CTF Study

Ottawa: The Canadian Taxpayers Federation (CTF) today released a report entitled: Fair Pensions for Future Generations: Tripled Tax Rates & Prospects for Reform. The study was prepared by Mark Milke, a former CTF director in British Columbia and author of the CTF book, Tax Me I'm Canadian.

"Ageing populations have forced countries around the globe to examine their social security systems to ensure long term sustainability. Twenty countries ranging from Australia to Sweden have moved to some form of mandatory savings accounts while others have raised their retirement ages," notes Mr. Milke. "In Canada, pension reform has been limited to raising tax rates."

The paper notes that:

1997-2003 Canada Pension Plan (CPP) tax increases cost taxpayers an extra $41.2-billion, and despite reductions in Employment Insurance (EI), overall payroll taxes are up.
Overall taxes are also up significantly since the introduction of the CPP in 1966.
The federal government has concentrated little on CPP expenditure reforms and instead merely raised CPP rates. CPP taxes have almost tripled since 1966 but the official retirement age has remained the same despite extended life spans.
The current structure of the CPP is unfair to younger contributors. Individuals born in 1930 receive a real rate of return on CPP contributions nearly five times that which accrues to individuals born in 1990 or 2000.
"Current taxpayers are burdened by high taxes, large debt repayments, escalating health care costs, and saving for their own retirement," said CTF federal director John Williamson. "It is necessary to address that imbalance via reforms to the CPP and inject some fresh thinking into pension reform."

Summary Findings from Tripled Tax Rates & Prospects for Reform:

The retirement age should be raised from 65 to 69 over a period of 16 years.
Cost-saving measures enacted in the CPP should be re-directed to current contributors in the plan. Savings should be transferred to individual CPP accounts in the form of guaranteed portions of CPP assets.
In time, allow individual CPP portions to be transferred to private sector RRSP-style accounts that cannot be withdrawn until retirement.
EI taxes should be significantly lowered to offset the steep rise in CPP premiums over the past sixteen years.