Proposed tax changes - what will that mean for us

[ralk]

54 minutes ago, Ian Wong said:

Don't have time for a full analysis right now.  

Here's the Govt of Canada's example, for dividend sprinkling, with annual tax savings of $35,000 (my point #6).

https://www.fin.gc.ca/n17/data/tppc-pfsp-eng.pdf  (page 10)

Now, this relies on having 3 adult family members to income split (unlikely for a new physician), but you can get a significant way there just with a non-working spouse (very common for a new physician with young children). 

Ian

If the bulk of the loss is through income splitting, then that adds up. I wasn't planning on income splitting, so that didn't show up in my personal income calculations moving forwards. Hard to see how any groups, much less physicians, win the argument on that proposal though. "I should be paying lower taxes than I otherwise would, but only if I have a spouse and/or adult children who earn much less than I do" isn't exactly an easily-defended position.

[Ian Wong]

Couple of points:

1. The system exists as it has, and an entire cohort of physicians has planned for retirement with these mechanisms in place. The government has suddenly moved the goalposts. No different than if you were relying on a govt pension or CPP/OAS for retirement, and it is no longer there. But we are 1 percenters, and therefore a minority of voters, so it's ok?

There are lots of other tax guidelines that are equally arguable to be unfair. No tax on capital gains for a primary residence is a massive one. It is a huge tax break for the boomer generation, and confers relatively little to no advantage to your and my generation. 

2. To directly address your point, why are we not taxed on a household basis, rather than as individuals?  

Under current rules, a two family household, with one partner working 80 hrs a week, and the other 0 hrs a week, pays substantially more taxes than if two partners each work 40 hrs a week, earning the same household income.

A one physician family is highly likely to be hosed by this.

How is this remotely fair?  The partner working 0 hrs a week doesn't even gain any RRSP contribution room, gets no access to CPP, gets no employee benefits such as healthcare, dental, sick days, vacation, etc. 

To flip your last point around, I am paying higher taxes precisely because my wife earns less than I do.

Ian

[NutritionRunner]

On 2017-08-21 at 8:27 AM, 5th time the charm said:

physicians in a family health team do not have salaries. They are in capitation models (such as a family health organization -FHO) and most are incorporated- they are independent contractors and also are considered under FFS because they can bill for health care procedures outside their basket and work in other FFS venues like surgical assist, ER, nursing home.  It is the allied health staff of a FHT (social workers, dietician, diabetic educators etc) who are salaried. 

However physicians in Community Health Centres ARE salaried.  Note that Community Health Centres, at least in Ontario, are NOT the same as Family Health Teams.  All the physicians at the Community Health Centre where I work are on salary.  We are currently trying to hire a new physician, and almost had secured one, but the fact that he couldn't charge FFS or charge extra for so many things that most doctors charge for (i.e. Forms completion, etc.) caused him to decide that CHC work was not for him.

When I see physicians living in homes that cost over a million (in areas where the average home price is $300,000) and driving expensive sports cars, it's hard to have sympathy for them.  My husband and I could never afford a million dollar plus home, nor could we afford an expensive sports cars, despite both having well-paying jobs.  Yes, physicians do have a great deal of training, responsibility, and take on a lot of debt during their training.  But they can still afford a lot of luxuries that are outside the reach of most Canadians, including those with just as much education.  And seeing the lousy job some physicians do, some of them clearly don't care about doing a good job, and are just going through the motions. Of course, there are many physicians who go above and beyond, and who definitely earn their salaries.  But there are also those who don't, and who just try to earn the maximum amount of money that they can, even when they aren't doing a good job at serving their patients' needs.

[ralk]

4 hours ago, Ian Wong said:

Couple of points:

1. The system exists as it has, and an entire cohort of physicians has planned for retirement with these mechanisms in place. The government has suddenly moved the goalposts. No different than if you were relying on a govt pension or CPP/OAS for retirement, and it is no longer there. But we are 1 percenters, and therefore a minority of voters, so it's ok?

There are lots of other tax guidelines that are equally arguable to be unfair. No tax on capital gains for a primary residence is a massive one. It is a huge tax break for the boomer generation, and confers relatively little to no advantage to your and my generation. 

2. To directly address your point, why are we not taxed on a household basis, rather than as individuals?  

Under current rules, a two family household, with one partner working 80 hrs a week, and the other 0 hrs a week, pays substantially more taxes than if two partners each work 40 hrs a week, earning the same household income.

A one physician family is highly likely to be hosed by this.

How is this remotely fair?  The partner working 0 hrs a week doesn't even gain any RRSP contribution room, gets no access to CPP, gets no employee benefits such as healthcare, dental, sick days, vacation, etc. 

To flip your last point around, I am paying higher taxes precisely because my wife earns less than I do.

Ian

Not really trying to start a debate here, was simply asking for clarification. I'm certainly not the one proposing these changes and so am not really in a position to defend them.

However, I'm also not overly concerned with them, despite being part of a one physician household, and I'm happy to explain why.

1. The system exists as it has for a period of time, but not indefinitely and there have been no guarantees that it would remain that way moving forward. The tax code is not set in stone and the federal government has every right to make changes to that tax code. Tax rates get changed on a regular basis, often with less warning than we're being given now with these proposals - which, it should be pointed out for the changes this thread is about, are still proposals and subject to possible change or even elimination before implementation. I'm hopeful we'll see some adjustments and considerations for retirement funds in professional corporations before all is said and done, especially since they affect a wide swath of small business owners and not just physicians.

I'll also point out that physicians are hardly the only ones to see changes to their retirement plans. We only need look so far as the recent issue with Sears employee pensions to demonstrate that. These were people with a legally binding agreement and are still seeing their projected retirement income slashed. It's not right that that happened to them, but I find it hard to argue that physicians are unique victims when 1) similar events are happening to people with far less ability to adapt financially and 2) we never had any guarantees of this tax system's longevity in the first place. This is one of the reasons I have not made plans to income split in order to fund my retirement - it has never been assured that it would be available.

It's true that there are other parts of our tax code that are unfair. However, if we're bringing morals into this, I have to state the obvious - two wrongs don't make a right. We're grappling with poor tax policies made by the boomer generation that enriched them while putting a drain on our society now, such as with the housing market. That doesn't mean our generation should get a pass for enriching ourselves at society's further expense.

2. Not sure exactly what this has to do with this discussion, my points, or the proposed changes. You're not taxed more because your wife earns less - you're taxed the same regardless of what your wife earns. Are you arguing that you should have a lower tax rate than a single individual doing the exact same work (including single parents and divorced individuals with children), or than a physician couple where each partner doing the same work you are, just by virtue of being married with an SO with a lower income?

I guess what I'm getting at is that when you say - "A one physician family is highly likely to be hosed by this." - that's me. That's exactly me. I have a young family and a tonne of debt. Furthermore, I'm in one of the lower-earning specialties. I could certainly use a bit of extra cash moving forward. And yet, I don't think I'm getting hosed by these proposals. Some of the proposed changes I agree with, or at least accept the rationale. Some of them I don't and I hope will get changed, but even then, more so for non-physician small business owners.

I'm not shy about fighting for what's fair for physicians. I spoke up in the tPSA debacle here in Ontario, loudly and frequently. If I get any opportunity to see physicians treated more like everyone else, I take it, and have in the past, often. Physicians in many ways deserve better than they get. I can't get worked up about this though. I can't help but see it as arguing for continued special financial privileges by a group who, even among the most affected, will remain very financially privileged if these changes go through. That doesn't change because I happen to be a part of that privileged group. I'm not part of the ignorant public here either when I take these positions. Not only do I see and care how hard physicians work, how much stress they endure, and how much education they undergo, I'm currently living that life. Despite that, I still have trouble sympathizing with physicians - my colleagues and seniors - up in arms about these changes.

Again, not trying to get involved in a debate here, despite this long post - just trying to give my perspective as a young physician who is, in theory, maximally affected by these proposals.

