My Meeting with Minister Morneau–A Physician Mom’s Perspective
Two days ago, I got the unexpected chance to meet with Finance Minister Bill Morneau. He had flown into Vancouver on his way to Kelowna for the Liberal Summer Caucus, and wanted to meet with local small business owners to get their feedback on the proposed tax changes for small businesses. Being a female physician/entrepreneur (I am a GP locum who also does maternity care, and CEO of Locumunity, a startup I launched 4 months ago), I got the invitation the day before.
The meeting was informal, held at Delaney’s, a downtown Vancouver coffee shop.
Amongst the other business owners was another physician, Dr Bar Zack (an ophthalmologist), a lawyer, a bar owner and 2 others. Longstanding Vancouver Center Liberal MP Dr Hedy Fry was also part of the discussion.
The discussion started abruptly with an angry business owner letting Minister Morneau know that he was going to have to lay-off an employee that day because of the proposed tax changes. Morneau’s response was that he shouldn’t do that as nothing had yet gone into effect. The business owner’s rebuttal was that he has to budget 6-12 months in advance since, as a small business, he doesn’t have large margins to play with.
Morneau proposed to back-up and start from the beginning. He went on to explain the 3 major points he is tackling with the proposed tax changes: 1) income splitting 2) tax deferral 3) converting income into capital gains. His main goal, he states, is to create fairness between employees who are salaried, and incorporated individuals. Minister Morneau gave the following example several times throughout our discussion: How is it fair that a mother who’s an employee with 2 children ages less than 18 who makes the same income as a woman who is incorporated and has 2 children over 18, can end up paying more tax (reasoning being the latter person is incorporated and can income split with her adult children based on current tax system).
The general argument back was that a salaried employee and a business owner are not the same; a salaried employee doesn’t have the same responsibility/expenses as a business owner, and a business owner has to budget for their own sick/vacation time, parental leave and pension. We then went around the table so that each person could give their point of view.
Being a female physician first and foremost (and 39+weeks pregnant, just starting on my self-funded parental leave), I argued two main points. The first is that incorporating was a negotiated benefit for physicians in lieu of a pay raise. The answer back was that that was a provincially negotiated agreement. I insisted that in my eyes, that shouldn’t matter, it was a government promise. The second point being that physicians’ income is capped by the government, and I cannot pass on any extra costs to patients. At which point Minister Morneau told me that the tax changes he proposes shouldn’t affect me. I disagreed; the way I use income splitting is to budget for a maternity leave of ~6 months, after which I return to ‘part-time’ work (shorter office hours, but three-four 24 hour shifts/months doing maternity care), and I income split with my spouse so he can take parental leave. We are thereby using income splitting to invest time in our children, raising well adapted productive citizens, and to allow me to return to work part time and keep up medical skills. I agreed with him on the point of income splitting with adult children, that is an unfair advantage. At that point, I perhaps saw him ponder in his mind a situation he hadn’t thought of before where someone was using income splitting in a productive/practical manner. (A side note income splitting with adult children, having talked to other mom physicians after the meeting, there are many who saved for their children’s education through their corporation rather than RESPs, as recommended by their financial advisors, and now face losing that).
Then Minister Morneau gave the example of how two people earn $100, the incorporated individual gets taxed $15, and has $85 to play with in the incorporation in terms of investment. We tried to make him see that that $85 dwindles quickly when you factor in all the expenses a self-employed business owner incurs. For instance, as a family physician locum, I have to pay 30-35% overhead costs, then add in malpractice insurance (~$950/mo as I do maternity care), professional dues/licensing fees/benefits/vacation/sick time/parental leave, and then also pay down my 100k+ line of credit that I accrued from my medical education, and hope some money is left to set aside for a pension. In fact, the GP office locum portion of my work is hardly worth the money I get at the end of a long day with paperwork to take home. Doing maternity care, where some overhead costs are covered by the hospital (cons being 24 hour shifts that can be grueling), is what has allowed me to save for a ~6 month maternity leave.
Dr Zack also relayed his own experience setting up an ophthalmology office with high cost equipment, and being responsible for the benefits etc of multiple staff. He argued that saving for a pension is a stress on physicians, as we are usually playing catchup after lengthy training/paying off student loans. The bar owner insisted that the government has to be clearer about CRA rules when the changes do happen and cannot leave things ambiguous.
Minister Monreau acknowledged Dr Zack’s point of view regarding pension. He then asked us to imagine that we were not small business owners, and to look at the overall picture of tax fairness in Canada. My response back was to say that when I step back, I see these drastic tax changes as making minimal gains for the government in terms of tax money, but having a huge impact on the Canadian economy as a whole, and therefore, is it worth it? Minister Monreau stuck to the point that this is all about tax fairness.
The meeting then concluded. As for the proposed tax changes, I did think that Minister Monreau is set on them, and that perhaps the only 2 things that he seemed a bit swayed on is pension planning for self employed individuals (comment directed at the other physician, so not sure if physician-specific), and I like to think that my explanation of how income splitting allows me to share parental leave with my spouse and continue working as a female physician made him think twice.
I still had my struggles as CEO of a physician startup to discuss with him. in less than 2 minutes I explained to him my situation, and the obstacles I’m encountering with Locumunity. I explained how I as a physician, identified a systemic health care need: there is low locum supply, high demand, and fragmented recruitment/retention efforts. The consequences of this are high physicians burnout (~52%), and that smaller cities/rural areas struggle to recruit locums. Locum recruitment and retention is identified as a priority need on provincial and national levels, so this is already on the government’s agenda. I came up with a solution and invested time, money and effort to make it a reality. Locumunity is a software as a service product that actively matches locums with employers/clinics, it is Canada-wide, specialty-wide. We launched end of April 2017, and already have ~600 physician users. Although our physician community has been very supportive and excited to use the product (fellow colleagues, some divisions of family practice), any association or government groups (e.g. Canadian Medical Association, ministries of health) have been reluctant to engage in any form of strategic partnership, which is disheartening to experience. How can you expect growth and innovation in the healthcare sector, especially for small business, when you ignore them, and then implement unfair tax reforms?
The Minister directed me to the Canadian Business Development Centre, and a fund that’s set aside for female founders. I’ll follow the lead…will update you on how it goes!