Constraining Canadian Federal Budget during Post COVID Downturn

[McG]

Here’s an idea to ponder.

Trevor Tombe: One straightforward way to balance the budget? Cut seniors benefits

thehub.ca

And an interesting observation:

The trouble is, restraining direct federal expenses doesn’t get you very far.

In fact, you could fire every single federal employee (excluding the military and RCMP) and still come up short!1 You could defund the CBC, privatize Via Rail, eliminate any program with the word climate or energy efficiency in the title, close every single regional economic development agency, and disband the entire Department of Canadian Heritage, and the deficit would be cut by barely more than one-fifth.

 

[Good2Golf]

As always, Trevor Tombe hits it out of the park on straight up, well-researched and well-presented factual information and insight. His assessment of actual viability for example of the potential split from COP of an APP was of similar caliber and quality.

Would be interesting to see the pushback that would likely follow, and from whom? I suspect a lot would come from Boomers. As a Gen-X’er left outside to play growing up while both parents were out working, I personally could deal with having no OAS at all, for example, since I foresee balancing my (reasonable I think) expectations with my earlier contributions. That said, I have little to no confidence that a socially-over focused government wouldn’t just blast those such ‘savings’ into oblivion like has developed over the last…checks calendar…8.173 years.

 

[dapaterson]

Cancelling the OAS deferral originally enacted in 2012 was good politics, bad policy.

 

[brihard]

“Old Age Security”.

So, if already financially secure… I’m not personally opposed to means testing for OAS.

 

[Halifax Tar]

“Old Age Security”.

So, if already financially secure… I’m not personally opposed to means testing for OAS.

Then I would argue you shouldn't be forced to pay into it either. Perhaps a return of contributions ? Or you can voluntarily leave if in the fund.

 

[YZT580]

“Old Age Security”.

So, if already financially secure… I’m not personally opposed to means testing for OAS.

one reason they have been so big on MAID. Seniors cost a lot of money outside of OAS

 

[Halifax Tar]

one reason they have been so big on MAID. Seniors cost a lot of money outside of OAS

Especially ones whose planning for their future depends on others pay cheques.

 

[brihard]

Then I would argue you shouldn't be forced to pay into it either. Perhaps a return of contributions ? Or you can voluntarily leave if in the fund.

You’re thinking of CPP or EI. We don’t have any payroll tax for OAS; it comes out of general government revenue.

 

[Kirkhill]

As a Boomer -

If you are going to suck back on OAS can I have my EI premiums back, with the lost interest, after a lifetime of paying and not claiming?

I lived in the wrong part of the country.

 

[Halifax Tar]

You’re thinking of CPP or EI. We don’t have any payroll tax for OAS; it comes out of general government revenue.

Fair, but General government revenue is still made up of our tax dollars.

 

[dapaterson]

“Old Age Security”.

So, if already financially secure… I’m not personally opposed to means testing for OAS.

OAS is reduced as individual income increases.

What is the clawback for OAS?​

The Old Age Security (OAS) clawback, also known as the OAS pension recovery tax, is a tax that is applied to individuals whose net annual income is above a certain threshold. For 2022, the threshold amount is $81,761. Your net annual income amount can be found on line 234 of your personal income tax return.

The OAS clawback tax is equal to 15% of the difference between the threshold amount and the individual’s actual income. This tax helps to ensure only those who truly need the OAS pension receive it, and that those who are able to support themselves do not receive benefits they are not entitled to. Thus, seniors with higher incomes will have a portion of their OAS pension clawed back by the Canadian government. The OAS clawback is an important part of Canada’s social safety net, and helps to ensure that the system is sustainable for future generations.

What is the clawback for OAS?

Financial security is important at any stage of life, especially retirement. One of the financial benefits Canadian retirees rely on is Old Age Security

advisorsavvy.com

 

[Kirkhill]

Fair, but General government revenue is still made up of our tax dollars.

Take another look at EI.

