June, 2013

 

Government Policies Drive Private Sector Seniors Into Impoverishment

Since the unionization of government workers began in the late 1960's, the institutional evolution has established numerous bureaucratic systemic regulatory obstructions, rigid financial impairments and outdated taxation paradigms that will most certainly debase the lifestyles of the growing demographic group of senior citizens in Canada. As a marketing executive, I’ve had the privilege of studying and analyzing the baby boom generation. Now that this huge demographic is entering their senior years, the traditional concept of being a “senior citizen” will change.  This is a certainty because throughout the boomers’ maturation cycles, they have redefined the lifestyles of their age group.

There are ponderous regulatory obstructions to creating jobs or new businesses for seniors, including out dated minority group hiring practices and complex employment practices for new small businesses. Already, the ability of senior citizens to sustain fixed and increasing living costs are severely impaired by taxes on things like education funding which no longer benefits seniors’ families.

Government financial policies regarding the costs of drugs, corporate price fixing, international & sovereign corporation acquistions in Canada, business tax policies, foreign controlled monetary policies, foreign trade agreements, domestic trade regulations, etc. all compund the need to over tax domestic citizens and especially to continue to clawback any wealth held by seniors.

Our graduated income tax system is increasingly unfair for seniors who rely on a changing and diminishing mix of annual revenues.  RRSP, pension and OAS revenues are inadequate to pay remaining mortgages, rising property insurance, increasing property taxes, over-priced fuel and communication expenses. Reduced incomes from other sources can’t meet other rising living expenses (food prices are increasing at rates exceeding 15% each year). These cost of living increases exacerbate the unfair and punitive extortionist expectations of government agencies who expect seniors to continue to fund their deficits and overly costly programmes and services.

These are merely a few of the dozens of rising costs seniors are hit with as their incomes and savings decline. In fact, becoming a senior in Canada is actually a precipitous road to imminent poverty or bankruptcy for well over 65% of senior Canadians. (Check Statistics Canada data for the Net Worth of individual Canadians over 65 years of age.) When one takes into account all the living costs, even a net worth of $500,000 is not enough to pay for a basic lifestyle for seniors living to 80 years of age or more. It definitely means there will be nothing left for their children to inherit.

Home equities (the largest source of personal savings accessible to seniors), are wiped out by deficit cash flows long before death. This eliminates the promised financial heritage of home ownership which was meant to help produce capital for the next generation. We need to preserve this private capital pool   to create the new businesses and employment opportunities our next generations will need. It is accurate to state that following the most prosperous era in our 150 year history, our government has almost eliminated the private transfer of wealth within 80% of the families to our next generation.
Canadians have created a government institutional paradigm that cannot possibly adapt to the new diminished earnings and spending patterns of baby boomer seniors. Canada needs major regulatory and taxation revisions to protect the financial status and financial self-sufficiency of senior citizens.

Every senior knows that CPP pension and OAS allowances are totally inadequate to fund basic needs of senior citizens. As a relatively healthy and active 69 year old senior, it is shocking to realize how dependent upon family or government charity hundreds of thousands of my peers have become… and these numbers are about to increase exponentially.

Our massive civil service community has created protective financial pools for themselves as seniors, but the vast majority of the other 70% of seniors is heading for the reality of impoverishment and state dependence. In fact, it is apparently quite possible that even the civil servant protections will be underfunded and additional charges will be downloaded on younger earners. There is no doubt in the minds of the vast majority of Canadians that government-paid-workers have created a private entitlement to modest senior citizen financial security on the backs of private sector workers and managers’ incomes during the past 45 years. (This is evidenced by government published data concerning the gap in incomes, compensation and wealth between the public and private sector middle and lower classes.)

I don’t expect more than a few people to have a full grasp of what is about to happen, even though there are numerous academic “study groups” making all sorts of assumptions and hypotheses and creating new theories about how things will play out. Nevertheless, if people are willing to open their minds and get down into the “nitty-gritty” of the cash flows of senior citizens, it will become clear that quite a few existing government regulations must be rescinded or revised in order to stop the drain on seniors’ finances.

Government directly and indirectly initiates cash transfers from senior’s to the bureaucracies and corporate enterprises in many economic sectors, including: retail taxation, small business taxation, self-employment taxation, property taxation, income taxation, no resource revenue re-distribution to the public, cartel controlled drug prices, and non-regulation of oligopolized industry trade practices such as price fixing and anti-competitive price manipulations condoned by government institutions such as the CRTC and industry bodies such as the IBC. It doesn’t take much thought and analyses to see how whatever incomes seniors (and everyone else) obtain is quickly claimed by government financial regulations and survival expenses.

