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Friday, 28 December 2012

Taxation, the looming Fiscal cliff and the impact on public health in North America

Just as the year comes to a close, DrPHealth will flip over 11,000 views despite very sporadic posting for the last few months.   Stay in touch by following on Twitter @drphealth where a Tweet will inform of all new posts, or you can follow or receive the blog posting by connecting at the bottom of the page. Forward the site to friends, as it is through regular use that the site will be updated.  Please leave comments or feedback – they are most welcomed.

On Dec 31, the US narrowly avoided going over the cliff by some last minute deals, however these are short lasted.  See a good analysis of the implications of the fiscal cliff on public health at Kaiser health news   

Gun control is taking second fiddle to the fiscal cliff these days.   Both will get attention by DrPHealth in the next few days.  The major question is what does the fiscal cliff mean for the health of Americans?

Canadians enjoy a standard of living which includes most health care costs being funded through the public purse.   Depending on where you live, tax burdens and marginal tax rates are slightly different, as are the cost of housing, cost of living, car insurance etc.   Picking the most affordable location to live is more complex than just looking at taxes.  If you are interested, try a tax calculator such as http://www.ey.com/CA/en/Services/Tax/Tax-Calculators-2012-Personal-Tax .  You may find that for a $30,000 per year income that the tax burden is lowest in Nunavut then BC, and highest in Manitoba.   For a $100,000 per year income, the tax burden is also lowest in Nunavut then BC, but highest in Quebec.  The marginal tax rate on that next thousand is also highest in Quebec, and lowest in Nunavut then Alberta.   At around $250,000 per year, tax levels become the highest in Nova Scotia. And around 325,000 Alberta provides the least tax burden.  At the highest income levels, marginal tax rates are between 39-50%.  For 30,000 per year income earnings the marginal tax rates are between 19 and 30%

Piecing out tax rates in the US is perhaps easier as the geographic issues are simplified.  Tax rates vary from 10% to a maximum of 35% (for those with incomes greater than 388,000), and are projected to increase when the country has gone over the cliff to 15% up to 39.6%.   So even if the jump over the cliff has occurred, the highest income earners in the US will be paying taxes comparable to Alberta.   The working poor income earners will be taxed considerably lower than in Canada.

Enter the health care insurance costs. For the 60% of Americans who are insured through self-pay or employment insurance, the added financial burden now becomes an absolute number – significantly impacting lower income earners, and dramatically impacting those without work benefits.   Health care insurance costs for a family earning that $30,000 are the same as the $100,000, and can double the “tax” burden at about $4500 per year.   Higher income earners are more likely to be have employment associated health care benefits.  All of sudden, what might look like a good deal, becomes significantly more challenging for marginal income earners, and a major inequitable benefit for higher income earners. To which we have been reminded that BC retains health premiums as essentially a flat tax for households, Ontario has a scale of premiums based on taxable income.  Neither of these is considered in calculations of provincial "tax" rates - but just as when comparing US rates, should be factored as tax burdens  

As the fiscal cliff looms, most Americans appear to be expecting and accepting of tax increases. The tax burden increases are being spread across all income earners in a somewhat gradient fashion.  The downside to the fiscal cliff is the compromise that is being seen in public health related programming as major funding cuts continue to whittle away while resources are being shifted into health service delivery.   Be sure to review the actuarial analysis of what this means to actually increasing health care costs More health care does not mean better health September 2012 

There is a major step yet to be made in both countries to more equitable wealth distribution.   Moreover, any calculation of tax burden or wealth must now health care out of pocket expenses, otherwise there is no comparability between two vastly different systems.   Finally, as the fiscal cliff looms, the impact on health becomes burdened by the increased tax load, the reduced spending on government programs that keep Americans healthy, and lastly, the health costs that another recession may bring. 

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