[rmorelan]

On 8/10/2017 at 11:00 PM, qnzjlo said:

Under the current system, those benefits are considered deductible expenses. What you described is a classic tax problem: salary v. dividends question. Since the tax system in Canada is not fully integrated, one can solve the optimal tax plan by looking at the jurisdictional tax rates and income brackets. Since this differs province by province, the indifference point between salary v. dividends would also change. Under the current system, double taxation is limited by the refundable dividend tax on hand (RDTOH) system. 

Let me describe - it's worth understanding. 

When your professional corporation earns a taxable income of $100,000, this is taxed at the Canadian-controlled private corporation rate, which is about 15% (11% federal + 4% provincial [assumed]). However, since the whole point of incorporating is to tax advantage of these low tax rates, physician would be inclined to keep after-tax earnings without the corporation and invest it in marketable securities, etc. These earnings are considered passive earnings. Passive earnings are what Morneau is gunning after. These passive earnings, in the past, are subject to refundable Part IV tax, which was about 33%. Refundable in a sense that the corporation pays it at 33%, but this flows into a RDTOH pool. The pool gets released as you pay dividends back to yourself - at which point this is a taxable dividend, and the corporation gets a "refund." So double taxation is very limited. 

This was the perceived benefit is that the company can enjoy tax deferral until the physician decides to release funds to himself. And precisely, why Morneau thinks it's "unfair." Normal Canadians would not have access to this as they cannot let their investments "brew" passively and have the discretion on WHEN to release the funds. Laymen can only have a few tax-effective tools at their disposal and are disadvantaged because they cannot choose when to release funds - partially they can by deciding when to sell, but if the stock pays dividends, they absorb the dividends as income in the same year. Unlike a professional corporation, where that dividends from stocks can be considered passive income and have that tax deferral opportunity. 

The part I don't get is the last paragraph sounds like exactly what a salaried person's pension effectively is. Normal Canadians have access to that all the time - tons of people have company or government sponsored pensions through their work. The money paid into the pension (which is in liu of other employment income) basically is tax sheltered until the employee retires. Doctors have been using for the most part the retained earnings to simulate a pension as the money is used for the most part for retirement. Laymen have tax effective tools - RRSPs and pension plans being the main ones that spring to mind - that usually small business owners don't or cannot use as effectively. Even company sponsored maternity leave or sick leave is in a sense a kind of tax deferral (your salary would be lower because the company has to budget for those expenses and it is factored into your market cost - which reduces your taxes now, only for you to pay taxes when you aren't working later while sick or on leave).  I wonder if the government said the funds could only be released if used during retraining/sick leave/family or maternity/paternity leave, or retirement (to stimulate a pension) if people would agree.   

I am not even sure comparing employees to small business owners is the right model anyway. Why are those even supposed to be equal in the first place? - businesses have risks associated with them that employees don't have with income varying often, and employees have benefits business owners don't. Business's also have long periods where little or no profit is made (effectively my entire training is time when my "business" is not profitable). Equalizing based solely on income ignores major differences between the two. 

 

 

 

[NLengr]

The biggest sticking point for the proposals related to passive income and the ability to keep money inside the corporation. Lots of people have mentioned the retirement planning aspects of this feature of incorporation so I won't rehash that. However, from a small business point of view, this has another massive downside that the government hasn't really considered/has ignored. It's not so much applicable to doctors, but is a huge issue for people who operate in the free market (plumbers, accountants, contractors, fisherman etc.).

Right now, you can keep money inside the corporation and build up some savings (the same as the retirement savings scenario). However, many small businesses use this money as a float to help keep them in business during bad economic periods. For example, lets say you are a contractor who installs hot tubs (a luxury item per say). You employ 6 people who you spent time and money on training them to be very good at what they do. It would be somewhat hard to replace them. During the good economic times, you are installing lots of hot tubs and saving some of the profits inside the corporation as investments. Soon, there is an economic bad period for some reason. You have less demand for hot tubs but you think it'll probably be fairly short term. Therefore, you decide to take some of your money saved inside the corporation and use it to pay for expenses and employee salary until the economy picks up again (you don't want to lose your highly skilled employees unless absolutely necessary). With the proposed changes, keeping a float for the bad times becomes much harder to do. Small businesses will see themselves either cutting spending or laying off employees much sooner than desired during bad economic times. And of course, laying people off and reduced spending by businesses will further depress the economy.

[NLengr]

6 hours ago, Ian Wong said:

To directly address your point, why are we not taxed on a household basis, rather than as individuals?  

Under current rules, a two family household, with one partner working 80 hrs a week, and the other 0 hrs a week, pays substantially more taxes than if two partners each work 40 hrs a week, earning the same household income.

A one physician family is highly likely to be hosed by this.

How is this remotely fair?  The partner working 0 hrs a week doesn't even gain any RRSP contribution room, gets no access to CPP, gets no employee benefits such as healthcare, dental, sick days, vacation, etc. 

To flip your last point around, I am paying higher taxes precisely because my wife earns less than I do.

So much of this. I get to pay more tax because my spouse is home with our children.

And before someone says "oh you're a staff man, so suck it up cause you're rich", it was an issue when I was a resident too when we compared household earning to other non medicine couples we hang out with.

[Ian Wong]

Hi ralk,

We are good. I respect you, and I believe the feeling is mutual.  Healthy discussion or even debate is the whole reason for these forums to exist.  I may not convince you of my side, nor vice versa, but finances are a huge blind spot for premeds all the way through to staff physicians. I hope to shed some light from the perspective of someone who is a relatively new attending physician. If nothing else, this discussion will be of significant benefit to the other readers of this thread. 

Having said that, I disagree with several of your points. 

1. This is no minor change to the tax code.  This is the confiscation of 1-3 million dollars of your future income.  How many extra weekends or call nights are you going to have to take to make up that deficit?  How can that not piss you off?

2. Using Sears as an example is in no way the same.  The employees of Sears have lost their pensions because Sears was not competitive, is going bankrupt, and doesn't have the money to pay out those pension obligations. Bad luck for those employees, but this is an inevitable part of capitalism.  Failing companies are going to fail.  No different than Blockbuster, Blackberry, Nokia, Sega, Palm, Radio Shack, or any number of other companies that didn't evolve and adapt to a changing environment.  Those Sears employees still had/have access to EI, CPP, and RRSP contribution room, so they had the opportunity to save outside of their pension.

Incorporated physicians are losing our main retirement vehicle because the government thinks we unfairly keep too much earned money and they want to take it back. How do you defend against that? Especially when we can't raise fees to compensate. Totally different scenario. 

3. If you read all the government preamble, all of these tax hikes are coming because of "fairness".  I would be a little happier to see my taxes go up after I see the government close some much larger unfair loopholes like the primary residence capital gains exemption.  For example, if a boomer bought a house for $100,000, and now sells it for $3 million, that entire $2.9 million is tax free (totally realistic and common scenario here in Vancouver).  

No millenial will ever have a chance to take advantage of this tax exemption.  A millenial might be able to turn $100,000 into $3 million by buying and selling Amazon shares/bitcoin/marijuana stocks/etc, but they'd pay nearly half of the gain in taxes. 

Why is it that houses are the only source of capital gains that can be 100% tax free (disproportionately held by boomers, the wealthiest generation of them all), while literally every other type of capital gains that a millennial or Gen-X could use to build wealth will be heavily taxed?  How is that "fair?"

4. You had previously written: "I should be paying lower taxes than I otherwise would, but only if I have a spouse and/or adult children who earn much less than I do" isn't exactly an easily-defended position.

For clarification, I turned that around, and am telling you that right now, "I am paying higher taxes than I otherwise would, because I have a spouse who earns much less than I do." This is happening because the government doesn't tax me as a household, but rather as an individual. Again, completely unfair.  Why should a family with one individual working 80 hrs and another 0 hrs get taxed more than a family where both individuals work 40 hrs?  Both families contribute 80 hours of work to our economy, but mine is punished.

Dividend sprinkling was a way to even out that discrepancy. My wife has a lot of low tax brackets that she can't use, despite the fact that she is contributing to my household. By getting rid of it, you are discriminating against families like mine and yours.

