This piece was published on April 29, 2015 in the Montreal Gazette. Below this version is the full unedited version.
Opinion: The federal budget doesn’t help most seniors
The April 21 federal budget has been touted as “the seniors’ budget” and many have praised the “wins” in the budget for seniors. However, is this really the case?
I would submit that most seniors benefitted very little from this budget.
First of all, let’s look at what was not in the budget for seniors. Seniors Vote, an initiative of dozens of seniors’ groups, called for major movement in the budget on four important issues:
Income security including restoring OAS and GIS to age 65 from 67 and increasing the Canada Pension Plan.
Health-care reform including increased funding for issues such as home care and a national pharmacare plan. The Canadian Medical Association has called for a national seniors’ strategy on care and health care.
A national housing strategy for seniors to let them stay in their own homes or move into purpose-built affordable housing.
Fighting inequality to assure all citizens, including seniors, can get out of poverty and their children can have decent jobs, not precarious work. Seniors’ poverty has been increasing in recent years and the latest Statistics Canada figures show 12.1 per cent of seniors now live in poverty (after-tax Low Income Measure). And for single seniors, the rate is now 28.5 per cent!
And yet there are no major moves on any of these four issues. Instead the budget contains four measures that do not signify any major progress on any of the above key policy areas.
So what does the budget have for seniors?
First, the budget increased the maximum annual Tax Free Savings Account contribution from $5,500 to $10,000. While some 11 million Canadians have a TFSA account, only about 1.9 million have maxed out their contributions. So do we really need an increase to the TFSA annual amount? While 92 per cent of those who have maxed out their TFSAs are over 55, among this group the over-65s still represent a minority of Canada’s seniors. Many of these seniors use the TFSA only because they have to find some place for their RRSP/RRIF holdings that they are forced to cash out and pay taxes on after age 71.
While some seniors may benefit right now from this policy, future seniors, as well as today’s Canadians, in general, will not. A recent Parliamentary Budget Office report projects that the fiscal impact of the TFSA program this year will be $1.3 billion, or 0.06 per cent of GDP in lost taxes, a $860 million loss to the federal government and a $430 million loss to the provinces. By 2060, Ottawa would lose $14.7 billion a year in total revenues as a result of TFSAs while the provinces would lose $7.6 billion per year. The Broadbent Institute’s report on TFSAs estimated a loss of an annual $15.5 billion in federal revenue within 40-50 years. This is why the finance minister himself recognized that this was a problem and that it would be left to Harper’s granddaughter to solve!
The second major plank for seniors in the budget was the change in the mandatory rates of withdrawal from Registered Retirement Income Funds (RRIFs). These changes would mean that a senior who turns 71 would be able to withdraw less than he or she has to withdraw by law now. Existing RRIF rules mean that someone who turns 71 in 2014 must withdraw 7.38 per cent of the 2015 market value of their assets in 2015. The new budget reduces this to a withdrawal of 5.28 per cent.
But while this move is positive for seniors who have a RRIF, and who, on average, are living much longer than before, it has to be balanced against the fact that, here again, the government will receive less taxes than before. Even more notable is that the vast majority of Canadians do not contribute to an RRSP (which at age 71 has to be transformed into a RRIF). Therefore this move does not affect most seniors or affects many very marginally, as they have no RRSP or very small amounts in one.
So while a few seniors are helped by these moves, it has to be remembered that this is the government which has raised the age of receiving Old Age Security and Guaranteed Income Supplement by two years. This move alone will cost all seniors over $13,000 each and for those among the most vulnerable, who also get the GIS, the amount of loss will be more than double that amount over two years.
The third major move touching seniors in the budget is the extension of the Compassionate Care EI leave from six weeks to six months. This is a leave program to help care for a family member who is terminally ill and expected to die within six months and allows a caregiver to go on Employment Insurance to care for the relative. Extending this program is a good idea, but there still are some major problems with this initiative. The first problem is the fact that the measure can be used only for caring for a terminally ill person dying within six months. This is not good enough as many persons, who are very ill, are not diagnosed as terminally ill in this short time frame, but could still use important care. As well, many persons who are the potential caregivers are not working or are self-employed, and thus will not have access to any funds through this program. So while a good improvement, this program needs more work, because as the population ages, we will need many more carers. And this program, even if it were to be increased in cost, is a much cheaper and more effective way of providing care than costly long-term or palliative care.
Finally, the budget outlined a non-refundable tax credit for seniors and people with disabilities who undertake home renovation projects. These projects must “allow a senior or a person who is eligible for the Disability Tax Credit to be more mobile, safe and functional within their home.” This would refund a maximum of $1,500 in tax relief on expenses of $10,000. This is positive, but many seniors will not be able to spend the money required to get the maximum credit and, if they have low or no taxes, they will get little or nothing back. A refundable tax credit would mean that many more would benefit. At the same time, necessary renovations, which are paid for by the state or perhaps through a decrease in property taxes, could allow even more to benefit, and, in the end, save money, as seniors can stay in their homes and not rely on more costly long-term care.
So in the end, most seniors’ lives will not be improved in any significant manner. This is not the “seniors’ budget we need!”
John Anderson is a director of the Canadian Alliance of United Seniors, a seniors’ advocacy group affiliated with Seniors Vote. He is a public relations consultant who lives in Ottawa, and is a former director of policy and research with the federal NDP.
The 2015 Federal Budget: Not a real seniors’ budget
John Anderson
The recent April 21 federal budget has been touted by many as “the seniors’ Budget” and many have praised the “wins” in the budget for seniors. However, is this really the case? I would submit that most seniors benefitted very little from this budget. First of all, let’s look at what was not in the budget for seniors. Seniors Vote, an initiative of dozens of seniors’ groups, called for major movement in the budget on four important issues:
- Income security including restoring OAS and GIS to age 65 from 67 and increasing the Canada Pension Plan.
