Identifying a problem doesn't mean you've provided a solution
By Walter Robinson
Last week the National Council on Welfare (funded by the Canadian government) released a report entitled A Pension Primer.
Its main findings were that 17 percent of Canadians who are 65 and older live below the poverty line. More shocking however, was their contention that 42 per cent of unattached women of 65 live below the poverty line.
The study found that this group (the 42 per cent) on average received $11,808 in total government transfers. These transfers include Old Age Security (OAS) and Guaranteed Income Supplement (GIS), Canada or Quebec Pension Plans (CPP/QPP) and provincial entitlements. This accounts for 92 per cent of their total income of $12,818 per year.
Societal and labour market factors clearly explain why many of these women have no other sources of retirement income other than government transfers. Many of them spent their working lives outside of the paid labour force. Or they were reliant on part-time and casual work during their working years.
While the debate about what constitutes a level of poverty in Canada still rages, one would have to be pretty callous not to agree that a meagre pension income of $12,818 per year is not conducive to living with dignity in most major Canadian metropolitan centres.
So what is to be done? The National Council on Welfare suggests that a top up of $1.5 billion in pensions to these "poorer" seniors would move them above their definition of the poverty line.
The problem, however, is not money. The feds alone will spend $23.5 billion on elderly transfers this year. That's 21 per cent of Ottawa's program spending, and that doesn't even include tens of billions of dollars in other "free" benefits such as healthcare ($83.5 billion when federal and provincial outlays are tallied up).
The real problem is how the money is doled out. Canada's wonderful "universal" social programs allow everyone, rich and poor alike, to help themselves to the public trough. A family making over $100,000 a year, for example, is entitled to OAS benefits, just like those making nothing. The road to eliminating poverty starts with an end to "universality".
Paul Martin as much as admitted this fact when he proposed a new "Seniors Benefit" to replace the current OAS/GIS system. It would have ratcheted down the amounts that could be collected by high income earning seniors. But, as usual, the feds gave in to the "universality" lobby.
Cutting government benefits to wealthy seniors no longer being an option then, the Council on Welfare proposes to dig into Canadians private savings and eliminate the RRSP tax deduction, which, they claim, gives a tax break to the wealthy.
Apparently, no one at the Council has an RRSP. If they did they would know that the RRSP deduction does not eliminate tax but merely defers it. Just because you don't have to pay tax, on let's say, a $10,000 contribution in 1999, doesn't mean that that money is forever tax free. You'll pay tax on the full amount when you withdraw that same $10,000 at retirement. RRSPs do not provide a "tax break", only a tax deferral. Eliminating the deduction would simply increase government revenues now, thereby reducing them in the future.
Tinkering with the tax system and creating disincentives for people to save on their own is not the answer to curtailing poverty among seniors. The simple solution is to redirect current benefits to those who really need them. What a concept!
Walter Robinson is the Federal Director of the Canadian Taxpayers Association.
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