Nova Scotia government’s policies hurt health-care recruitment effort

The Houston government swept into power in 2021 in Nova Scotia with a major emphasis on “fixing” the province’s health-care woes. Now entering the third year of its mandate, “fixing” health care remains an elusive goal. Wait times for medically-necessary procedures are the highest in Canada while the list of Nova Scotians without a family doctor continues to grow.

One persistent challenge in health care has been recruitment. Efforts to address shortages of doctors, nurses and other health professionals often feature prominently in government policy and announcements. However, when it comes to recruiting, the Houston government’s big-spending high-tax fiscal policies are working against its health-care reform goals.

To see how the two are connected, we first must understand Nova Scotia’s fiscal position. Under the Houston government, the province is running a budget deficit projected to be $264 million this year, with additional larger deficits to follow in coming years. In fact, the government has announced no plan to balance the budget.

This deficit-spending is because the government has turned on the spending taps. Over the past two years prior to 2023/24, Nova Scotia’s spending increases were the second-highest in Canada on a percentage basis. Provincial comparisons are not yet available for this year but all indications suggest the spending spree has continued. According to the province’s latest fiscal update, program spending has increased by $422-million—or 10.1 per cent above what was budgeted, which itself was an increase from the prior year.

High taxes are needed to maintain this large and growing size of government. Not surprisingly, Nova Scotia has some of the highest personal income taxes in North America. Tax rates at higher income levels (over $150,000 per year), which would apply to many health-care professionals, are the highest of all 60 jurisdictions in North America, as the province has a 54 per cent (combined federal-provincial) top marginal personal income tax rate.

High tax rates are also applied to those with more modest incomes—at $75,000 in income, Nova Scotia’s combined rate of 37.17 per cent is the third-highest in North America.

While this tax competitiveness problem affects workers in all industries, health care stands out. Economic research shows that high overall tax rates can affect location decisions, meaning high tax rates will deter some high-earning doctors and other health professionals from coming to Nova Scotia. These workers are highly mobile, and while many factors affect their location decisions, taxes certainly play a role.

Secondly, high marginal tax rates (the tax rate applied to the next dollar earned) discourages workers from working additional hours (such as overtime) given the high tax penalty paid for additional work.

To make matters worse, Nova Scotia has put itself in a position of weakness compared to neighbouring New Brunswick, which has taken a markedly different fiscal approach of balanced budgets and debt reduction and is in a much stronger position to lower taxes. Should the Higgs government introduce a substantial tax cut this year, which is expected, the very health professionals the Houston government wants to attract will—all else equal—have more money in their pockets by choosing to locate in New Brunswick.

Whether it be New Brunswick or anywhere else, the health-care professionals the Houston government so badly seeks face punitively high tax rates if they choose to live in Nova Scotia. Maintaining a big-spending large-government approach requires high tax rates. By changing its fiscal approach, the Houston government could take a good first step in helping solve the province’s health-care recruitment challenges.