Governments should tax aging Canadians based on the wealth in their homes to make sure they pay their fair share for medical care
What does housing have to do with health?
Housing shapes our health and our ability to pay for medical care. Canada’s premiers and prime minister should consider these connections as they negotiate health care spending.
Most medical care spending comes when we fall ill, but health begins where we are born, live, learn, play and work. Our homes are central to these conditions.
So it’s a major health problem that home prices have increased by hundreds of thousands of dollars since 1976 (after inflation), when today’s aging population were young adults. The problem is made more acute because young Canadians now earn thousands less for full-time work.
The growing gap between home prices and earnings risks anxiety and mental illness for young adults who are squeezed between a vice grip of time and money. The stress is contagious to the children we raise, which helps to explain why one-quarter of Canadian children start kindergarten vulnerable in ways that mean they are more likely to fail, go to jail and wind up sick as adults.
So much of this adult anxiety and child vulnerability could be avoided if the next Canada Health Accord recognized that health begins in our homes, neighbourhoods and jobs. The first ministers must resist budget allocations for illness treatment that leave too little leftover to promote health and well-being.
Medical care spending, combined with current tax rates, risks crowding out provincial spending on housing. International data show Canada already spends more than most countries on medical care, but we have below-average access to doctors, MRI and CT scans.
Promoting health requires that we slow the escalation of housing prices and recouple the value of homes to earnings. While it took about five years of full-time work for the typical 25-to-34-year-old to save a 20 per cent down payment in 1976, it now takes 12 years. It’s worse in Toronto and most of B.C.
Finding a better balance between taxing income and housing wealth could help. By comparison with other countries, Canadians collect a large portion of our taxes from income – something that hasn’t been growing as fast as we’d like for most. By contrast, we tax housing wealth relatively little, even though polls show the majority of Canadians now judge that housing prices in their cities are unreasonably high.
It’s time to distinguish between two Canadians who earn $45,000: one is a young renter; the other has been in the housing market for decades and owns outright a home worth over $600,000. We treat them almost identically in terms of measuring their ability to pay for medical care and other social services. But they aren’t identical, especially when we recognize that Canadians don’t prepay for the medical care we plan to use in retirement in the same way we prepay for the Canada Pension Plan.
Each province pays for medical care consumed in a year. But demand is highly related to demographics. Whereas 31 cents of every health-care dollar went to Canadians age 65-plus in 1976, now nearly 50 cents of every care dollar goes to this group. In 1976, fewer tax dollars had to be collected from each Canadian to pay for this care, since there were six workers for every retiree. Today, there are fewer than four workers for every retiree. And in the coming decades, there will be only two workers paying the freight for every retiree.
Studies question if tax rates can be sustained as the population ages. So it’s important to monitor the degree to which the aging population pays the full share of the medical care they consume. And what implications will this have for public funds available to invest where health begins – in our homes?
We can reduce these intergenerational tensions by factoring housing wealth more into how people pay for medical care. The high home prices that drive wealth accumulation for the majority of the aging population are an important source of prosperity. And they can draw from that prosperity to pay a fair share for medical care.
In addition to supporting the health needs of an aging population, taxing housing wealth more fairly would give governments the revenue needed to ease the time, money, service and environmental squeeze on younger Canadians, while cooling down housing prices.
That’s a housing strategy that can promote health for all generations.
Dr. Paul Kershaw
Dr. Paul Kershaw is a policy professor in the UBC School of Population Health, and founder of Generation Squeeze.