Basic taxes on income are actually extremely high for seniors living in Canada and especially in Ontario. Seniors commonly pay basic income tax of at least 32% and marginal tax rates of 46% are quite common. Property taxes are over $4000 for an average home, ( ie. another 5% of income). HST at 13% on at least 50% of expenditures, adds another 6.5% tax on total income. The average consumer also pays at least an extra 3% tax on their incomes for excise taxes hidden in the price of many goods such as gasoline. This amounts to a minimum of accumulated taxes of 59.5% of our incomes. This is the reality and in fact if we add in vehicle licenses, safety checks and emission checks and other regulatory fees, the government claws back over 60% of our incomes. No wonder generations of Canadians die in poverty!

The bottom line is that we need to quickly restructure the financial future of seniors to facilitate dignified livelihoods for these millions of people. This can be achieved by reducing seniors’ cash flows to government agencies and bureaucracies, by facilitating income earning capabilities for this well-educated demographic, and by controlling the costs for essential supplies, services and equipment needed for a dignified lifestyle. (It is absurd how Canadians are forced to pay 20-50% higher prices for so many services and items than people pay in less developed and more developed nations.)

We also need to heighten public awareness of injustices built into our taxation systems. For example, after raising our families and paying educational taxes on our heavily mortgaged properties for over 35 or 40 years, it is extortionist to keep charging seniors taxes to fund education for everyone else’s children. After contributing to our country for all our working lives, it is wrong to be forced to pay for the medical costs of people who recently arrived and haven’t contributed to our economy yet and may indeed never contribute.

Even though 80% of our national wealth is owned by less than 10% of the population, it is contemptible that seniors continue to be taxed on incomes that are so low they cannot afford to remain in the homes they worked 40 years to purchase. This affordability is wiped out by increasing MPAC assessments and municipal property taxes (which are 70% for education) plus excessive energy costs due to an overly costly infrastructure and executive profiteering in this legalized monopolistic sector. Home insurance is mandatory to have a mortgage, yet this cartel has raised premiums well beyond inflationary levels for years. The motor vehicle sector is no different.

The net result is that we are facing the equivalent of child labour at the opposite end of the demographic. Seniors’ labour is imperative for over 80% of our senior citizens who have stood by their work ethic all their lives and abhor the possibility of taking charity. Their right to a decent retirement lifestyle has been stolen by short-sighted government and institutional policies that tax and claw back their meagre earnings. Ageism is rampant in the corporate sector and even the government sectors where elder citizens are routinely rejected for jobs they would enjoy doing because they are now “over-qualified” or might soon become a burden on their existing pension funds.

Something as equitable as five-year-income-averaging for commission workers has been denied so that the government can profiteer from huge income tax rates when these Canadians have a good income year. Many seniors can’t get full time wage jobs and many are forced into “consulting” or commission work with very unstable cash flow. Yet the tax authorities demand quarterly tax payments when no taxable profit is actually acquired until November or December. The bureaucrats even charge interest on these non-payments of these un-earned incomes. RRSP’s taken out early in the year to fund marketing expenses and other business expenses are taxed at exorbitant tax levels when the income is finally earned and thus the seniors cannot afford to replenish their RRSP when they finally do their own taxes.

Seniors mostly do their own tax returns because they can’t afford accountants. Thus, they do all their bookkeeping when all the receipts and T4’s arrive one month or so after the RRSP contribution deadline. We don’t know how much tax we will owe until it is too late to borrow to make an offsetting RRSP contribution. In order to alleviate the financial burden on seniors, once the husband or wife turns 65, they should be allowed the option to blend their incomes if this would reduce their overall income tax liability.

It would be very easy to list many injustices and inequities from our government regulations and policies that present day seniors are coping with. It is rare that I speak to friends of my generation who don’t have real and just claims of excessive taxation and flagrant price fixing nowadays. These are people of honesty and integrity, not habitual complainers.

The baby boomer generation behind me is not nearly as flexible and forgiving as my generation. If our government doesn’t actively pursue fairer practices by government and industry, these people will undoubtedly revolt with much stronger voices than this somewhat cautionary forewarning message.
Canadians need to know that real changes are coming that will lessen the financial burdens of senior citizens. The whole context of senior lifestyles needs to be re-examined from the context of productive income earning lifestyles- not the “life is a beach” mythology perpetuated by Investment Organizations and Insurance Companies. With over 60% of Canadian business conducted from computer terminals, well-educated computer literate seniors could have an influential role in our future economy. It is up to our present leadership and government to recognize our potential and to change the playing field to help us survive and prosper. The potential opportunities for meaningful lives throughout our 70’s and into our 80’s is broad in scope and rich in depth.

Do you have the vision we need?