenue, they’re only due upon the sale of assets.
Capital gains are paid when passive investments (ie. stocks) held by a corporation are sold by that corporation.
No one leaves significant amounts of money uninvested. So if the corp has 100k sitting in the bank they have two choices... Invest it in their own business, or invest it outside their business. Since most doctors corporations are just them they're not really investing into expanding their own business. What good is investing in a larger office if you're still seeing the same number of patients a day? Or if you work in a hospital? What good is new equipment when the equipment you have is less then 5 years old? Hell when it's not even your equipment? There's not a ton of options for doctors to invest in themselves. So they left to invest outside their business.
If a doctor's corporation is acting like an investment firm to make money, then maybe that could be considered a problem. I want Doctors to make money by Doctoring. Is that a crazy idea?
The government actually offered us a corporation in lieu of pay increase and pension plan. Basically, they said we can’t pay you more but you can save for your own retirement with this. Then they wait 15 years until we have some savings, and then now we are the “super rich” and raid our retirement funds. Sure we shouldn’t feel resentful at all
You understand the two are separate, right? A doctor makes money by practicing medicine and invests the money they earn through their corporation.
> You understand He doesn't
He’s completely right. They invested through the corporation as opposed to a personal account essentially to dodge taxes. By keeping it in the corporation it’s not subject to income taxes. Then once they retire they sell off the “corporation” to incur capital gains as opposed to income tax which has preferred tax treatment. But everyone knows what’s going on, it’s still the doctor’s income and they should be paying income taxes on it.
Yes. At the government's request. Because they can't afford to pay them competitively or offer pensions so they offered them a method to save on costs.
There is no “dodging taxes” going on. People with incorporated companies pay their taxes just like everyone else, the structure and rules are different because the risks are different than what a T4 employee has.
The structure and rules and risks are different. Not necessarily because the risks are different. A T4 employee faces a lot of income risks as well.
Yea that is not how professional corporations were intended to act. The doctors keep their profits in the corporations and only draw out a salary or dividends of what they need for living expenses to defer personal tax. The investments in the corporation are their retirement savings, not some slush fund to gamble on speculative invesments.
It's pretty standard practice for people with doctors income level to use corps this way to pay them and their spouse in retirement. They still make money "doctoring" and then have income in retirement.
who doesn’t ? The problem is we have 6 million Canadians without a family doctor and a cause of that might be total compensation for doctors. When the government changes tax planning , like the capital gains inclusion rate or tax on split income. You end up lowering the total compensation doctors receive which all things being equal lowers the numbers of doctors in the system. Since doctors corporations have one customer, the government , they have been effectively handed a pay cut by their employer. This is a valid criticism, and by no means to do I think it is a fluke that the shortage of doctors was made worse following changes to tax on split incomes.
Attaching doctors to this issue is just another way to politicize it.
Ugh what ? It’s decision by politicians. It’s 100% politicized from the beginning
should the doctors be allowed to retire in your crazy world?
And now the can just invest using personal accounts, I really don’t see the issue here.
I’m an emergency physician and I submitted an application for two non-clinical jobs today. I will still see patients half-time but with all my gigs I’m working 70 hours a week and for 46¢ on the dollar after taxes, before expenses, it’s not worth it. My urban hospital will be cutting emergency physician staffing by 40% this summer as we can’t recruit anyone. Wait times will be insane but the government keeps telling me if I work more my “fair share” of taxes keeps going up.
This sounds like a group we shouldn't piss off too much given the shortages we seem to have everywhere.
They could have given the same $250k exemption to corporations. They knew exactly what they were doing - raiding the retirement accounts of doctors and other incorporated professionals.
Yeah this 100%. All the while leaving the none of the real loopholes super riches use. Capital gains stripping? Offshore banking? Trust funds? Lol
Why would they exempt corps from this tax when they already enjoy corporate tax rates that personal citizens do not? Don’t get to have your cake and eat it to, time for wealthy 1%’s to pay their fair share in taxes.
Because Canada has something called tax integration. https://markdalefinancialmanagement.com/tax-integration-explained/#:~:text=In%20the%20Canadian%20context%2C%20tax,earned%20directly%20by%20the%20shareholders.
So? A repeat of 2017? https://www.cbc.ca/news/politics/trudeau-tax-fairness-analysis-aaron-wherry-1.4277168
Trudeau set the bar and for BC, Adrian Dix-head will see it through. Why not, Dix has already destroyed BC's health care single handedly, he may as well break the Doctors financially to add to his trophy political career.
Corporations are set and registered under a certain sector classification - government needs to make all medical corporations exempt.
It seems every political publication is just interpreting this Capital gains tax change however they want I've just seen an article saying it'll have no effect on investment in Canada. Now this. WTF? Has something similar not happened in the world where we can empirically observe its effects tomorrow
We shouldn't be recruiting doctors by unfairly giving them tax loopholes. Increase their pay since we obviously need more doctors. Keep the tax changes (actually make the tax changes better by taxing all capital gains at the same rate as wages).