From another perspective, you and I are highly trained physicians. We should be working as much as we can. Canada has invested in our education to serve the public.  If I am capable and willing to work 50 or 60 hours a week, and my spouse is willing to shoulder the increase in household work needed to support my medical career, then this is a big win for the Canadian public. It is a much better return on those tax dollars used to train me, than if I worked 40 hours a week, particularly since as an incorporated individual I get no overtime pay.  Why not recognize my spouse's work by allowing me to attribute some of my income to her low tax brackets?

Either tax me as a household, or give me back my dividend sprinkling.

If you are just going to tax the heck out of every additional dollar I make, I should logically cut both my work hours and personal spending.  I will disproportionately gain more hours per dollar back in my life.  This is not beneficial to the health care system, nor the patients, nor the economy.

Remember, this corporation is my retirement fund.  It will be used to pay for our household's retirement needs, so that I will not be a future burden to the Canadian tax payer.  My income in retirement is likely to be such that I won't qualify for OAS or GIS, even as my taxes pay for OAS and GIS to other Canadians.  As an incorporated individual, I pay double the amount into CPP as both an employer and an employee, but I get the same single benefit as if I'd only paid into it once.  The government should be incentivizing us to save more now, rather than removing our main retirement vehicle, so that the government doesn't have to subsidize us when we are elderly.

5. It is very admirable and altruistic that you aren't angered that the government is taking $1-3 million dollars from you.  Yes, you will still live comfortably.  Even though you will now work 5-10 more years, or perhaps 500 more call weekends or whatever to make up the money they just took from you.  And this is just one tax grab.  This will only raise $250 million annually, but our 2017-2018 deficit is $25-30 billion.  I'm sure the government will be looking for more tax dollars later, particularly since they haven't done anything to cut spending. And since you are still a 1 percenter, you are still going to be a target. At what point will you conclude: "I'm being over-taxed!"

From a Financial Post article. published by William Watson on Nov 23, 2016: In 2014, the 1 percenters in Canada had a median income of $313,200, made 10.3% of all the income, but paid 20.5% of all the federal and provincial taxes.  So 1 out of every hundred Canadians is already paying one fifth of all the taxes.  

Final thought.  I am happy to pay taxes as long as they are being spent responsibly and they strengthen my life, my family's lives, and our community.  I think a lot of our taxes are being spent frivolously. 

I would be less unhappy if those taxes were being used appropriately. Take my taxes, and purchase good equipment and infrastructure, so my hospitals can run appropriately.  Fund an EMR system that actually works, and make it integrate with both hospitals and outside offices.  Pay for enough staff so expensive OR's and MRI scanners aren't sitting idle for many hours each day. Open up more nursing homes now, and invest heavily in home healthcare because there's a huge wave of boomers coming who are otherwise going to overwhelm all our of current resources. The latest agreement on Federal health transfer funding is a substantial cut from where it was previously; fund it back to at least its previous level. Stop giving away money to outside countries and focus on domestic problems, like illicit drugs or mental illness, both of which are a huge chronic drain on our society. Put more money into palliative care and hospice, so we aren't wasting untold millions of dollars on expensive end of life care in ICU and inpatient wards. Invest more in outcomes analysis, so that we find out which hospitals are doing best in different areas, so we can emulate those best-practices across the country. 

In short, don't take more of my tax dollars until you prove to me that you are using my current tax dollars responsibly.

Ian

[Snowmen]

10 hours ago, NLengr said:

The biggest sticking point for the proposals related to passive income and the ability to keep money inside the corporation. Lots of people have mentioned the retirement planning aspects of this feature of incorporation so I won't rehash that. However, from a small business point of view, this has another massive downside that the government hasn't really considered/has ignored. It's not so much applicable to doctors, but is a huge issue for people who operate in the free market (plumbers, accountants, contractors, fisherman etc.).

Right now, you can keep money inside the corporation and build up some savings (the same as the retirement savings scenario). However, many small businesses use this money as a float to help keep them in business during bad economic periods. For example, lets say you are a contractor who installs hot tubs (a luxury item per say). You employ 6 people who you spent time and money on training them to be very good at what they do. It would be somewhat hard to replace them. During the good economic times, you are installing lots of hot tubs and saving some of the profits inside the corporation as investments. Soon, there is an economic bad period for some reason. You have less demand for hot tubs but you think it'll probably be fairly short term. Therefore, you decide to take some of your money saved inside the corporation and use it to pay for expenses and employee salary until the economy picks up again (you don't want to lose your highly skilled employees unless absolutely necessary). With the proposed changes, keeping a float for the bad times becomes much harder to do. Small businesses will see themselves either cutting spending or laying off employees much sooner than desired during bad economic times. And of course, laying people off and reduced spending by businesses will further depress the economy.

Very true and it would also have a big impact on physicians who need to purchase a lot of expensive equipment for their clinic. There is a much lower incentive to upgrade equipment if you have to pay for it out of pocket instead of being able to purchase it through funds kept in your corporation which makes in nearly half as expensive in practice. Few people would argue that purchasing medical equipment is part of a tax evasion scheme or a retirement fund, yet it would still be affected by these measures.

[NLengr]

4 hours ago, Snowmen said:

Very true and it would also have a big impact on physicians who need to purchase a lot of expensive equipment for their clinic. There is a much lower incentive to upgrade equipment if you have to pay for it out of pocket instead of being able to purchase it through funds kept in your corporation which makes in nearly half as expensive in practice. Few people would argue that purchasing medical equipment is part of a tax evasion scheme or a retirement fund, yet it would still be affected by these measures.

True for any company who is looking to purchase equipment.

Now, those companies will simply pass some of the costs into consumers by increasing prices to help compensate. So we're all going to be paying for these tax changes via increased costs. 

Increasing costs to consumers, decreasing small business employment and spending, decreasing retirement savings. However, we can't forget to bail out Bombardier (not because of political concerns in Quebec of course....). Yup, that's the behaviour of a party that really cares about the middle class. 

[ralk]

12 hours ago, Ian Wong said:

Hi ralk,

We are good. I respect you, and I believe the feeling is mutual.  Healthy discussion or even debate is the whole reason for these forums to exist.  I may not convince you of my side, nor vice versa, but finances are a huge blind spot for premeds all the way through to staff physicians. I hope to shed some light from the perspective of someone who is a relatively new attending physician. If nothing else, this discussion will be of significant benefit to the other readers of this thread. 

Having said that, I disagree with several of your points. 

1. This is no minor change to the tax code.  This is the confiscation of 1-3 million dollars of your future income.  How many extra weekends or call nights are you going to have to take to make up that deficit?  How can that not piss you off?

2. Using Sears as an example is in no way the same.  The employees of Sears have lost their pensions because Sears was not competitive, is going bankrupt, and doesn't have the money to pay out those pension obligations. Bad luck for those employees, but this is an inevitable part of capitalism.  Failing companies are going to fail.  No different than Blockbuster, Blackberry, Nokia, Sega, Palm, Radio Shack, or any number of other companies that didn't evolve and adapt to a changing environment.  Those Sears employees still had/have access to EI, CPP, and RRSP contribution room, so they had the opportunity to save outside of their pension.

Incorporated physicians are losing our main retirement vehicle because the government thinks we unfairly keep too much earned money and they want to take it back. How do you defend against that? Especially when we can't raise fees to compensate. Totally different scenario. 

3. If you read all the government preamble, all of these tax hikes are coming because of "fairness".  I would be a little happier to see my taxes go up after I see the government close some much larger unfair loopholes like the primary residence capital gains exemption.  For example, if a boomer bought a house for $100,000, and now sells it for $3 million, that entire $2.9 million is tax free (totally realistic and common scenario here in Vancouver).  

No millenial will ever have a chance to take advantage of this tax exemption.  A millenial might be able to turn $100,000 into $3 million by buying and selling Amazon shares/bitcoin/marijuana stocks/etc, but they'd pay nearly half of the gain in taxes. 