Premiums: 29 BCAD
Benefits: 22 BCAD

Net 7 BCAD to General Revenues.

 

[Brad Sallows]

I'm more interested in what exactly "Other Transfers" are, if transfers to other levels of government and to individual are already accounted elsewhere.

 

[Kirkhill]

I'm more interested in what exactly "Other Transfers" are, if transfers to other levels of government and to individual are already accounted elsewhere.

Equalization, Social Transfers and Other Arrangements = 46 BCAD with an awful lot of flexibility.
Pretty much equivalent to what we are borrowing = 40 BCAD

 

[brihard]

OAS is reduced as individual income increases.

What is the clawback for OAS?

Financial security is important at any stage of life, especially retirement. One of the financial benefits Canadian retirees rely on is Old Age Security

advisorsavvy.com

I stand corrected, thank you. It’s not clear to me, then, what direct transfers to seniors are being pitched here as ‘in play’- or if this would simply lower the threshold for the existing OAS clawback? A family income of $150k would suggest a more aggressive OAS clawback than presently exists base on the ‘15% of the difference over $81,761’ criteria currently in place.

 

[dapaterson]

I stand corrected, thank you. It’s not clear to me, then, what direct transfers to seniors are being pitched here as ‘in play’- or if this would simply lower the threshold for the existing OAS clawback? A family income of $150k would suggest a more aggressive OAS clawback than presently exists base on the ‘15% of the difference over $81,761’ criteria currently in place.

There are additional complexities at play, as different types of income in retirement are taxed / grossed up differently.

Retirement income for low income Canadians generally comes from CPP, OAS and GIS. Some sort of comprehensive old age income plan might be easier to administer (ESDC is currently in the midst of a multi year multi billion dollar effort to refresh their backend software, which is not progressing well).

 

[brihard]

There are additional complexities at play, as different types of income in retirement are taxed / grossed up differently.

Retirement income for low income Canadians generally comes from CPP, OAS and GIS. Some sort of comprehensive old age income plan might be easier to administer (ESDC is currently in the midst of a multi year multi billion dollar effort to refresh their backend software, which is not progressing well).

Max CPP, OAS, and GIS (and yes GIS should max if full CPP is only non-OAS income) totals $26,435.88 a year, or $2202.99 a month for an individual between ages 65 and I think 75 where it bumps up slightly. That’s pretty dismal if someone hasn’t been able to save anything additional over their working life. And you need to contribute fully to YMPE for 39 years to get maximum EI.

Lots of seniors out there in very dire straits.

 

[Halifax Tar]

Lots of seniors out there in very dire straits.

No doubt. The question I want to know is why and how ?

 

[brihard]

No doubt. The question I want to know is why and how ?

I think sometimes we forget how good we’ve got it with relatively high incomes and gold plated pensions. A lot of people have had to scrape by month to month on just enough money to make it to next paycheck. For older women in particular they may have been out of the workforce for years (or never entered it) while raising children, and haven’t com close to maximizing CPP contributions, nor were they able to get jobs later in life that came with a pension plan. Others have maybe dealt with disability, their own medical crises, or being a caregiver to chronically ill family… there are lots of reasons people might spend much of their life working but still reach ‘retirement’ with a pittance.

 

[Halifax Tar]

I think sometimes we forget how good we’ve got it with relatively high incomes and gold plated pensions. A lot of people have had to scrape by month to month on just enough money to make it to next paycheck. For older women in particular they may have been out of the workforce for years (or never entered it) while raising children, and haven’t com close to maximizing CPP contributions, nor were they able to get jobs later in life that came with a pension plan. Others have maybe dealt with disability, their own medical crises, or being a caregiver to chronically ill family… there are lots of reasons people might spend much of their life working but still reach ‘retirement’ with a pittance.

I think sometimes we don't give ourselves enough credit for actually working for and improving our stations in life. And people who decide to waste their education and earning years should not be entitled to a portion of my pay cheque.