- Healthcare reform including increased funding for issues such as homecare and a national pharmacare plan. The Canadian Medical Association has called for a national seniors’ strategy on care and healthcare.
- A national housing strategy for seniors to let them stay in their own homes or move into purpose built affordable housing
- Fighting inequality to assure all citizens, including seniors, can get out of poverty and their children can have decent jobs not precarious work. Seniors’ poverty has been increasing in recent years and the latest Statcan figures show 12.1% of seniors now live in poverty (after tax Low Income Measure)[i] And for single seniors the rate is now 28.5%!
And yet there are no major moves on any of these 4 issues. Instead the Budget contains 4 measures which do not signify any major progress on any of the above key policy areas. So what does the Budget have for seniors?
First, the budget increased the maximum annual Tax Free Savings Account contribution from $5500 to $10,000. While some 11 million Canadians have a TFSA account, only some 1.9 million have maxed out their contributions. So do we really need an increase to the TFSA annual amount? While 92% of those who have maxed out their TFSAs are over 55, among this group the over 65s still represent a minority of Canada’s seniors. Many of these seniors use the TFSA only because they have to find some place for their RRSP/RRIF holdings which they are forced to cash out and pay taxes on after age 71.
While some seniors may benefit right now from this policy, future seniors, as well as today’s Canadians, in general, will not. A recent Parliamentary Budget Office report projects that the fiscal impact of the TFSA program this year will be $1.3 billion, or 0.06 per cent of GDP in lost taxes, a $860 million loss to the federal government and a $430 million loss to the provinces. By 2060, Ottawa would lose $14.7 billion a year in total revenues as a result of TFSAs while the provinces would lose $7.6 billion per year. The Broadbent Institute’s report on TFSAs estimated a loss of an annual $15.5 billion in federal revenue within 40-50 years. This is why the Finance Minister himself recognized that this was a problem and that it would be left to Harper’s granddaughter to solve!
The future consequences of this plan are stark. If governments will lose some $22 billion per year in tax revenues in the future, many of the social and health programs which seniors now rely on could be threatened.
Even more troubling is the government’s overall view that it is up to seniors to save for their future, and if they do not or cannot, then it is just too bad because governments will not have the resources to help them.
The second major plank for seniors in the budget was the change in the mandatory rates of withdrawal from Registered Retirement Income Funds (RRIFs). These changes would mean that a senior who turns 71 would be able to withdraw less than he or she has to withdraw by law now. Existing RRIF rules mean that someone who turns 71 in 2014 must withdraw 7.38% of the 2015 market value of their assets in 2015. The new budget reduces this to a withdrawal of 5.28%. This means as this chart below shows they would be able to keep more in the RRIF as they grow older.
But while this move is positive for seniors who have a RRIF, and who, on the average, are living much longer than before, it has to be balanced against the fact that, here again, the government will receive less taxes than before. Even more notable is that the vast majority of Canadians do not contribute to an RRSP (which at age 71 has to be transformed into a RRIF). Therefore this move does not affect most seniors or affects many very marginally, as they have no RRSP or very small amounts in one. Statcan noted that just under 6 million taxfilers contributed to an RRSP in 2012, virtually unchanged from 2011, and this was only 23.7% of the total number of taxpayers, down from 24.0% in 2011.
So while a few seniors are helped by these moves, it has to be remembered that this is the government which has raised the age of receiving Old Age Security and Guaranteed Income Supplement by two years. This move alone will cost all seniors over $13,000 each and for those among the most vulnerable, who also get the GIS, the amount of loss will be more than double that amount over 2 years.
The third major move touching seniors in the budget is the extension of the Compassionate Care EI leave from 6 weeks to 6 months. This is a leave program to help care for a family member who is terminally ill and expected to die within 6 months and allows a caregiver to go on Employment Insurance to care for the relative. Extending this program is a good idea, but there still are some major problems with this initiative. The first problem is the fact that the measure can be used only for caring for a terminally ill person dying within 6 months. This is not good enough as many persons, who are very ill, are not diagnosed as terminally ill in this short time frame, but could still use important care. As well, many persons who are the potential caregivers are not working or are self employed, and thus will not have access to any funds through this program. So while a good improvement, this program needs more work, because as the population ages, we will need many more carers. And this program, even if it were to be increased in cost, is a much cheaper and more effective way of providing care than costly long term or palliative care.
Finally, the budget outlined a non-refundable tax credit for seniors and people with disabilities who undertake home renovation projects. These projects must “allow a senior or a person who is eligible for the Disability Tax Credit to be more mobile, safe and functional within their home”. This would refund a maximum of $1500 in tax relief on expenses of $10,000 or a 15% credit. This is positive but many seniors will not be able to spend the $15,000 to get the maximum credit and, if they have low or no taxes, they will get little or nothing back. A refundable tax credit would mean that many more would benefit. At the same time, necessary renovations, which are paid for by the state or perhaps through a decrease in property taxes, could allow even more to benefit, and, in the end, save money, as seniors can stay in their homes and not rely on more costly Long Term Care.
So in the end, while parts of these four measures may help some seniors, particularly those with higher incomes, most senior’s lives will not be improved in any significant manner. We still need real action on the four major concerns we outlined at the start of this piece. This is not the “seniors’ budget we need”!
[i] http://www.statcan.gc.ca/daily-quotidien/141210/t141210a003-eng.htm
Canadian Alliance of United Seniors 
Good analysis, John.