Why is it that houses are the only source of capital gains that can be 100% tax free (disproportionately held by boomers, the wealthiest generation of them all), while literally every other type of capital gains that a millennial or Gen-X could use to build wealth will be heavily taxed?  How is that "fair?"

4. You had previously written: "I should be paying lower taxes than I otherwise would, but only if I have a spouse and/or adult children who earn much less than I do" isn't exactly an easily-defended position.

For clarification, I turned that around, and am telling you that right now, "I am paying higher taxes than I otherwise would, because I have a spouse who earns much less than I do." This is happening because the government doesn't tax me as a household, but rather as an individual. Again, completely unfair.  Why should a family with one individual working 80 hrs and another 0 hrs get taxed more than a family where both individuals work 40 hrs?  Both families contribute 80 hours of work to our economy, but mine is punished.

Dividend sprinkling was a way to even out that discrepancy. My wife has a lot of low tax brackets that she can't use, despite the fact that she is contributing to my household. By getting rid of it, you are discriminating against families like mine and yours.

From another perspective, you and I are highly trained physicians. We should be working as much as we can. Canada has invested in our education to serve the public.  If I am capable and willing to work 50 or 60 hours a week, and my spouse is willing to shoulder the increase in household work needed to support my medical career, then this is a big win for the Canadian public. It is a much better return on those tax dollars used to train me, than if I worked 40 hours a week, particularly since as an incorporated individual I get no overtime pay.  Why not recognize my spouse's work by allowing me to attribute some of my income to her low tax brackets?

Either tax me as a household, or give me back my dividend sprinkling.

If you are just going to tax the heck out of every additional dollar I make, I should logically cut both my work hours and personal spending.  I will disproportionately gain more hours per dollar back in my life.  This is not beneficial to the health care system, nor the patients, nor the economy.

Remember, this corporation is my retirement fund.  It will be used to pay for our household's retirement needs, so that I will not be a future burden to the Canadian tax payer.  My income in retirement is likely to be such that I won't qualify for OAS or GIS, even as my taxes pay for OAS and GIS to other Canadians.  As an incorporated individual, I pay double the amount into CPP as both an employer and an employee, but I get the same single benefit as if I'd only paid into it once.  The government should be incentivizing us to save more now, rather than removing our main retirement vehicle, so that the government doesn't have to subsidize us when we are elderly.

5. It is very admirable and altruistic that you aren't angered that the government is taking $1-3 million dollars from you.  Yes, you will still live comfortably.  Even though you will now work 5-10 more years, or perhaps 500 more call weekends or whatever to make up the money they just took from you.  And this is just one tax grab.  This will only raise $250 million annually, but our 2017-2018 deficit is $25-30 billion.  I'm sure the government will be looking for more tax dollars later, particularly since they haven't done anything to cut spending. And since you are still a 1 percenter, you are still going to be a target. At what point will you conclude: "I'm being over-taxed!"

From a Financial Post article. published by William Watson on Nov 23, 2016: In 2014, the 1 percenters in Canada had a median income of $313,200, made 10.3% of all the income, but paid 20.5% of all the federal and provincial taxes.  So 1 out of every hundred Canadians is already paying one fifth of all the taxes.  

Final thought.  I am happy to pay taxes as long as they are being spent responsibly and they strengthen my life, my family's lives, and our community.  I think a lot of our taxes are being spent frivolously. 

I would be less unhappy if those taxes were being used appropriately. Take my taxes, and purchase good equipment and infrastructure, so my hospitals can run appropriately.  Fund an EMR system that actually works, and make it integrate with both hospitals and outside offices.  Pay for enough staff so expensive OR's and MRI scanners aren't sitting idle for many hours each day. Open up more nursing homes now, and invest heavily in home healthcare because there's a huge wave of boomers coming who are otherwise going to overwhelm all our of current resources. The latest agreement on Federal health transfer funding is a substantial cut from where it was previously; fund it back to at least its previous level. Stop giving away money to outside countries and focus on domestic problems, like illicit drugs or mental illness, both of which are a huge chronic drain on our society. Put more money into palliative care and hospice, so we aren't wasting untold millions of dollars on expensive end of life care in ICU and inpatient wards. Invest more in outcomes analysis, so that we find out which hospitals are doing best in different areas, so we can emulate those best-practices across the country. 

In short, don't take more of my tax dollars until you prove to me that you are using my current tax dollars responsibly.

Ian

There's a lot here that I'll try to address, but I think I'll just muddle my position by going point-by-point, so I'll try to hit all the points in a narrative - if I miss something important, please let me know and I'll respond more directly to that point.

There are two parts to the proposed changes that are worth separating. The first is income splitting by one fashion or another. The second is tax deferment through passive investment within a corporation.

The former accounts for a significant change in post-tax income for those who have taken full advantage. Yet, it has been characterized by a tax loophole and not without cause. My parents - who are not physicians but professionals to whom this applies - certain thought it looked like a clear loophole when they were informed they could income split with me as an adult, university student, and chose not to do so because it has all the characteristics of a tax loophole. It allows incorporated individuals, many of whom are quite wealthy, reduce their tax payments significantly if and only if they have a partner or adult children. However, incorporation was not intended as a vehicle for income splitting. It also does not serve a clear social purpose. In general, a tax code which encourages people not to work when they might otherwise, especially young adults, is a poorly designed tax code. You mention your particular example, of you be able to work longer hours because of a partner at home, yet I'd conjecture that while you may prefer this set-up, it is not necessarily socially beneficial. Many households have both partners in the work force, often with one or both working as many hours as you do, while keeping up with their housework and raising their children well. Indeed, some households have no choice but to do this to make a fraction between both partners that you or I will make individually. Likewise, having physicians work long hours is not necessarily a good thing, as physician work hours are well associated with burnout, depression, and fatigue, all of which have been shown to impact patient care.

For the sake of argument, even if we assume a social good from having one partner at home while a high-earning one works longer hours, the current system accomplishes this in an inefficient manner by applying only to professionals who self-incorporate, rather than affecting all earners who would prefer a single-worker household. A simple tax deduction or, as you suggest, potentially household taxation would be far more equitable methods of accomplishing this goal. I don't believe such a system is warranted given the reasons above and given that by benefiting one group (married individuals with income disparities), it conversely punishes those who don't fall into that group, including dual-income households, single parents, and divorced couples with children who don't have the luxury of having one person at home while the other works. It's great that you are able to choose to have one partner at home and for you to work longer hours, but that does not mean the tax code should reward you for it, especially at the expense of others who cannot make the same choice.

The second aspect, on tax deferment with passive income in the corporation, I believe is far more defensible. As several posters have pointed out, income saved and invested in professional corporations can validly be used for purchases for that corporation. That's a major intended purpose of corporate earnings and so doing so is using the system as intended. However, physicians largely don't use their corporate savings for capital expenses, but rather using it for their retirement savings, which is not the intended purpose of professional corporations. I think there's still a reasonable argument to allow this, however. The effects on overall tax burden are much more minor than with income splitting, as any money saved in the corporation is taxed both as corporate earnings at the time of acquisition, and again as income later down the road when that money is withdrawn from the corporation when (presumably) the professional is in a lower tax bracket. Tax deferment for the purposes of retirement savings are well established in Canadian tax law through RRSPs and pensions. Professionals and small businesses cannot easily set up pensions for themselves or employees as easily as as larger organizations, yet their is equal need to provide for retirement regardless of working situation. I do see investment for retirement within a professional corporation as a way of partially evening the odds when it comes to retirement planning with salaried employees, and if this is to be eliminated, I would argue strongly that the government should be providing an alternative vehicle for self-incorporated professionals to save for their retirement. The fact that this part of the proposals is the least defined means I'm hopeful there is room for such changes to be made.

With respect to what's fair when it comes to income, taxes, and societal contributions, as I appreciate the positions you've advanced here, because from my experience both within medicine and working in healthcare prior to entering medicine, your views are very common if not the norm among physicians. Unfortunately, I believe many if not most physicians have lost perspective on what "fairness" means by virtue of living so wholly within the bubble of the medical profession, and the further I get into training only reinforces that viewpoint.

