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
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
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
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.