NEW CANADIAN HEALTH CARE FUNDING
To: Hon Kelvin Goertzen, Manitoba Minister of Health
To: Hon Brain Pallister, Premier of Manitoba
To: Hon Cameron Friesen, Manitoba Minister of Finance
Copy: Cliff Cullen MLA, Ian Wishart MLA, Jon Gerrard MLA
To: Canada Minister of Health, and Parliamentary Secretary
To: Canada Minister of Finance, and Parliamentary Secretary
Copy: Kevin Lamoureux MP
December 5, 2016
Proposed changes to the Canada Income Tax and Benefits Return:
1. Line 420: "Net federal tax"
- Lower the federal tax rate as needed to account for removal from it of all federal transfers to provinces for health care.
2. Add a new Line 425: "All Provinces' and Territories' health care insurance tax" (having a distinct print colour different from the provincial tax line).
- Set this tax rate (in the first year) such that it replaces the total amount the federal tax is lowered, so the change is revenue neutral in the first year.
- After the first year, the provinces annually decide, by majority vote, what the health care tax rate should be, but the federal government retains the option to cap the health tax rate at a maximum rate.
This dedicated health care tax collected is then entirely forwarded to the provinces, but distributed among the provinces in accordance with the relative health care needs of each, based principally on population and age distribution of the population in each province.
- Prior year's national health care data is used by the Federal Government to calculate the average relative health care service cost requirement for each age of persons, in general being a higher cost for older persons. However other relative adjustments could be added, such as a higher health service cost per pregnant person or per new infant.
- Relative payments to provinces thus vary annually with the relative health care needs and population of each province.
The health care tax rate would also vary with the age of the taxpayer. Older persons would pay a higher rate than younger persons, because their risk of needing health care services is higher, and because younger persons may have an accidental death, and thus not have the privilege of living to be an older person typically drawing more heavily upon government health care funding. The age of retirement and all older ages, could be set as the full rate level for the health care tax, with a simple linear tax rate reduction for younger persons. A 25 year old would thus pay 25/65 = 38% of the rate paid by a 65 year or older person.
A wealth factor should also be included, to ensure that wealthy persons who happen to have low income, are also required to pay health care tax similar to high income earners:
- exclude personal residence from wealth determination to ensure seniors in their own homes would not be cash stressed as a result of this tax line;
- use the Bank of Canada interest rate to determine deemed possible annual income if the person's assets were converted into income earning assets.
3. Line 428: "Provincial or territorial tax"
- This initially remains unchanged, as set by each province, but would likely decline as provinces choose to shift more emphasis onto the new line 425 for their heath care revenue.
Federal government achieves political freedom from taxing responsibility for health care, and could implement this change unilaterally to expedite.
Provinces achieve greater collective control over total health care funding.
Provinces retain independence for health care expenditure decisions, achieving diversity of approach to enable learning from each other.
- Only federal string attached might be that provinces must annually spend the funds received on universal public health care services or investments.
Canada achieves an automatic "Equalization" regarding the federal funding of health care.
- Funding is raised from income across Canada, and then distributed according to need across Canada.
- Health care can thus be removed from the calculation of other equalization needs among provinces.
Provinces and the public are assured of enduring federal tax collection and fair allocation, via a visible mechanism, ensuring secure long term funding.
Canadians achieve greater equity of funding for health care service needs in all provinces, automatically adjusting for relative demographic and income changes among provinces.
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