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Rhys Kesselman is professor emeritus at the School of Public Policy at Simon Fraser University. His research focuses on taxation, social policy and public finance.

Recent daily news reports have been filled with stories of family doctor shortages and lengthy waits for ER care, specialist appointments, diagnostic tests and spaces in long-term care facilities. People have died while queuing for surgery or waiting for referrals to see a specialist, while many others have endured worsening conditions, prolonged pain and emotional distress. Canada has fallen behind most advanced countries in timely access to medical care.

A declining system poses risks not only to the health of Canadians, but to the survival of universal public health care itself, as more of the electorate may be persuaded toward a privatized system by this lack of timely access.

Fixing the system will require extensive reforms – such as greater use of nurse practitioners and specialized surgical clinics – but also substantial additional funding. This point has been voiced repeatedly by the country’s first ministers, as they have urged the federal government to ramp up health care transfers to the provinces by an additional $28-billion a year. This figure is large and subject to debate, but it is less than the typical amount of growth made by the Canadian economy in a year.

One might ask why the provinces don’t simply raise their own revenues to cover the growing gap between needs and resources. The answer is that provinces are concerned about tax competitiveness and public reaction, which has deterred them from raising their taxes. Given its greater fiscal powers and the national interest in Canada’s paramount social program, the federal government is best suited to raise the funds. But adding to the federal deficit is untenable given the recent bulge in public debt.

A key question, then, is which sources are best suited to generate the needed fiscal room. Potential sources might include savings that come from paring down existing programs, or increased tax revenues. Here I suggest three specific sources to illustrate how this goal might be pursued.

My first proposal would be to focus on delivering Old Age Security benefits more specifically to seniors living around and below median income levels. OAS is the largest federal expenditure, at $55-billion annually, and is projected to grow to nearly $145-billion annually by mid-century.

While OAS benefits are taxable, they are also subject to a “recovery tax” based on individual incomes above a threshold of $79,845 and below $129,757. This recovery tax recaptures $2.3-billion, or just 4.4 per cent, of the program’s gross cost. On account of pension income splitting, couples with total incomes up to $160,000 can completely escape the recovery tax on their total $16,000 of annual benefits, and can further dodge it by using tax-free savings accounts.

In response, I would reduce the recovery-tax threshold and apply it to the joint incomes of couples so as to recoup up to $8-billion of annual revenues. This reform would affect mainly those at income levels above the median, which was also the objective of the Chrétien administration’s ill-fated 1996 Seniors Benefit proposal. The elderly, and particularly those at advanced ages, will increasingly be suffering from the constrained access to timely medical and long-term care that these funds would be used to address.

My second proposal would be to raise the GST from its current 5-per-cent rate, thus reversing the Harper government’s 2006 decision to cut this rate from 7 per cent. Each percentage point increase in the GST rate would generate an additional $7-billion, allowing the initiative to provide an extra $14-billion annually to federal coffers. Low-income households could be insulated from the impact of the rate hike by enhancing the GST refundable tax credit.

My third proposal would be to raise the tax inclusion for capital gains from its current 50-per-cent rate for taxpayers with the largest gains at the highest incomes. The top 1 per cent of taxpayers by income currently garner a full 70 per cent of the total $16-billion in annual federal-provincial tax savings from the existing provision. My recent research assesses alternative ways of formulating this reform, and depending on the precise option, additional billions could be generated. Some of these funds would go directly to the provinces via their income taxes, with the larger portion redounding to federal revenues.

The needed reforms and increased staffing of our country’s public health care system will not happen overnight, but they will never happen without adequate funding. Just as shortcomings in the Canada Pension Plan were addressed in recent years through improved benefit coverage and concomitant financing, the time for shoring up Canada’s public health care system with requisite financing is now.

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