Blogs & Comment

Chart: Health spending vs. income tax paid by age

Baby boomers have contributed a ton in income tax—now they're going to cost a lot.

Healthcare costs rise rapidly with age. Using data from The Canadian Institute for Health Information’s National Health Expenditure Trends (1975-2011) and federal income tax reports, we see that the 14% of people in Canada who are over 65 used over 44% of Canada’s healthcare budget and contributed 11% of total federal income tax. However, over their lifetimes, especially in the 45 years between ages 20 and 65, they contributed over 88% of the income tax and only used 44% of the healthcare costs. Individuals under 20 used about 11% of healthcare and their 0.17% contribution to income tax does not even register on the graph below. This system of contributing then withdrawal is kind of like an RRSP. You put money in during your working years and take it out in retirement. The fly in this ointment is our aging population. The trends all point to fewer people contributing and more withdrawing in the future. Meaning either people of working ages will be tasked with contributing more, healthcare will get less robust or a combination of the two.