To the Editor:
There’s growing controversy about Stephen Harper’s changes to “Tax-Free Savings Accounts” (TFSAs), especially compared to how he chopped the old age pension a few years ago.
He is nearly doubling the annual TFSA contribution limit (from $5500 to $10,000), thus ballooning the costs of this program by many billions of dollars and skewing it toward wealthier households. The Parliamentary Budget Officer has published a blunt critique, calling the changes “regressive.”
With annual contributions up to $5500, TFSAs have generally been within reach for most Canadians. But interestingly, only about one-third of all those eligible actually participate, and fewer than a quarter of that third contribute the maximum. If not used-up in one year, the room to make a TFSA contribution can be carried forward. At the existing annual limit of $5500, the average TFSA still has close to $10,000 of unused room for more contributions.
So there would not appear to be a compelling case for boosting the annual limit. How many middle-class families have an extra unutilized $10,000 available in after-tax money every year to max-out? Almost doubling the limit, as Mr. Harper is doing, creates investment advantages increasingly limited to those with higher wealth. Is that good public policy? Is it affordable?
These questions bring to mind the cuts Mr. Harper is imposing on Canada’s Old Age Security (OAS) and Guaranteed Income Supplement (GIS) system. It looks like a double standard. While TFSAs are being enriched, the OAS and GIS are being curtailed in a manner that will take nearly $32,000 from the very lowest-income seniors.
In the aggregate over future years, Mr. Harper’s OAS/GIS reductions will generate several billions of dollars in “savings” for the federal treasury, while his expansion of TFSAs will deplete that same treasury (and the provinces too) by several billions of dollars.
The trade-off is clear — the small pensions of the least wealthy and most vulnerable seniors are being cut to make room for higher retirement incomes for the more well-to-do. That strikes a lot of people as unfair.
It’s important to note what the OAS/GIS are, and who benefits:
* These are modest retirement income support programs provided by the federal government — the OAS since 1952, the GIS since 1967. Beneficiaries do not contribute premiums. All Canadians (on a means-related basis) become eligible for the OAS upon reaching the age 65. If they have very little other income, they are also eligible for the GIS.
* The maximum OAS monthly benefit for a single individual is currently $564. The maximum GIS is $764. That works out to a grand total of just $1,328 per month, or $15,937 per year for seniors at the lowest end of the income scale.
* OAS/GIS benefits are scaled down (and eventually eliminated altogether) for those who have other higher sources of retirement income. The system is thus focused on seniors who don’t have many options to support themselves in a secure and dignified way.
* From a fiscal perspective, the cost of the OAS/GIS today is equal to about 2.5 per cent of Canada’s Gross Domestic Product. That’s a bargain compared to many other countries where their public pension systems consume some 10 per cent or more.
* This attack on future lower-income seniors directly violates an explicit election promise made by Stephen Harper personally. He has broken his word.
of one point of GDP.
* A vast array of experts and actuaries have reported that Canada’s OAS/GIS system is sound and secure and doesn’t need this age-change — including analysts with the OECD, the Parliamentary Budget Officer, the Auditor General, the Office of the Superintendent of Financial Institutions, the Fitch and Moodys rating agencies, the universities of Calgary, British Columbia and York, the Centre for Policy Alternatives, the C.D. Howe Institute and others. In short — if it ain’t broke, don’t fix it.
* Furthermore, delaying the eligibility age doesn’t make the need go away. Losing two years of benefits will cause some of the most vulnerable seniors to fall below the poverty line. Many will have to seek social assistance from provincial governments. So the real costs just get transferred from one level of government to another.
* Fundamentally, the main point is fairness. Who are the Harper government’s primary victims here? They are those who must rely on OAS/GIS the most. They are those with the most meagre incomes and the fewest alternatives. They are very often single women living alone. From these Canadians, in their years between 65 and 67, Mr. Harper is going to take nearly $32,000.
This policy is simply wrong. The recent TFSA enhancements make that point glaringly obvious. How can Mr. Harper claim he has to cut support for the poorest elderly widows, while his budget is bolstering the incomes of those already more affluent?
Surely Canada can do better than this!
Ralph Goodale
Member of Parliament Wascana
