Montréal, le 15 août 1998
Numéro 18
(page 6) 
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     « Politicians and babies are very much alike. They should be changed often, and for the same reason. »   
 by Ralph Maddocks
          When I was quite young, a good many years ago, I thought that I would live for ever; a common misconception at that age. It is one of the reasons that young men are often eager to go to war, and why governments can get away with sending them there. Another common attitude of those years is not to be overly concerned about retirement and such things as pensions. I do not need to pontificate about the relationship of compound interest and time; if you don't understand it now you will when you retire. 
          For the last forty or more years, successive Canadian governments have led us to believe that when we would reach retirement we would have a government pension. In fact, they were so solicitous of our future welfare that they made it obligatory. The Old Age Security (OAS) pension was not an insurance scheme like Employment Insurance, it was a forced contributory savings plan for retirement. There was no choice in the matter, a tax of 4% of your taxable income was set aside to help pay for this promised pension. This tax, and defined portions of various other sales and corporate taxes were used to finance it through the Consolidated Revenue Fund. The pension would be payable at the age of 65 whether you were a pauper or the richest man in the land, and it would be payable even if you left this land. You didn't even have to be a citizen to collect, you just had to live here for at least ten years. You paid and you benefitted, it was all remarkably simple.
Goodbye yellow brick road 
          Simple, that is until 1972, and again in 1975, when the Liberal government of the day folded the premiums into the General Fund, thus hiding those specific taxes. This devious ploy made it very difficult to determine the precise revenue generated by the specific taxes collected. This was the first step on the road leading to the abolition of government pensions. The government also introduced the Canada Pension Plan (CPP) – rejected by Quebec of course which had to have its very own plan (QPP) – to which workers and their employers were obliged to contribute. The second pillar in the construction of the retirement income system. They also introduced what appeared to be a wonderful way to save money tax free, the much vaunted RRSP. In essence it offered an opportunity to save a percentage of your pay up to a maximum amount each year. It was the next step in making people pay directly for their own pensions. In another sense it was a move towards individual responsibility, surely a laudable aim. Somewhere along the line, tax credits were given to people over 65, all of which seemed to offer a cushion against the poverty of old age. 
          The unlamented Mulroney government, fearful of what it perceived to be the impending crisis in the publicly funded system of pensions, introduced reductions in tax credits. Then they introduced that sensitive caring, and appalling, term « clawback ». Not to be outdone, the ever caring Liberals, when it came to their turn, tightened the screws again, lowering eligibility for the « clawback » and removing tax credits. Next, they proposed the so-called tax free « Seniors Benefit », a proposal which called for the replacement of the OAS and its Guaranteed Income Supplement (GIS) and the continuation of the « clawback ». Given the space limitations, suffice it to say that this would have meant that, assuming a 50% provincial tax rates, a couple with a combined income of up to say $59 000 would have a combined tax and « clawback » rate of almost 60%! A great reward for a lifetime of hard work and saving for retirement! This so-called Seniors Benefit now appears to have been abandoned, although no doubt they are planning an assault on your future pension earnings in more devious and stealthy ways. 
Some great reward 
          One of the main groups fighting the Senior Benefit proposal was the Canadian Alliance of Retired Persons (CARP) and they produced some very interesting analyses of what is actually going on in this murky field of pension reform. In a communication to their members they showed that, depending upon the individual case, for every RRSP dollar contributed and every dollar in RRSP tax relief, the contributor gets back $2.94, but the federal and provincial governments get back $22.14. CARP claims that not only will there be enough money for future generations, the system is self-financing (CARP News, June 1998). They contend also that by 2001, the system taken as a whole will show a net surplus of $5 billion. 
          The government forecasted a tripling of OAS costs after 2010. They did not mention that from 1971 to 2000 these costs rose at much faster pace. From 2001 to 2030, OAS costs will increase at only one quarter of the rate of increase during the previous thirty years. The government talks only about costs, they do not talk about the revenues from the specific taxes collected having, as related, deliberately buried them in the 1970's. These OAS/GIS revenues are now estimated to be some $13 billion in 2001. The government only looks at taxes foregone due to RRSP plans; considering them a cost. It ought to be comparing them to the taxes it will collect in the future on these current contributions, suitably discounted to reflect present values. In 1995, the Auditor General proposed a present value approach to calculating all this; the world still waits patiently. 
          Using the Auditor General's approach, CARP estimates that by 2001 the tax assisted part of the system will produce a profit of about $18 billion. If you add the previously mentioned $13 billion this gives a total of $31 billion in tax revenues from the tax assisted and publicly funded retirement income system. This is a surplus of $5 billion over the government's own estimated costs of $26 billion; a surplus which will grow beyond 2001. All this ignores the tax profit the government will make on RRSP and CPP/QPP programmes which are not yet mature. 
          I wonder why the conventional media never explains that our caring social engineers in Ottawa seem to be far more interested in increasing tax profits at the expense of senior citizens than in the sustainability and future affordability of the system to which we are all obliged to subscribe. 
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