Last week the Prime Minister stood in the House of Commons and in response to a question from the opposition leader said these plans would not be taxed.
Here’s the excerpt from the exchange between the PM and the Opposition Leader:
Hon. Rona Ambrose (Leader of the Opposition, CPC):
Mr. Speaker, millions of Canadian workers will be forced to pay the Liberals' new tax on health and dental benefits. Many will lose their coverage and find themselves paying out of pocket for important expenses like life-saving medicines, mental health counselling, and their children's braces. It is not fair that the Prime Minister racks up billions of dollars in spending on his priorities and now Canadians have to pay for it with a $1,000 new tax on their health and dental benefits.
Why would the Prime Minister even consider doing this?
Right Hon. Justin Trudeau (Prime Minister, Lib.):
Mr. Speaker, we got elected on a commitment to invest in the middle class, to support the middle class and those working hard to join it. The very first thing we did was lower taxes on the middle class and raise them on the wealthiest 1%. We are committed to protecting the middle class from increased taxes and that is why we will not be raising the taxes the member opposite proposes we will do.
A recent article in the National Post, questions in the House of Commons before the break, and calls to the Minister of Finance’s office have brought to light that government has identified taxing health and dental benefit packages as a possible source of additional revenue for the federal government, under its commitment to review $100 billion in forgone federal revenue. Interestingly, the recommendation was made in the 2015 Report of the Advisory Panel on Healthcare Innovation under the heading “Financial Fairness In a Period of Transition”:
- Make employer-paid premiums for employer-sponsored health and dental benefits a taxable benefit to the employee, while permitting employees to claim this expense as a qualifying medical expense under the new Refundable Health Tax Credit.
We don’t know if the government is planning to implement this recommendation as is, but the whole issue of taxing health care benefits is a huge red flag for the business community and employees who depend on these plans for
preventative care. Taxing health care benefits would cost employees hundreds, if not thousands of dollars each year, and could result in fewer employers offering these plans. For example, if your premiums were $5,000 a year, that cost would be viewed as a taxable benefit and added to your total taxable income for the year (see box above).
Preventative care includes vision care, prescription drug, mental health services, dental care, occupational therapy, and physio, chiro, and massage therapies.
Taxing health benefits could limit use of preventative measures by Canadians and put added stress on the health care system as a whole. The Canadian Chamber of Commerce has found that Finance Canada estimates that exempting employer-provided health benefits results in about $2.9 billion in forgone tax revenue. However, that
generates $32.2 billion in additional health care benefits for Canadians.
“We know that healthy employees are productive employees," says Monique Beneteau, Health Promoter with Peterborough Public Health. "Without access to benefits, one could anticipate higher rates of absenteeism and presenteeism. I would think that taxing employee health benefits, where the majority of workers are employed in small businesses and receiving very modest pay, could be the difference between making ends meet and
living in poverty while working.”
When Quebec introduced a similar tax, 20% of employers dropped health and dental benefits for employees. Studies suggest the removal of this tax benefit across the board could result in a decrease of 50% of small firms that will be able to offer health benefits.
The impact of such a tax is far reaching, with about 24 million Canadians using employer-provided health care benefits.
While in Peterborough for a Town Hall recently, Prime Minister Trudeau made numerous references to his government’s intention to grow the middle class. It is believed this type of tax will not accomplish that goal, but rather create unintended consequences in other areas of health care. It will not bring more fairness to Canadians or simplify the tax code. It will download further complexity onto Canadian employers and potentially leave Canadian families without access to the care they need.
The Canadian Chamber of Commerce has prepared an email letter template. We are asking that you urge the government, through your MP, to maintain the tax-free status of employer-provided health care benefits.