MP Report for Okanagan-Coquihalla February 13th, 2012: The future of fewer taxpayers paying a larger bill

In my previous two MP reports I have discussed the OAS in context with the changes occurring in Canadian demographics to the extent that by 2030, our population of citizens who are over 65 will double. The fact that the amount of citizens over 65 will double from currently 4.7 million today to 9.3 million by 2030 is not, in itself an alarming concern. However what must also be taken into context is the other important changes occurring to Canadian demographics. As I mentioned in last week's report in 1975 there was a ratio of 7 working taxpayers for every citizen over 65. Today that ratio has been reduced down to 4 taxpayers per retired senior. However by 2030 that ratio will be further reduced down 2 working taxpayers per retired senior.   Why does this matter?

Critics have suggested that these pending changes to our population should be ignored and are of no significance. I  respectfully disagree. Over the past weeks I have been further researching this subject and I do believe that there is a legitimate cause for concern. Critics have suggested that the future increase in OAS spending, in spite of consuming a larger share of our national GDP, is "manageable" and is really an issue of spending priorities. While this may sound like a reasonable claim, it is also very important to understand where this money will ultimately come from.   Many citizens may be unaware of this fact however the single largest source of revenue for the Federal Government is from income tax. Nearly 50% of all Federal Revenue, a total of $ 113.5 billion, comes off the top of your pay check. By comparison the GST as a revenue source provides just over 10% of government funding at $ 28.4 billion.

From a revenue perspective the fact that income tax contributes almost half of all federal government funding as the single largest revenue source is significant.   When one considers that the ratio or working taxpayer's to citizens over 65 has gone from 7:1 in 1975 and will further decline to 2:1 by the year 2030 it is clear that not taking action today will create problems in the future. I am not suggesting that there is a crisis, however with income taxes comprising nearly half of all government revenues combined with fewer working taxpayers  in the years ahead ultimately means there will less people trying to pay an increasingly larger bill. On the spending side it must also be noted that OAS is only one of many benefits provided under Canada's vast social safety net. Total current spending on support for the elderly is roughly 13% of the entire federal budget at $36.6 Billion. The child benefit program by comparison is less than half of this amount at $12.7 billion while Health transfers to the provinces are currently $26 billion. It should also be noted that currently Canada is paying $ 30.9 billion a year in debt serving costs.

I have in the past pointed to the challenges that other countries, most notably Greece, are facing from the inability to take proactive actions and maintain public spending within what taxpayers can afford. Even France, one of the most prominent countries in the European Union, faces challenges since its credit rating was recently downgraded, placing more debt pressure on its citizenry. Generally speaking few problems are created overnight and most are decades in the making. Many citizens have rightfully pointed out that Canada is a country rich in resources however it must also be noted that our Government is actively trying to open up alternative markets to those resources and often the very projects that help to achieve these important goals are also opposed. Canada is a country that was build on hard work and if we are to keep Canada strong as a nation we must accept the importance of taking proactive actions to ensure that we have the resources needed to provide the services that Canadians can depend upon but also that Canadian taxpayers can afford. Our Government will continue to work towards these important goals.

Dan Albas is the Member of Parliament for Okanagan- Coquihalla and can be contacted at dan.albas@parl.gc.ca