CANADIAN CENTRE FOR POLICY
ALTERNATIVES
LYNNE FERNANDEZ
TWO SECTIONS
Seniors’ Poverty Rate
The Truth about Taxes
• How the
• Avoiding the
greatest
Generational
Canadian
Divide
policy success
story may be
unravelling
GREATEST POLICY SUCCESS
STORY IN CANADIAN HISTORY
REDUCTION OF SENIORS’ POVERTY RATE
WHAT MACLEAN’S ARTICLE GOT RIGHT:
GREATEST POLICY SUCCESS STORY IN
CANADIAN HISTORY
40
35
30
1976
25
20
15
10
5
0
Seniors
19-64
Under 18
2013
CHILD POVERTY
• In 1989 the House of Commons passed a
unanimous resolution “to seek to achieve the
goal of eliminating poverty among Canadian
children by the year 2000” and two years
after the entire House of Commons voted to
“develop an immediate plan to end poverty
for all in Canada.” Neither the promised
poverty elimination or plans have
materialized.
HOW THINGS IMPROVED FOR SENIORS
• Direct policy programs:
• OAS
• CPP
• Guaranteed Income
Supplement
A VERY DIFFERENT LABOUR MARKET
• Today’s ageing Canadians enjoyed:
• Higher rates of unionization
• Better wages
• More secure employment
• Better benefits, including pensions
In sum, they worked in a standard
work environment vs. a precarious
work environment.
COMPREHENSIVE SET OF
GOVERNMENT PROGRAMS
• Public Healthcare – Canada
Health Act enforced by
federal government: funded
50%
• Public education
• National housing strategy
THE WEALTHY SENIOR?
•Little data to back up the
claim of many very
wealthy seniors
•More income and wealth
data required for 65+
group
THE BENEFIT CLAW BACK
• “DESPITE POLITICAL BLOWBACK,
GOVERNMENTS MAY ALSO NEED
TO START SUBJECTING SACRED
SENIOURS’ BENEFITS LIKE PENSION
INCOME-SPLITTING OR CPP AND
OAS TO A ‘MEANS TEST”- A SLIDING
SCALE BASED ON INCOME.”
A LIFETIME OF TAXES
• A LIFETIME OF PAYING TAXES = FULL
ACCESS TO OAS
• CPP IS AN INSURANCE PROGRAM:
IF YOU PAY IN, YOU SHOULD
BENEFIT. PERIOD
• WE MUSTN’T ERODE THE
UNIVERSALITY OF THESE
PROGRAMS
NEED TO REFORM CPP
• OECD warns that reform needed if future
ageing Canadians are to enjoy financial
security
• Private pensions are mainly concentrated
among high-income workers
• Coming decades will see an increase in
poverty for ageing Canadians
• Women, who face more breaks in their
careers and whose wages are not equal to
men’s, will be hit the worst
NOT JUST ABOUT INCOME
• We need a new Healthcare Accord:
• Not renewed
• We need to renew Special Operating
Agreements for low income housing:
• Not renewed
WE NEED A RE-ENERGIZED FEDERAL
COMMITMENT TO HEALTHCARE AND
HOUSING: NOWHERE ON THE HORIZON
“CASH-STRAPPED GOVERNMENTS”
• HAVE TO MAKE A CHOICE
BETWEEN SUPPORTING AGEING
CANADIANS OR SUPPORTING
YOUNGER CANADIANS…..
• WHE NEED TO ASK WHY????
THE TRUTH ABOUT TAXES
TAX FAIRNESS
TAX CUTS
• Between 1995 and 2009 tax
revenue had dropped from
36% of GDP to 33% of GDP.
• $50 billion LESS in public
revenue.
A BUCK IS A BUCK
•Royal commission on
taxation, or the Carter
Commission said:
•A buck is a buck, or all
income should be taxed at
the same rates regardless of
its source
WHEN A BUCK ISN’T A BUCK
• Wealth (company assets, real
estate, gold bars etc.) subject to
capital gains
• Capital gains taxed at half the rate
of income (wages, pensions etc.)
IF A BUCK WERE A BUCK…
• If capital gains were taxed the same
as employment income, we would
increase revenues by $8.4 billion.
