For the past six years, the Canadian Taxpayers Federation (CTF) has been campaigning to see Alberta's regressive health care premium tax eliminated. Over the years we've written columns, dropped thousands of petitions off at the Legislature, and told anyone who would listen why this $1,056 per year, per family tax had to be axed. On February 4th, 2008 the efforts paid off.
After years of being told no, the new Stelmach government announced they would phase out the premiums over the next four years. Now every major political party in Alberta has committed to eliminate the Alberta health care premium if they form government.
It took a while to convince the decision makers on the merits of eliminating this tax, but it might take just as long to clear up the various myths that still surround the tax. Here's a quick recap:
Myth #1: Health care premiums pay for health care and cutting them will cut the health care budget
Premiums pay for health care no more than do gambling proceeds, insurance taxes or royalty revenues. The $979-million the government expects to collect this year in health care premiums go directly into the General Revenue Fund along with every other tax.
In 2004, when the government eliminated health care premiums for seniors, it was a loss of revenue for the government of $45-million, yet heath spending increased by $1.1-billion in the next budget.
Myth #2: Health care premiums remind people that health care is not free
Few people actually believe that health care is free. We've yet to meet anyone who thinks that doctors and nurses work pro bono and hospitals magically grow out of the ground at no cost to taxpayers. In fact it's expensive; really expensive.
If anything, health care premiums send the wrong message that health care is relatively inexpensive to provide at $44 per month, per person. In fact, the actual cost is closer to $300 per month, per person.
Myth #3: Not charging a health care premium will cause people to access the health care system more
Few people enjoy having to access the health care system, as it means they are either sick or injured. Those that do abuse the system are not discouraged now and won't be discouraged after the premium is gone.
Further, seven of the ten provinces do not collect health care premiums and you don't see people in those provinces abusing the system any more than here in Alberta. Nor do you see them running with scissors, driving with out seatbelts or encouraging teens to start smoking because their health care is "free" unlike Alberta's.
Myth #4: My company pays my premiums so I won't benefit from their elimination
According to Alberta Health and Wellness, 2.6 million Albertans pay health care premiums, of which 1 million are directly billed and 1.6 million are billed through an employer group plan.
If your employer is paying any portion of your premium it's treated as a taxable benefit, meaning that one still has to pay income tax on the money a company sends to Edmonton. For example, if your employer pays 100 percent of your family health care premium each year, you are still paying the provincial and federal income taxes on an extra $1,056. This costs the average taxpaying family $340 per year in extra income taxes - money that will be back in your pocket when the tax is eliminated.
In addition, once the tax is gone you have a strong case to say to your employer: "you were paying $1,056 on my family's behalf to the government before, why not give it to me now " Tough to argue with that logic.
Regardless of whether you pay it directly or your company pays it for you, all 2.6 million Albertans will be getting a tax cut of some form once the premiums are gone.
To recap, health care premiums don't fund health care directly, they don't really discourage use of the system, and eliminating them will be a tax cut for 2.6 million Albertans even if your company pays. Axing this tax is long over due.
Throughout the 2008 Alberta Provincial election, the CTF provided regular updates which are listed below. This included our "Spend-o-meter" which provided an update of the spending promises:
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