Your position on Sears employees and others losing pensions or retirement savings I think is characteristic of that. Like physicians now, these are workers who are getting squeezed because the organization paying them made poor decisions and has less money than expected. In their case it's a corporation, for us it's the government. By-and-large, they aren't responsible for the failings of their employer, no more than physicians are responsible for the failings of the government. Because their pensions, benefits, and seniority are fixed to the company they worked at, these employees don't really have much more mobility to change employers than physicians do. We both get CPP, we both have RRSPs, so no differences there. Where there is a difference is that almost all of them earned less than we do, and all had legal guarantees from their employer for these benefits which are now being broken, while physicians were never promised this system and no entity ever legally provided such guarantees. Yet our situation is unfair but their's is acceptable? If anything, their situation is worse that our's, because they are having promises get broken and have less financial ability to withstand such a loss.

Likewise, I find your response to the possible loss of after-tax income fairly typical for physicians, but no less representative of a loss of perspective among physicians. You've mentioned working longer hours, delaying retirement, taking on more call shifts to make up the shortfall. What about living smaller, with fewer luxuries? Even with a large number of children at home and a spouse who doesn't work, your income will cover the necessities of life and then some. Most Canadian families live quite well on a fraction of what you or I earn and are still able to retire at a good age, even those without pensions (most people don't have pensions and that number has been growing). What the typical physician earns is well beyond the point where an extra dollar earned meaningfully increases happiness or overall well-being. There are so many of our fellow Canadians, including many of our colleagues in healthcare, working just as hard as we do and earning less for it - and will continue to earn far less if these proposals and then some go through - yet who are leading good lives nevertheless. You asked at the beginning: "How many extra weekends or call nights are you going to have to take to make up that deficit? How can that not piss you off?" Well, my answer to that is I'm not going to work any extra weekends or call nights to make up any deficit as a result of these or future changes. Rather, I'm going to live with fewer luxuries, because there's really not much more that I need that I don't already have. Even if I lose money as a result of these changes - and again, the difference for my personal situation is not $1 million, let alone $3 million - that doesn't piss me off because I'll still earn more than enough to provide for myself and my family with plenty left over to spend on non-essentials, more than even the average highly-educated professional will have. I don't have to work longer or harder for my retirement as a result, I just have to live within my means, which I can easily do. That the physicians I've encountered seem oblivious to this possibility has remained one of the most baffling parts of my time in healthcare.

You characterized public acceptance of losses to physicians as being because we're part of the 1% highest income earners. I disagree. I've found that the public generally appreciates the work physicians do and believes we should be paid well for our work, within the top 1% of earners. Where I think we lose the public is when we fight tooth and nail to maintain or increase our incomes that are already well beyond the 1% threshold, especially when physicians appear to have little sympathy for the economic situations of the vast majority of people who are worse off financially. It comes across as arrogant, entitled, even greedy. What concerns me is that we're starting to earn that reputation. When we fight against what can easily be characterized as a loophole, we expend political capital and public goodwill on what will be perceived as being for our own financial well-being. This makes it that much harder to fight other, more defensible fights, like the current impasse between the OMA and the Ontario government, one which has seen what few labour rights we have threatened and almost eliminated. We don't have the public support we need in that fight, not because of an inevitable consequence of being part of the top 1% of earners, but because of our actions and attitudes as part of that 1%. The public hasn't supported us because we haven't earned their support.

Lastly, when it comes to how the government uses tax dollars, I am in full agreement that our tax dollars are not being used optimally, especially when it comes to healthcare. However, if we're waiting for tax expenditures to be perfect before anyone can see their taxes go up, well, then taxes are never going to go up on anyone. That's an unrealistic expectation in any circumstance and not a recipe for good governance. There's always going to be public expenditures we object to and other expenditures we feel the government we should be making but aren't. That's part of living in a democratic society where everyone's viewpoints are considered at the voting booth and, if we don't like what our current government is doing, we can vote in others who should better adhere to our collective preferences. I'd hate for that same standard of perfection to be applied to physicians - if we never got a fee increase until all physicians had 100% appropriate billings, never ordered unnecessary tests or therapies on the public dime, and never made a mistake which cost the public additional money in healthcare costs... well, then we'd never get a fee increase.

To sum up my diatribe here, I think fairness is the crux of the divide between your position and mine. There are aspects which I believe may be unfair, yet I see as being fairly minor in their effect. I will be arguing against these as the public debate continues and as opportunities for feedback to the federal government present themselves, as I do in any instance where I feel the system treats physicians unfairly. Yet, I believe the most impactful proposals being made - namely stopping income splitting - are fair when considering Canada as a whole and the needs of most Canadians, even if they potentially impact my income and those of other physicians.

Edit - Wow... this was way longer than I expected, even by my standards. Apologies to all reading, especially Dr Wong, for the wall of text.

tldr (please see above for more nuance); I believe that income splitting, as currently implemented, is a loophole rightfully being closed; that passive income within a corporation for retirement savings has some merit which should for that reason either be maintained or replaced with a better-tailored alternative; that physicians as a group have lost perspective on what fairness means in the broader Canadian society, especially when it comes to income; and that it's far from unfair that we might have to live marginally more modestly in order to properly save for our retirements since we will still earn more than enough to do so while living happy, productive, healthy lives, while providing for our families, and while enjoying some luxuries of life unavailable to most Canadians on top of that all.

[JohnGrisham]

20 hours ago, NutritionRunner said:

However physicians in Community Health Centres ARE salaried.  Note that Community Health Centres, at least in Ontario, are NOT the same as Family Health Teams.  All the physicians at the Community Health Centre where I work are on salary.  We are currently trying to hire a new physician, and almost had secured one, but the fact that he couldn't charge FFS or charge extra for so many things that most doctors charge for (i.e. Forms completion, etc.) caused him to decide that CHC work was not for him.

When I see physicians living in homes that cost over a million (in areas where the average home price is $300,000) and driving expensive sports cars, it's hard to have sympathy for them.  My husband and I could never afford a million dollar plus home, nor could we afford an expensive sports cars, despite both having well-paying jobs.  Yes, physicians do have a great deal of training, responsibility, and take on a lot of debt during their training.  But they can still afford a lot of luxuries that are outside the reach of most Canadians, including those with just as much education.  And seeing the lousy job some physicians do, some of them clearly don't care about doing a good job, and are just going through the motions. Of course, there are many physicians who go above and beyond, and who definitely earn their salaries.  But there are also those who don't, and who just try to earn the maximum amount of money that they can, even when they aren't doing a good job at serving their patients' needs.

As mentioned above in our prior exchange, the salaries for FM docs in the CHC realm salaried, seem to be much better than FM docs who are in FFS. So your qualms with physicians in general is more so aimed at specialist perhaps, because most young, new generation FM docs aren't having the same luxuries as the old FM docs and if they are making the same amount as the CHC physicians you work with - are busting their ass. The basic math on FFS would mean they'd have to work far more hours than the CHC docs to make the same effective salary. Even when you acknowledge incorporation, which may be the way of the dodo bird at any rate regardless.

Im surprised that the doc didnt take the CHC position.  Getting paid a salary to do forms seems great to me. 

[gangliocytoma]

21 hours ago, NutritionRunner said:

 

 Yes, physicians do have a great deal of training, responsibility, and take on a lot of debt during their training.  But they can still afford a lot of luxuries that are outside the reach of most Canadians, including those with just as much education.

Just out of curiosity (in no way am I trying to be boastful or presume others are worse), but which other fields have people undergoing 8 years of schooling and 2-5 years of training (plus an additional few years of fellowship in some cases) before they make their full salary?

[Let'sGo1990]

21 minutes ago, gangliocytoma said:

Just out of curiosity (in no way am I trying to be boastful or presume others are worse), but which other fields have people undergoing 8 years of schooling and 2-5 years of training (plus an additional few years of fellowship in some cases) before they make their full salary?

