Trudeau dismisses plea from doctors to reconsider capital gains tax change

Prime Minister Justin Trudeau is rejecting a call from some doctors for his government to reconsider its planned capital gains tax hike.

The doctors warn that the tax change could undermine efforts to recruit and retain physicians in Canada and threaten the stability of the health-care system.

Canada is facing a severe doctor shortage. An estimated 6.5 million Canadians are going without access to primary care as family physicians retire en masse and medical schools struggle to recruit new residents to replace them.

Speaking at Wanuskewin Heritage Park near Saskatoon Tuesday, Trudeau said the tax hike presented in the federal budget only asks "the wealthiest to pay a little bit more."

"We just don't think it's right that a student, or an electrician or a teacher be paying taxes on 100 per cent of their income while others have the opportunities to use accountants and pay taxes on only 50 per cent of that income," he said.

WATCH | CMA president 'deeply concerned' about capital gains tax change:

CMA president ‘deeply concerned’ about capital gains tax change

4 hours ago

Duration 9:00

Canadian Medical Association president Dr. Kathleen Ross tells Power & Politics that she fears changes to the capital gains tax will make recruitment and retention of physicians more difficult at ‘a time where the health force is beleaguered, mothballed and really struggling to deliver on services to Canadians.’

A capital gain is the difference between the cost of an asset — a cottage, an investment property, a stock or a mutual fund — and its total sale price.

Right now, only 50 per cent of capital gains are taxable; the budget proposes to increase that "inclusion rate" from 50 per cent to two-thirds on capital gains above $250,000 for individuals.

The budget also proposes to tax two-thirds of all capital gains earned by corporations and trusts.

Canadian Medical Association president Kathleen Ross told the Canadian Press earlier Tuesday that many doctors would be be hit by the hike because they incorporate their medical practices and invest for their retirement within their corporations.

Trudeau defended the measure, saying it's about fairness.

"This is about the fact that in order for people to succeed across this economy, at all generations, we need young people to succeed, we need young people to be able to buy homes in the coming years, we need young people to be confident of the future," he said.

"So yes we are asking the most successful in this country to do a little bit more to make sure that everyone can see themselves in the success of this country."

Ross said the proposed changes would increase "financial strain" on a class of professionals who often do not have access to pensions.

Recruitment and retention

"We have seen this portrayed by the government as tax fairness for every generation, but realistically, there are certain members of the population that are going to be more impacted," Ross told the Canadian Press.

Ross said many doctors set themselves up as small businesses, incorporating their practices to help them deliver services to their patients.

In a statement posted on the CMA website, Ross said the hike "will create another barrier to retaining and recruiting physicians in a time when our health system and the providers within it are already under constant strain."

The statement says that the tax increase undermines the well-being of doctors and "jeopardizes the stability of our struggling health-care system" at a time when physicians are already leaving the profession or reducing their hours.

Ross's concerns were echoed by the non-profit organization Doctors Manitoba.

"A change like the one proposed in the federal budget may have the unintended consequence of making it harder to recruit and retain doctors, and that's a big concern for Manitoba considering we have a record high shortage of doctors right now," a spokesperson from the organization said in an email.

Morneau calls it 'a disincentive for investment'

Former Liberal finance minister Bill Morneau also criticized the proposed changes to capital gains last week, saying it's "clearly a negative to our long-term goal, which is growth in the economy, productive growth and investments."

"This was very clearly something that, while I was there, we resisted. We resisted it for a very specific reason — we were concerned about the growth of the country," he said last week at a post-budget Q&A session with KPMG, one of the country's large accounting firms.

"I think we always have to recognize any measure that creates a disincentive for investment not only impacts us within the country but also impacts foreign investors that are looking at our country."

Jessica Brandon-Jepp, the Canadian Chamber of Commerce's senior director of fiscal and financial services policy, said the capital gains hike could affect growth.

"We oppose any measure which will increase the costs for businesses and Canadians when both are currently experiencing challenging economic headwinds," she said.

In a statement, a spokesperson for Finance Minister Chrystia Freeland said the federal government is changing the capital gains inclusion rate "because it's unfair that a nurse pays a higher marginal tax rate than a multi-millionaire."

"These changes are in addition to the $200 billion we are investing in health care and the enhanced forgiveness of student loans for doctors and nurses wanting to work in rural and remote areas," Katherine Cuplinskas said.