Majlis Health Commission has proposed levying a 70% tax on the income of high-earning physicians.
“This is yet another example of hasty decisions made through a mechanical approach to economic issues, which requires closer scrutiny,” wrote Hamed Qoddousi, assistant professor of finance at Stevens Institute of Technology, in the Persian daily Ta’adol. Excerpts follow:
The underlying intention behind this proposal is claimed to be an attempt to battle astronomical incomes in the medical profession, though it seems to have ignored the physicians’ take on the issue.
For the sake of redistribution of incomes and social security, levying reasonable and calculated taxes on the earnings of affluent classes seems tenable. So the point at issue here is not taxing the well-off but rather the particular policy of levying a 70% tax on physicians, since one of the first questions that strikes the mind is whether it is logical for marginal tax rates of different professions to be so disparate.
In most countries, income tax is independent of an individual’s occupation and pertains to their level of income. But the policy pursued by Majlis Health Commission favors major tax discrimination between physicians and other professions, the high-paying and non-productive ones in particular.
What has to be taken into account is the distortions that can result from imposing such reckless taxes on production resources. The first critique that can be directed at progressive taxing on incomes is the discouraging effect it has on the productive and proficient workforce, as a result of which the society will be deprived of their hard-to-replace services.
The second question is which physicians are to be subjected to the new regulation? These are eminent specialists in, for example, heart or eye transplant whose expertise and services are very much sought-after. Now, if these specialists are forced to give up 70% of their incomes, they will no longer be willing to work long hours or carry out major operations and will prefer instead, to work part time and rest since the tax applied to the lower brackets in a progressive tax system is not as considerable, or engage in other areas of activity irrelevant to their field of profession. Hence, the exceptional services of a highly potential group will be lost.
On the other hand, such high tax rates will probably affect the price of medical services and patients will have to bear the brunt at the end of the day.
On the bright side though, the taxation system might help combat the “super star” phenomenon in the medical market, which reflects the attraction of the most prominent doctors, and help patients approach the lesser-known but equally competent physicians and specialists.
This has another side to it, as well. Visiting fewer patients, the distinguished doctors will have more time to spend on each and every patient, although this might increase the time patients have to wait for treatment. Whether the society will benefit from this redistribution of patients depends on the quality gap between the well-known doctors and their lesser-known counterparts.
To conclude, if taxes are to be applied to high incomes, then prominent specialists, artists and the ones benefiting from outstanding expertise and talent must be the last group to whom these taxes should be applied. Instead, these people must be encouraged in whatever activity they are doing to making their services much more easily available to the society. Yet, the policy pursued by the parliamentary commission is in marked contrast with this notion.