• So, we could add $8.4 billion dollars to
pay for a pharma-care plan and
national housing strategy that would
help ALL low income Canadians
PENSION-INCOME SPLITTING
• INCOME SPLITTING ALLOWS HIGHINCOME SENIOR TO TRANSFER
INCOME TO LOWER-INCOME
SPOUSE
• ELIMINATES HIGH-INCOME
SENIOR’S OAS CLAWBACK
PENSION INCOME SPLITTING
• 7 out of 10 senior families get NO benefit at
all from pension income splitting
• The richest 10% of senior families receive
more than the bottom 70% combined.
• The cost of pension income splitting for
senior couples in 2015 is estimated at $1.7
billion ($1.2 billion federally and $500 million
provincially).
• In contrast, it would cost $1.5 billion a year to
lift all Canadian seniors out of poverty.
ON ONE HAND…
•WE’VE SAID THAT
OAS SHOULD NOT BE
CLAWED BACK
ON THE OTHER HAND…
• THIS “CORRECTION” [PENSION
SPLITTING] DOES NOT HELP LOWINCOME PENSIONERS
• THE RICHEST 40% OF PENSIONERS
GAIN MOST OF THE BENEFITS FROM
PENSION INCOME SPLITTING
• THE POOER THE SENIOR FAMILY,
THE LESS BENEFIT IT RECEIVES
POOREST 10% VS RICHEST 10%
•THE POOREST 10% OF
SENIORS RECEIVE AN
AVERAGE OF 10 CENTS IN
TERMS OF A TAX BREAK
•THE RICHEST 10% RECEIVE
AN AVERAGE OF $820
KEEP IT SIMPLE
•No claw backs: universality
•Tax income and wealth
equally
•Eliminate tax loopholes
•Prevent tax avoidance
•Restore progressivity
CORPORATE TAX CUTS
• FALLEN FROM 28 PER CENT IN 2000
TO:
• 18% effective January 1, 2010
• 16.5% effective January 1, 2011
• 15% effective January 1, 2012
IT ADDS UP
• When federal government cut
corporate income tax rate from
18.5% to 15%, we lost $1.75 BILLION
for each percentage point
decrease
• $6.125 BILLION
TAX HAVENS
•Cost Canadians
$10 billion a year
PROGRESSIVE TAX SYSTEM
•AS INCOME
INCREASES, SO
SHOULD THE RATE AT
WHICH IT IS TAXED
TAX RATES ON WEALTHY
• In 2014: 29% on earnings
over $136,270.
• In 1981 rate was 43% on
earnings over $119,000 (1981
dollars)
• Before WWII, was as high as 90%
TAX FAIRNESS
• A STRONGER HEALTHCARE
SYSTEM:
• Renew 10-year accord
• Add pharma-care; long-term
care; home care;
• Renew Federal Commitment
to Canada Health Act
TAX FAIRNESS
• Means to help all low-income
Canadians, including children
• Means to maintain
improvements for ageing
Canadians.
TAX FAIRNESS
• MEANS TO RESTORE NATIONAL
HOUSING STRATEGY:
• Renew Special Operating Agreements
which are due to start expiring
• Restore housing security to all lowincome Canadians
• Eliminate national housing crisis
TAX FAIRNESS
• Restore the Employment Insurance
Program
• National childcare program
• Restore funding to healthcare
TAX FAIRNESS
•Let’s avoid the
generational
divide
DIVIDE AND CONQUER
• Great success in lowering seniors’ poverty rate did
NOT occur on backs of younger generations
• Deliberate policy decisions such as:
• CCP; OAS; GIS
• NATIONAL HOUSING STRATEGY
• VIABLE UNEMPLOYMENT INSURANCE SYSTEM
• PROGRESSIVE INCOME TAX SYSTEM TO SUPPORT
ALL THIS AND MORE:
• EDUCATION
• HEALTHCARE
IT WAS THE WHOLE PACKAGE
• A broad range of government
supported programs and policies
created the greatest policy success
story in Canadian history
• By dismantling those programs,
Canada’s ageing population will begin
to feel the pinch again and…
• Tomorrow’s seniors will not do as well.
IT’S ABOUT ALL OF US
•REFUSE TO BUY INTO IT’S
THEM OR IT’S US
ARGUMENT
•A FAIR TAXATION SYSTEM
= A FAIR SOCIETY