Medicare is Not the Reason for Canada’s High
Taxes
Apologists for Canada’s high taxes often try to defuse taxpayer
complaints by claiming that our publicly funded health care system is
the reason our taxes are so much higher than in the United States. But
the "Medicare explanation" just doesn’t hold any water.
In its recent budget, the Liberal government in Ottawa decided to ramp
up federal spending on health care by $11.5 billion over the next five
years while cutting taxes by $1.5 billion next year.
The public and media discussion of health care and taxes that followed
often ended up with the same rationalization: "Taxes are higher in
Canada than the States because our federal government pays for our
public health care system." In other words, our higher tax levels are
simply the price Canadians must pay for Medicare.
In many quarters, this has become public policy gospel. But is that the
real reason for high taxes? A quick review of the evidence says no.
First of all, such arguments ignore the fact that public health funding
in the United States, as well as in Canada, is pretty much the same.
Public sector funding in Canada represents about 70% of the all the
health care dollars spent in our country, as opposed to south of the
border where public sector funding is about 50% of the total. Private
funding picks up the rest in both countries. But that’s not the whole
story.
When you look at public health spending in relation to economic output
(and therefore our respective tax bases) public spending accounted for
6.6% of Canada’s economic output versus 6.45% in the United States – a
difference of less than two-tenths of a percent.
That’s not enough to account for the huge gap in the tax burden between
the two countries.
No, the reason for higher taxes in Canada is the higher cost of all
government programs here in our country, not to mention the cost of
servicing our mountainous debt.
(In fact, according to the recent budget, the cost of servicing Canada’s
national debt remains the federal government largest expenditure and the
total continues to climb. In 2000, the government paid $40.9 billion to
service its public debt, but that figure rise to $43.3 billion by 2001).
No matter how you slice it, taxes in Canada are much higher than in the
United States. One of the best measures of a country’s overall tax
burden is to look at the percentage of tax revenue compared to a
country’s economic output. For instance, the total tax burden in Canada
represents 43.5% of our economic output. In the United States, the tax
burden is only 31.6% of their economic output – an 11.9 point
difference.
But if we remove public health care spending from the respective tax
loads of both countries, the remaining tax burden to support other
government spending amounts to 36.9% in Canada versus 25.2% in the
United States – an 11.7 point difference. The gap is virtually the same
Canadians owe our high tax levels to all the spending our government
engages in. Taxes are indeed higher in Canada, but public health care is
not the "reason," it’s just the excuse.
Note: the 'Tax Money' that the Canadian government was collecting
was not enough to pay their international debts. So since 2000, they have tried
desperately to bring upper class immigrants into the country to take their
money!
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