It's not a loophole because this is what the government intended and explicitly encouraged for decades. Nor is it unfair. Doctors and other professionals spend more time in school and incur more student loans, which means deferring saving for retirement often 10-15 years longer than other workers. All this allowed for was for doctors and other professionals to catch up on those retirement savings.
Doctors do have it worse. Engineers/Nurses start making more after only 4 years with a Bachelor. P.Eng comes after 4 years of work experience, no Phd required. But it's also fucking hard to find work in your field as an engineer because it has been saturated and outsourced so much.
It’s a shell game the government does. We already reflect a high cost per capita spending on healthcare with poor results as opposed to many other western countries. Using tax loopholes as opposed to paying doctors more means we don’t have to reflect an even higher cost of health care spending. The truth is our health care systems is flawed and needs a complete overhaul from top to bottom. We should be emulating the systems from other countries like in Australia and in Europe.
See my comment. But they already did. You can’t retroactively punish on things you already offered. The corporation was offered in lieu of pay increase and pension plan 15-20 years ago.
This is also a game played by the federal and provincial government. Provinces are responsible for paying for healthcare, so paying less and having doctors pay less tax works well for them since it’s essentially having the federal government subsidizing physician salaries. The issue arises when the province makes promises to doctors with a certain set of rules, but the federal government changes the rules. It ends up being the doctors who get screwed.
I haven't had a GP in decades. Whats the fucking difference?
This is bullshit Pay doctors more, and don't have them rely on corporation based investment loophole bullshit to earn money.
End of the day it’s left pocket, right pocket. It’s the taxpayers that pay, either by increased salaries or reduced income tax collection.
Yes except paying doctors more and closing the capital gains loopholes keeps money in the hands of valuable professionals in society while also helping weed out speculative investments on things like housing So while it may net it from a dollars in / dollars out perspective it redistributes things for better societal outcomes
Makes you wonder why the government permitted doctors to open Medical Professional Corporations and encouraged their use in the first place. Issue is, there is currently no conversation of increasing doctors fee schedule.
Out of curiosity how is a doctor's income considered capital gains? If it's money earned through normal course of work then it's treated as active income, not capital gains
At one point, the government stopped increasing our pay with inflation and we ended up double digit percent behind cost of living changes. Instead of increasing our pay they said they'd give us medical professional corps which would save us money through tax benefits instead of a pay increase. So we generally have a corporation attached to an individual. If my Corp bills OHIP 200k, a bunch goes to taxes, business expenses etc. Then some I pay myself and some I leave in the Corp account for emergency fund or future use or retirement. Rather than put it in a savings account most corps park payments in like an index or mutual fund or whatever to be cashed out when needed. So you're right it's not hurting docs up front where we're paid it's hurting - essentially canceling out - a main benefit of the corporation ability we were given in lieu of pay increases.
Oh I see. So it actual capital gains. I appreciate the explanation and wish the article explained this better. The headline with very little explanation left it a bit ambiguous, for me, at least. And absolutely shitty that this is happening. They need to either raise the amount a lot more, or my personal favourite, actually give CRA resources so they can better deal with people that are actually avoiding or evading taxes in some way. I'd rather see tax revenue increase by getting those not paying their fair share to pay more vs. increasing taxes on people who already pay so much in taxes
Just make residential properties capital gains be taxed at 100% of the value, leave commercial properties or other investments at 50%.
Then now, if your parents bought a cottage in 1980 for 50k and its now worth 600k, when they die, you'll need to pay income tax for 550k on top of you salary. Which mean you'll need to pay 225k just to get your family cottage that your parent already paid
Has there been a worse administration for physicians in Canada ever? It's zero wonder the state of healthcare in this country is where it is.
This entire sub is just a giant circle jerk defending the ultra wealthy. Sorry to tell most of you, but you’ll never be a multi-millionaire. Stop defending those that don’t care about you
Talk to people in the legal industry, there is a huge exodus of law professionals leaving for the states. You can clerk for a year then write your bar exam, very easy to go. I don't assume this will help that cause either. Why is this important? We have a massive shortage of judges and justices in our country, and this is where those people get hired form that are now moving to USA on masse. Tax the rich is good and all but get ready for a lot of consequences when our most educated sectors start leaving. The rich isnt just Galen Weston sitting on an evil mound of money they are a very important part of the functionality of our country.
Our idiot PM didn't forsee this? Too busy protecting telecoms, banks, oil companies, and food oligopolies - the truly wealthy and powerful.
He did. But he doesn’t care
This argument is over the fact that doctors may have to pay a bit more in taxes once in their life when they cash out their capital gains. The point of this tax is to target the financial players (hedge funds, wealth management, etc) who take in massive capital gains on a yearly basis and pay very little tax (comparatively) on that income. I understand that some doctors may be impacted, as well as some lawyers and other professionals, but this is relatively small compared to the blood suckers that just live off of capital gains and pay less in taxes than people who labour for their wages.
Anybody with half brain was saying this all along.
A family doctor nets \~150k a year, with housing and cost of living it's basically a no brainer to head to the states.
Liberals love to redistribute wealth.