A simple way to help Canada’s poorest seniors
TheStar.com – news/opinions/editorials
Published Monday, Feb. 28, 2011.
Although Canada’s poverty statistics are stubbornly high, there has been great progress against poverty among our growing population of seniors — until now.
The percentage of elderly Canadians living in poverty fell hugely from 29 per cent in 1976 down to 4.7 per cent in 2007, but rose to 5.8 per cent in 2008. That increase is due largely to the deteriorating position of single elderly women, whose poverty rate jumped from 14.5 per cent in 2007 to 17.1 per cent in 2008.
Poverty among single aged men was down one percentage point, from 13.1 per cent in 2007 to 12.1 per cent in 2008, but remains high. By contrast, poverty among seniors in couples was only 2.6 per cent in 2008.
Canada’s retirement income system can take most of the credit for the success to date in reducing elderly poverty. The federal old age security (OAS) and guaranteed income supplement (GIS) and provincial and territorial supplements together assure a basic income for seniors.
The Canada and Quebec Pension Plans play an important role as well, especially since the flood of women into the workforce means they are increasingly getting pensions in their own right. But as we saw from the latest poverty statistics, we cannot rest on our laurels.
The Harper government displays a bipolar approach to Canada’s seniors. One of its policy changes has helped the poor, another the wealthy.
In their maiden 2005 budget, the Conservatives announced a modest but long-sought improvement to the guaranteed income supplement for low-income seniors, the first real (above inflation) increase in more than two decades.
Over 2006 and 2007, maximum payments rose by $432 for single recipients and $696 for couples.
But the very next year brought a 180-degree turn in Ottawa’s treatment of the elderly, through a major change in the income tax system. Couples that previously paid tax on each spouse’s individual income, like other taxpayer couples, could now split their income from private pensions and RRSPs so that each would pay tax on half of private pension income. Couples in which one spouse (typically the man) has all the private pension income — the traditional one-income couple — are the biggest winners since the higher-income spouse now pays tax at a lower rate.
Pension income-splitting does absolutely nothing to help single seniors or even the poorest elderly couples who pay no tax. Some senior couples have enjoyed a tax reduction, but the measure is regressive — the higher their income, the bigger the tax break.
Federal tax savings in 2007 from income-splitting for couples in which one spouse has all the private pension income ranged from just $310 for couples with $20,000 from private pensions and RRSPs to $7,280 for the privileged elite with $100,000. And the tax break is costly — an estimated $733 million in 2009, according to the Department of Finance’s latest tax expenditure report.
There is a far fairer and more effective way to spend that $733 million — use it to boost the guaranteed income supplement for the poorest seniors.
The increase should be targeted to single recipients because they have a much higher poverty rate than elderly couples. Moreover, the poverty gap — the difference between the maximum OAS/GIS and the poverty line — is deeper and wider for singles than couples.
In 2010 the maximum OAS/GIS for single seniors fell $5,039 below the poverty line for metropolitan areas with 500,000 or more residents; $2,190 below for large cities of 100,000-499,999; $1,888 below for towns of 30,000-99,999, and $234 below for places under 30,000. Only in rural areas did the poverty gap change to a surplus ($1,570). For elderly couples, the poverty gap was only $447 for metro areas, while couples’ maximum OAS/GIS is higher than the poverty line for all other community sizes.
Focusing improvements on single seniors, who make up 60 per cent of all GIS recipients, would allow Ottawa to raise their annual GIS by around $800 — from the current $7,854 to $8,654 — at a cost of about $740 million, fully financed by cancelling pension income splitting. Maximum income from OAS/GIS would rise from the current $14,076 to $14,876.
Granted, this increase would not fully close the poverty gap for single seniors. But it would still be a welcome incremental step in strengthening the income guarantee for Canada’s poorest seniors.
Finance Minister Flaherty has said that he does not want new spending plans in his next budget. Here is a zero-cost option that will go some way toward addressing the plight of seniors in poverty, especially single women.
Moving $700 million-plus in tax breaks from the wealthiest seniors to the poorest is a tough choice — just the kind we expect from a government with limited fiscal room.
Ken Battle, Sherri Torjman and Michael Mendelson are president, vice-president and senior scholar at the Caledon Institute of Social Policy.
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