Letter by Canadian Taxpayers Association.

August 11, 2004

Abolish “health care premium” tax for all Albertans

Exempting seniors from having to pay the health care premium tax is a step in the right direction. But this tax should be abolished for all Albertans, because it’s deceitful, regressive and unnecessary.

This tax is deceitful because it’s dressed up like an insurance premium, which it is not. These “premiums” of $1,056 per family per year, or $528 per year for individuals must be paid like every other tax. If you fail to pay, the government will place a lien on your property, seize your car, freeze your bank account, garnish your wages, etc. This tax is also deceitful because it gives Albertans a false impression that our health care system costs $44 per month, or $88 per month for families. In fact, the Alberta government spends nine times as much on health care as what it collects from Albertans by way of the health care premium tax.

The Alberta government could take all revenues from personal income tax ($5.1 billion), property tax ($1.2 billion), tobacco tax ($0.7 billion), liquor tax ($0.6 billion), and fuel tax ($0.6 billion), and rename these five taxes “health taxes,” and put the combined total of $8.2 billion into a separate health care account. That would give Albertans a better understanding of how much health care truly costs. But right now, all money collected as “premiums” – $928 million per year – is put into General Revenues like every other tax.

Not only is the health care premium tax deceptive, but it is regressive. A single person earning $16,000 per year at a minimum wage job must pay $528 per year. A family with children earning $35,000 per year must pay $1,056 per year.

In addition to being deceptive and regressive, the health care premium tax is unnecessary. Revenues from this tax make up less than 4% of total revenues; the Alberta government could easily do without the extra $928 million.

Further, it costs $13 million per year to collect this tax – enough money to purchase four MRI machines.

The government’s decision to exempt some Albertans from this tax on the basis of age looks like a cynical pre-election ploy. In regards to their income, seniors are just like 25-year-old and 45-year-old Albertans: some are rich, some are poor, and most are middle-income.

But now the government has created a situation where a well-to-do retired couple – without kids to support or a mortgage to pay off – is exempted from the $1,056-per-year tax. But if this same retired couple has children – in their 30s, raising kids and paying the mortgage – those adult children must pay the full $1,056-per-year tax. How is that fair?

The only valid basis for a tax exemption is an inability to pay, or a low income. Race or ancestry is not a valid basis for a tax exemption, nor is age. There is no reason why wealthy seniors should be exempted from a $1,056-per-year tax while middle-income families must pay the full $1,056 bill. One must remember that low-income seniors have already been exempted from this tax, as have non-seniors with very low incomes.

Hopefully the government’s move to exempt seniors from this tax is the first step towards exempting everyone. But until that happens, a glaring and unfair inequality will remain in place, and Albertans will continue getting gouged by a tax that is deceitful, regressive and unnecessary.