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Fraser Institute

Here’s your annual bill for public health care

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From the Fraser Institute

By Bacchus Barua

Notably, the amount paid by the average family has increased by 239.7 per cent since 1997 (the first year of available data).

According to a recent survey by Statistics Canada, almost half of Canadians said that rising prices are affecting their ability to meet day-to-day expenses. At the same time, Canadians are increasingly aware of their significant tax burden, with 74 per cent feeling the average family is overtaxed. This is not surprising given the average Canadian family spends more on taxes than food, clothing and shelter combined.

However, one contributor to this growing tax burden remains hidden—the price we pay public health care. You read that right. Public health care is not free—but it’s very difficult to figure out exactly how much we pay for it on an individual or family basis.

This is primarily because our public health-care system is funded through general government revenues. In other words, there’s no dedicated tax that fully funds the system. Our income taxes, sales taxes, business taxes and other taxes get poured into a fiscal vat, from which governments take a generous portion for health care.

While it’s easy enough to gauge total health-care spending by governments ($225.1 billion) or how much was spent per Canadian ($5,614), it remains nearly impossible for Canadian families of different sizes and incomes to calculate how much they contribute towards that vast amount.

But a recent study helps us get a general idea. According to the study, an average family of four (two parents and two children) with an average income of $176,266 will pay an estimated $17,713 (in taxes) for public health care this year. Single Canadians, with an average income of $55,925, will pay $5,629. Of course, these amounts vary by income with the poorest 10 per cent of income earners paying $639 while the top 10 per cent pay $47,071.

Notably, the amount paid by the average family has increased by 239.7 per cent since 1997 (the first year of available data). This increase is 3.1 times greater than the rate of inflation, 2.2 times greater than food cost increases, and 1.6 times greater than housing costs increases. And crucially, the cost of public health care for the average family has increased 1.7 times faster than their average incomes grew during the same period.

These figures are not only important for families who are interested in how their tax dollars are spent, they are one very important side of the equation when trying to understand whether we receive good value for our health-care dollars. Moreover, as politicians continue to promise ever increasing health-care spending to fix our crumbling system, it’s crucial for Canadians to understand exactly how that spending impacts their wallets.

One thing is clear. With nearly an $18,000 price tag for the average family of four, Canada’s public health-care system is anything but free.

Business

Canada’s chief actuary fails to estimate Alberta’s share of CPP assets

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From the Fraser Institute

By Tegan Hill

Each Albertan would save up to $2,850 in 2027—the first year of the hypothetical Alberta plan—while retaining the same benefits as the CPP. Meanwhile, the basic CPP contribution rate for the rest of Canada would increase to 10.36 per cent.

Despite a new report from Canada’s chief actuary about Alberta’s potential plan to leave the Canada Pension Plan (CPP) and start its own separate provincial pension plan, Albertans still don’t have an official estimate from Ottawa about Alberta’s share of CPP assets.

The actuary analyzed how the division of assets might be calculated, but did not provide specific numbers.

Yet according to a report commissioned by the Smith government and released last year, Alberta’s share of CPP assets totalled an estimated $334 billion—more than half the value of total CPP assets. Based on that number, if Alberta left the CPP, Albertans would pay a contribution rate of 5.91 per cent for a new CPP-like provincial program (a significant reduction from the current 9.9 per cent CPP rate deducted from their paycheques). As a result, each Albertan would save up to $2,850 in 2027—the first year of the hypothetical Alberta plan—while retaining the same benefits as the CPP. Meanwhile, the basic CPP contribution rate for the rest of Canada would increase to 10.36 per cent.

Why would Albertans pay less under a provincial plan?

Because Alberta has a comparatively younger population (i.e. more workers vs. retirees), higher average incomes and higher levels of employment (i.e. higher level of premiums paid into the fund). As such, Albertans collectively pay significantly more into the CPP than retirees in Alberta receive in benefits. Simply put, under a provincial plan, Albertans would pay less and receive the same benefits.

Some critics, however, dispute the estimated share of Alberta’s CPP assets (again, $334 billion—more than half the value of total CPP assets) in the Smith government’s report, and claim the estimate understates the report’s contribution rate for a new Alberta pension plan and overestimates the new CPP rate without Alberta.

Which takes us back to the new report from Canada’s chief actuary, which was supposed to provide its own estimate of Alberta’s share of the assets. Unfortunately, it did not.

But there are other rate estimates out there, based on various assumptions. According to a 2019 analysis published by the Fraser Institute, the contribution rate for a new separate CPP-like program in Alberta could be as low as 5.85 per cent, while AIMCo’s 2019 estimate was 7.21 per cent (and possibly as low as 6.85 per cent). And University of Calgary economist Trevor Tombe has pegged Alberta’s hypothetical rate at 8.2 per cent.

While the actuary in Ottawa failed to provide any numbers, one thing’s for certain—according to the available estimates, Albertans would pay a lower contribution rate in a separate provincial pension plan while CPP contributions for the rest of Canada (excluding Quebec) would likely increase.

Tegan Hill

Director, Alberta Policy, Fraser Institute
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Business

For the record—former finance minister did not keep Canada’s ‘fiscal powder dry’

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From the Fraser Institute

By Ben Eisen

In case you haven’t heard, Chrystia Freeland resigned from cabinet on Monday. Reportedly, the straw that broke the camel’s back was Prime Minister Trudeau’s plan to send all Canadians earning up to $150,000 a onetime $250 tax “rebate.” In her resignation letter, Freeland seemingly took aim at this ill-advised waste of money by noting “costly political gimmicks.” She could not have been more right, as my colleagues and I have written herehere and elsewhere.

Indeed, Freeland was right to excoriate the government for a onetime rebate cheque that would do nothing to help Canada’s long-term economic growth prospects, but her reasoning was curious given her record in office. She wrote that such gimmicks were unwise because Canada must keep its “fiscal powder dry” given the possibility of trade disputes with the United States.

Again, to a large extent Freeland’s logic is sound. Emergencies come up from time to time, and governments should be particularly frugal with public dollars during non-emergency periods so money is available when hard times come.

For example, the federal government’s generally restrained approach to spending during the 1990s and 2000s was an important reason Canada went into the pandemic with its books in better shape than most other countries. This is an example of how keeping “fiscal powder dry” can help a government be ready when emergencies strike.

However, much of the sentiment in Freeland’s resignation letter does not match her record as finance minister.

Of course, during the pandemic and its immediate aftermath, it’s understandable that the federal government ran large deficits. However, several years have now past and the Trudeau government has run large continuous deficits. This year, the government forecasts a $48.3 billion deficit, which is larger than the $40 billion target the government had previously set.

A finance minister committed to keeping Canada’s fiscal powder dry would have pushed for balanced budgets so Ottawa could start shrinking the massive debt burden accumulated during COVID. Instead, deficits persisted and debt has continued to climb. As a result, federal debt may spike beyond levels reached during the pandemic if another emergency strikes.

Minister Freeland’s reported decision to oppose the planned $250 onetime tax rebates is commendable. But we should be cautious not to rewrite history. Despite Freeland’s stated desire to keep Canada’s “fiscal powder dry,” this was not the story of her tenure as finance minister. Instead, the story is one of continuous deficits and growing debt, which have hurt Canada’s capacity to withstand the next fiscal emergency whenever it does arrive.

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