Training in other fields also isn't as time intensive on an hours/week level as it is in medicine. 

[ralk]

27 minutes ago, gangliocytoma said:

Just out of curiosity (in no way am I trying to be boastful or presume others are worse), but which other fields have people undergoing 8 years of schooling and 2-5 years of training (plus an additional few years of fellowship in some cases) before they make their full salary?

Your average PhD takes more time than medical school, and often can take as long as medical school plus residency, especially if you include post-docs. Lawyers, obviously, require quite a bit of training. Several healthcare professions often take 6-8 years of total training now, as programs move from direct-entry to second-entry status, or into straight graduate programs. Fellowships are becoming increasingly common in these fields as well. I think it's also worth mentioning that "full salary" means a lot different in other professions than medicine. Most Canadians don't see their final income levels until late in their careers, once they gain seniority and move up the ranks. Many start out with incomes below that of a typical medical resident. Physicians, by contrast, see a huge jump in their income after residency/fellowships, but no change afterwards, and that's a fairly unique income trajectory.

Few of these careers are as competitive as medicine and few involve the same hours as medicine does, at least in residency. I'd argue that medicine is at or near the top in terms of sacrifice required to establish a career in the early years, but we're not so far ahead of other careers as we like to believe in this regard, and the payoff comes fairly early in a dramatic fashion.

[Ian Wong]

ralk,

Great reply, which opens up even more topics for discussion. 

1. This income splitting via dividends was designed into the taxation system.  As such, it's not a loophole.  A loophole is an unintended feature. It was even promoted by various provincial governments as a way to avoid increasing physician fee schedules.  Issuing dividends is at the core of business and the stock market, and therefore is a core portion of our economy.  If I buy shares of Royal Bank, I receive a fraction of its profits via dividends for as long as I own the shares. 

Similarly, if my wife purchased shares of my company when I started it, back when it had no income and was carrying outstanding debt related to a radiology buy-in, and the company has now grown to a point where the debts are paid off and there is profit to be shared, I can't issue a dividend?  

If your parents had gifted you money as an adult, and you bought shares of Royal Bank, you shouldn't be able to receive those dividends?  If your parents directly gifted you shares of Royal Bank, you shouldn't receive those dividends?

You can't just unwind the issuing of dividends without messing with a much larger taxation framework, that also includes large corporations, dividends, and capital gains. And again, issuing dividends is a feature, not a loophole.

2. You made my point exactly regarding income splitting lower down.  If you tax me as a household, I wouldn't have to resort to incorporation to divide income with my wife.  There is no reason you couldn't apply the household taxation to all Canadians.  It would be more fair.  As a single person, you would file as a single person household.  Divorced is also a single person household.  And one physician family households would be treated just as equitably as all other Canadian families, where our household total income of "X" is taxed the same as any other household making "X", which is currently NOT the case. 

3. I would argue that the passive income growing within a corporation can be more powerful than income splitting.  That passive income can grow tremendously through compound growth.  As noted earlier in my example, $30,000 invested annually over 30 years (total of $900,000 contributed), turns into $4.49 million when compounded at 9%.  That is one of the major features of incorporation, to grow your retained earnings, to be issued in the future as needed (whether this be for a capital purchase, for retirement funding, or to pay corporate expenses during a lean period).  You can't just arbitrarily take away one of those options without crippling the concept as a whole. 

4. You are correct that my views are shared by many physicians.  I shared your views when I was a med student. It is my belief as that as we advance in our training and careers, that we become more cynical, but also more realistic. You should not downplay your sacrifices made to become a physician, nor feel guilty that you earn significantly more than the average Canadian. You can and should be a humble 1 percenter. You are making more than the average Canadian because you got better marks, studied harder, put in uncounted 60-80 hour weeks, delayed your earnings by at least a decade, went into massive student debt, and on a daily basis make decisions that require that education and continued commitment to learning, otherwise people get harmed or die. You are also making more than the average Canadian because we share a huge border with the US, and their free market physician salaries directly influence ours.

5. I feel badly for Sears employees. I agree they are getting a raw deal.  However, this is still a completely different situation.  Getting hosed because your company is going bankrupt due to poor business decisions is completely different from getting hosed because the government thinks you keep too much of your earned money, and will take it away by legal force if necessary.  If you think these are equivalent, then we agree to disagree.

I hope you agree with me that a failing company needs to be allowed to fail.  The alternative is endless government subsidies from tax-payers, and the company losing all motivation to improve or dig itself out of its rut, since it then loses those free subsidies. Bombardier being a perfect example, as mentioned earlier.

Those Sears employees will eventually go onto the social safety net provided by the government, paid for by other taxpayers.  They will be ok, just like all the employees of those other under-performing companies I mentioned previously.

6. As mentioned earlier, the logical course of action to increased taxes is to decrease hours worked and decrease my spending proportionally. I will get back more free hours per dollar.  This is a terrible principle on both an individual and national level, particularly for physicians (due to our long, subsidized training). Taxes should be used to incentivize good behaviour, not punish it.  With this, you are incentivizing me to work less hours than I am willing or capable of working. 

You clearly live well within your means. I do as well; my lifestyle has not changed substantially since fellowship. We are both fiscally responsible households. I'm still going to be unhappy if I am taxed more, just the same as if Shaw decides to increase my cable bill, or someone steals $20 from my wallet.  It is true that I am more capable of absorbing a tax increase than the average Canadian, but I'm also already paying far more taxes than the average Canadian.  

'We are also not talking about a small sum of money.  Whether you think it is true or not, losing $1-3 million dollars will affect your household somehow.  A time will arise when someone in your family could use or will need that money, or perhaps you encounter a needy charitable cause to support.

7. You have contradicted yourself.  You state that "the public believes we should be paid well for our work, within the top 1% of earners", and then say "where we lose the public is when we fight tooth or nail to maintain or increase our incomes that are already well beyond the 1% threshold..."  

Here's the problem.  Our fee schedules have consistently lagged inflation.  We are constantly taking fee cuts.  If you are not advocating to stay in the 1%, you won't stay there.

You need to be advocating for at least inflation adjusted stasis. Nobody in his or her right mind should be willing to work for less and less money over time, particularly as you are gaining experience and seniority. That shouldn't be happening in any industry or profession.

Ian

[NutritionRunner]

2 hours ago, gangliocytoma said:

Just out of curiosity (in no way am I trying to be boastful or presume others are worse), but which other fields have people undergoing 8 years of schooling and 2-5 years of training (plus an additional few years of fellowship in some cases) before they make their full salary?

Registered Dietitians with PhDs teaching in accredited dietetic programs.  4 years undergrad + 1 year dietetic internship (unpaid) + 2 years Master's + 4 years PhD + 1-4 years post-doc.  That's more than 8 years (11 required, post docs aren't always needed).

[NutritionRunner]

3 hours ago, JohnGrisham said:

As mentioned above in our prior exchange, the salaries for FM docs in the CHC realm salaried, seem to be much better than FM docs who are in FFS. So your qualms with physicians in general is more so aimed at specialist perhaps, because most young, new generation FM docs aren't having the same luxuries as the old FM docs and if they are making the same amount as the CHC physicians you work with - are busting their ass. The basic math on FFS would mean they'd have to work far more hours than the CHC docs to make the same effective salary. Even when you acknowledge incorporation, which may be the way of the dodo bird at any rate regardless.

Im surprised that the doc didnt take the CHC position.  Getting paid a salary to do forms seems great to me. 

They obviously do a lot more than fill out forms.  They have to see patients all day, 15 minute appointments, from 8:30 to 4:30, with an hour for lunch, and those patients are often complex, enormously affected by the social determinants of health (in a negative way), living in poverty, unable to afford their medications (a reality for the working poor), disabled,  with serious mental health concerns, etc., etc.  In addition to spending a full day seeing patients, you also have to complete forms, squeezing it in somewhere (perhaps you get a no-show), but can't charge extra for those forms.  You have to engage in case conferences about those patients, typically with allied health, but also with other members of the team (medical secretaries, management, etc.)  You have to work one evening clinic a week, and one on-call shift on a weekend or holiday each month.  You have to meet the LHIN's targets for the % of patients who should have certain screening tests performed, even though this patient population is notorious for not attending screening appointments. You have to deal with patients who are extremely angry that you are trying to taper them off opioids, or benzos.

The salary offered clearly isn't as lucrative as FFS primary care, because we have had locum physicians who were offered a full-time job turn it down, clearly stating that it is because they would make more doing FFS. 

[JohnGrisham]

Just now, NutritionRunner said:

They obviously do a lot more than fill out forms.  They have to see patients all day, 15 minute appointments, from 8:30 to 4:30, with an hour for lunch, and those patients are often complex, enormously affected by the social determinants of health (in a negative way), living in poverty, unable to afford their medications (a reality for the working poor), disabled,  with serious mental health concerns, etc., etc.  In addition to spending a full day seeing patients, you also have to complete forms, squeezing it in somewhere (perhaps you get a no-show), but can't charge extra for those forms.  You have to engage in case conferences about those patients, typically with allied health, but also with other members of the team (medical secretaries, management, etc.)  You have to work one evening clinic a week, and one on-call shift on a weekend or holiday each month.  You have to meet the LHIN's targets for the % of patients who should have certain screening tests performed, even though this patient population is notorious for not attending screening appointments. You have to deal with patients who are extremely angry that you are trying to taper them off opioids, or benzos.

The salary offered clearly isn't as lucrative as FFS primary care, because we have had locum physicians who were offered a full-time job turn it down, clearly stating that it is because they would make more doing FFS. 

I did not mean to imply they only fill out forms all day - i meant, the fact that they CAN allocate time to fill out forms while on the clock(salary) is a nice thing! 

Again, I have rotated with plenty of FM docs who see similarly complex patients as well, but that are on FFS, and they are getting hammered because they cant simply cut people off after 10 mins like they can for more complex patients.  All the things you mention, are pretty much what a lot of FFS FMdoctors also do. And on average, a FM doc who is on FFS  compared to the 830-430 CHC doc, are having to work many more hours to come close to the same pay that CHC docs are getting. Unless I am missing something? As in do they actually not only work 8:30-4:30? i.e. do they still have to work after hours for the forms and thats what they mean they don't get reimbursed? if that is the case, then that makes MUCH more sense. So in a sense its not a true salaried, 9-5 set hours kind of job. 

 

[NLengr]

47 minutes ago, NutritionRunner said:

Registered Dietitians with PhDs teaching in accredited dietetic programs.  4 years undergrad + 1 year dietetic internship (unpaid) + 2 years Master's + 4 years PhD + 1-4 years post-doc.  That's more than 8 years (11 required, post docs aren't always needed).

That's a pretty small subset of dietitians. Thats like an academic neurosurgeon at a major academic center. Those guys are doing undergrad, med school, 6 year residency, phd (or at least masters) interrupting residency then 1-3 fellowships (1-2 years each). They're training 18-20 years routinely. 

Whats the normal training time for an RD (I assume 8 years?). That's a better comparison to a family doc. 

[JohnGrisham]

28 minutes ago, NLengr said:

That's a pretty small subset of dietitians. Thats like an academic neurosurgeon at a major academic center. Those guys are doing undergrad, med school, 6 year residency, phd (or at least masters) interrupting residency then 1-3 fellowships (1-2 years each). They're training 18-20 years routinely. 

Whats the normal training time for an RD (I assume 8 years?). That's a better comparison to a family doc. 

No, it is 4 years undergrad(first two years are just general science pretty much) + 1 year internship for 5 years total for most dietitians in practice.   And having lived with a dietitian roommate in undergrad, their 1 year internship is no where near as difficult as Year 3 clerkship in medicine.  


 

[DentalFoodie]

21 minutes ago, JohnGrisham said:

No, it is 4 years undergrad(first two years are just general science pretty much) + 1 year internship for 5 years total for most dietitians in practice.   And having lived with a dietitian roommate in undergrad, their 1 year internship is no where near as difficult as Year 3 clerkship in medicine.  


 

I wouldn't say most. Maybe ~5 years ago that might be the case but as of now at least 50% of all undergrad dietetic students come into the program having completed some university if not a degree or masters, at least those in Ontario schools (Ryerson, Western, Guelph). Common ones were MSc but there were a few MBAs that wanted to switch careers... definitely not all the straight from high school types. That's at least 2-4years of another undergrad + possibly 1-2 years for masters. And internships are going the way of the dodo. More and more are becoming integrated masters (MHSc, MPH etc) and thus add another 1-1.5 years to the schooling (total 2-2.5 years depending on the program). Also, for internships, unlike clerkship, it isn't considered full time education in the sense that OSAP starts charging interest while your paying to intern for free. 

As for difficulty, depending on the program yes clinically it will be much easier than what any clerk has to go through (ex MPH the focus is on public health, they meet the bare minimum for clinical competencies). However, I don't think it's fair to say its always easier than clerkship, when I did intensive/critical care, I pretty much stayed 1-2 hours later than the MD or residents (never mind the clerks, they're dismissed around 4pm so the docs can finish their work) and start seeing patients ~1-1.5 hrs before they come in.

[ralk]

Hi Dr Wong,

Thank you once again for the thoughtful reply. 

1. Dividends in general serve a useful role, but the way they're used with professional corporations and within families obscures their original purpose. When I buy shares in something like Royal Bank, I have to give up money I've earned elsewhere to make that purchase, and the person selling has to agree to give up their ownership of those shares at that price. More importantly, anyone can make that same purchase and, if the demand for shares in Royal Bank exceeds the number of people selling, those shares increase in value.  And, by taking on those shares, I risk losing value on them.

A family member does not purchase shares in a professional company, they're given for free. They don't have to give up anything to get them.These shares are not available to anyone else, it's not a free market. There's no risk in holding those shares, as they have no public value to lose. Dividends are meant to represent a return on investment within a company and yes, that's how they're intended to work. But holding shares in a professional corporation as a family member of that professional isn't an investment, and this isn't how dividends were intended to work.

Likewise, while both provincial governments and tax advisors may promote income splitting, it's the federal government who set up this system and did not intend it to be used in this manner. A third party - like the provincial government - taking advantage up an unintended consequence of a loophole doesn't make it any less of a loophole.

2. I just realized that we may be talking about two different concepts here. I had thought that we were talking about a US style system that allows for joint filing of taxes and taxes married individuals less for the same income than a single individual. As I understand it, I think you're arguing for taxing every household at the same level, regardless of set-up of a household. If so, that changes some of my points, but not the overall conclusion. The main drawback in the case I think that it would be incredibly punitive to dual-income households. If my partner's income gets tacked onto mine and taxed at my marginal rate, rather than at their current rate, that would significantly lower our household income - unless we got divorced. On a back-of-the-enveloppe calculation, that would cost my household at least $10k per year in increased taxes at current rates. I presume that with household income being taxed instead of individuals we'd see a reduction in tax rates to make it all revenue neutral, but the net effect there is still that as a dual income household, my taxes would go up to make your taxes (as well as all single-income households' taxes) go down. That also provides a fairly powerful incentive for me to divorce my wife, which I'd rather not do. If we're talking about things related to tax changes that would piss me off, this sort of change would absolutely set me off. OSAP funding already gave me a financial incentive to hold of getting married longer than I'd like, I'd rather not repeat that situation indefinitely moving forward.

3. The equalizing effect comes when that invested money is removed and has to be taxed as income, after having already been taxed as corporate earnings. I'll use your figures here. If I take $30,000 in income at the highest marginal rate in Ontario (53.53%) and then invest it at 9% for 30 years, I end up with $213,000, before capital gains kick in. Now, if I take $30,000 and invest it in my corporation for 30 years at 9%, after paying the 15% corporate tax rate in Ontario, I end up with $338,000! Yeah, that's a lot more. But now I need to take it out. If I took it all out within a single year, I would have... $194,000, based on current income tax rates. $19,000 less than what I'd make if I just took it as income in the first place and invested it myself. Now, capital gains within a corporation I'm fairly certain even this out a bit, and if I invest less within the corporation or take money out over a longer period of time, some small gains start to appear. But we're taking very small differences, optimistically on the order of a thousands dollars or two per year, and that's all banking on future income tax rates being similar or lower than they are today.

5 (I'll save 4 for the end). I certainly agree that companies should be allowed to fail. And I'm not suggesting we should be bailing out company's unfunded commitments to their employees. What I am saying is that when talking about the fairness of sudden changes affecting our retirement, we're not alone in that. If we're accepting that others have to endure such changes without recourse, due to factors beyond their control and in circumvention of agreements they made, we really have no right to complain about similar changes affecting our retirement plans that were made without violating any agreements. I'm not saying either is right in principle, but if we're considering fairness in terms of holding all individuals to the same standards, we can't shrug when others suffer a harm and then get outraged when it happens to us. After all, the social safety net exists for us too, and if they're ok falling on it, so would we.

6. The psychology and economics of tax changes I find incredibly interesting. You're right, there's an economic incentive to work less when taxes increase. Psychologically though, most people don't. When income falls, most people increase their hours to make up for that shortfall, just as you initially suggested, in order to maintain quality of life exactly where it is. If we're talking good policy to encourage people such as physicians to work, pure economic theory says decrease taxes, because rationally acting individuals should respond to that incentive. Yet empirical evidence shows the opposite is true, that higher taxes that decrease post-tax income (within reason of course) may increase working hours for those who have that option, in order to maintain overall income stability. This, sadly, may mean that we end up playing into the government's hands by responding to these changes by working more, thereby providing the government with cheaper per-unit medical services and even more overall tax revenue. Therefore, I choose to take the rational actor approach, to work the same (or less), and take advantage of my relatively more valuable free time.

4 & 7. I worked hard to get where I am and do think I deserve a high income. I wouldn't have entered medical school if the promise of significantly higher earnings didn't exist - instead, I would have happily continued at my lower-paying career. I'm happy to defend the notion that my income should be well into the six figures, within the top 1% of wage earners. Yet, there are huge disparities within that 1% level. Both $250k per year and $500k per year are 1%'er income, but one is clearly higher than the other. I'll argue strenuously that every physician working full-time should earn somewhere near the former at a minimum, and that some who work particularly onerous hours, or had exceedingly difficult training, or take on additional liability, or all three (OBGYNs, surgeons, etc) deserve much more.

However, I have immense trouble defending those who are making a half-million or more. Especially since we're not exactly bleeding a slow death to inflation either. Despite recent cuts or holds to fee schedules failing to keep up with inflation, over the past 30 years or so, overall physician income has grown in real terms, despite working, on average, slightly shorter hours. Efficient gains and other incentive schemes have overwhelmed fee schedule changes. I remember one event when a physician found out that a governmental change was going to result in them losing about $70,000 per year in income for the same income. A huge loss, no doubt. They were livid, distraught and complaining to everyone around about how much they were going to lose. Yet their income was still going to be over half a million per year. They were still going to be able to afford their luxury-brand cars, their expensive house in a nice neighbourhood, their frequent high-priced vacations, and their kids in an expensive private school. The kicker - the people they were complaining to, their healthcare colleagues, we all earning about $70,000 per year total, and had none of those luxuries.

I don't expect physicians to be happy about losing income. I'm certainly not happy about recent developments that could put a damper on my future income. But not being happy isn't the same as being pissed off, or angry, or protesting, or thinking it's unfair. I can dislike a change for its effects on me, but still understand its rationale for its effects on others, and even support it in some cases. Finally, I think that we as physicians need to have a better understanding of how we're viewed by the broader society, and what the public considers fair, and we need to pick our battles accordingly. When it comes to income splitting, I can't sell myself on the notion that it isn't a loophole, hard as I try. Do we really expect to be able to convince the average Canadian, earning a median household income of about $80,000, that it's not and that we deserve to pay lower taxes? I'd much rather try to convince them that our fees should keep pace with inflation, or that we should be funding more surgical time, or that we should increase funding for palliative care and mental health services, because not only do I think these could positively impact my bottom line, while benefiting patients, I think I can win those arguments in the public eye. Physicians don't have a great history of winning hard-line battles with the government over funding models or taxes - as any reading of Canadian physician strikes in the past demonstrates. I agree that we need to fight to maintain our position, but we need to be smart about it, and at least when it comes to income splitting, this isn't the battle to pick.

[Hanmari]

Look, in the end, if we think it's not worth it anymore after all this ruckus, we'll just cut back our hours or leave. That has the potential to be very harmful to society, as Dr. Wong mentioned earlier. People will fall sick and die from decreased care and they will blame the doctors for their failing health as they always do, but that won't budge us because blaming us isn't paying us.

On the other hand, if we still think it's worth it after all this ruckus, we will trudge on at the new status quo. As Ralk said, we'll still be 1 percenters and maybe that is enough for enough of us that care level won't decrease and society as a whole will be fine.

The government might want to trap us in a socialist bubble in this capitalist world, but wait a while and people will naturally see if they can afford to do this to us.

Or y'know, they might go full fascist and force us to work. In which case let's just grab our hospital stock of flammables and torch the parliament. Anesthesia guys with their gases in front.

[JohnGrisham]

12 minutes ago, DentalFoodie said:

I wouldn't say most. Maybe ~5 years ago that might be the case but as of now at least 50% of all undergrad dietetic students come into the program having completed some university if not a degree or masters, at least those in Ontario schools (Ryerson, Western, Guelph). Common ones were MSc but there were a few MBAs that wanted to switch careers... definitely not all the straight from high school types. That's at least 2-4years of another undergrad + possibly 1-2 years for masters. And internships are going the way of the dodo. More and more are becoming integrated masters (MHSc, MPH etc) and thus add another 1-1.5 years to the schooling (total 2-2.5 years depending on the program). Also, for internships, unlike clerkship, it isn't considered full time education in the sense that OSAP starts charging interest while your paying to intern for free. 

As for difficulty, depending on the program yes clinically it will be much easier than what any clerk has to go through (ex MPH the focus is on public health, they meet the bare minimum for clinical competencies). However, I don't think it's fair to say its always easier than clerkship, when I did intensive/critical care, I pretty much stayed 1-2 hours later than the MD or residents (never mind the clerks, they're dismissed around 4pm so the docs can finish their work) and start seeing patients ~1-1.5 hrs before they come in.

That is a fair point about prior education before getting into RD programs, but similarly would apply to medicine/dental school also.   So that is a wash.  Quite a large amount of most medical school classes include people with masters or extra UG training.  The rationale for that is usually medical school entrance requirements are quite high, so they have to continue to beef up their applications. This is different than people deciding to be 2nd careers as you are stating. The entry requirements into the RD programs on the west coast at least, are not nearly as difficult as the medical school requirements(this is a meaningless point from a training difficulty perspective, and just a supply/demand issue).  Usually for allied health programs, if you did extra training before entering it is because 1) you are making a career change or 2) you didn't have strong enough grades etc, so you're taking extra time to beef things up to get in or 3) you were undecided and/or discovered it later etc. 

Not sure what OSAP finances has to do with the current discussion. As for becoming integrated masters - sure, but many residents also throw in MHsc and MPHs into the mix during residency too(yay for unecessary credentialism). Again, all that does is increase the time length of training - just one metric, not factoring in the other intangibles that are associated with medical training.

The majority of internship experiences over the course of the 40 odd weeks, will be on average easier than a similar time length of clerkship. Sure some periods of time or sites/locations may have comparable difficulty, but that is a minority.    Again, time isn't the only consideration - otherwise the Naturopaths doing "more clinical hours in their medical degree than MD students" would hold more weight - but it doesn't. 

Im not trying to be rude or disrespectful at all, i'm just stating that the rigour, requirements and sacrifices of most other programs are far from being comparable to what a trained physician had to go through. 

None of this really has to do with the discussion at hand though, so i'll defer this discussion!