POLITICAL PARTIES HAVE ‘CHICKENSHIT CLUB’ MEMBERSHIPS BECAUSE THEY TAKE THE EASY WAY OUT ON SOCIAL INJUSTICE AND INEQUALITY

POLITICAL PARTIES HAVE ‘CHICKENSHIT CLUB’ MEMBERSHIPS BECAUSE THEY TAKE THE EASY WAY OUT ON SOCIAL INJUSTICE AND INEQUALITY

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

(Blog author’s comment:  The topic of financial discrimination of singles and low income families has been addressed from many different angles in this blog.  This particular blog post shows how compounding of benefits on benefits such as Registered Retirement Savings Account (RRSP) combined with a tax free Canada Child Benefit (CCB) allows wealthy families with children who can afford to max out RRSPs to benefit the most from reduced taxes, increased income, and increased wealth.  It also shows how governments and politicians fail to right the biggest social injustices and financial inequalities by going after the easiest targets.

WHAT IS THE ‘CHICKENSHIT CLUB’

Jesse Eisinger in his book ‘The Chickenshit Club’  gives a blistering account of corporate greed and impunity, and the reckless, often anemic response from the Department of Justice.  He describes how James Comey, the 58th US Republican Attorney (appointed by Republican George W. Bush and fired by so called Republican Donald J. Trump) was giving a speech to lawyers of the criminal division.  These lawyers were some the nation’s elite. During his speech, Comey asked the question: “Who here has never had an acquittal or a hung jury? Please raise your hand.” This group thought of themselves as the best trial lawyers in the country.  Hands shot up. “I have a name for you guys,” Comey said. “You are members of what we like to call the Chickenshit Club.”

Comey had laid out how prosecutors should approach their jobs.  They are required to bring justice. They need to be righteous, not careerists.  They should seek to right the biggest injustices, not go after the easiest targets.

This ‘chickenshit club’ has continued to grow.  No top bankers from the top financial firms went to prison for the malfeasance that led to the 2008 financial crisis. And the problem extends far beyond finance–to pharmaceutical companies, tech giants, auto manufacturers, and more.

DPAs (deferred prosecution and nonprosecution agreements) have become the norm in the USA (and now is being legislated in Canada) where high crime perpetrators are being given the easiest way out by ensuring prosecution is carried out by paying a nominal fine and agreeing to minor policy changes, but without serving any jail time.

Political parties have joined the ‘Chickenshit Club’ by taking the easiest way out and failing to promote social justice and equality for all therefore ensuring that wealthy households and corporate elites continue to increase their wealth over single person and low income households.

The ‘Chickenshit Club’ of low income and food insecurity and minimum wage

Living Wage and Minimum Wage

It is a known fact that the Canadian minimum wage in all provinces is not sufficient to bring households up to middle class status.

A major failure of Living Wage research is that it usually only identifies three household profiles, a single person, single parent with children and a family comprised of two adults and children.  The failure to include a household of two adults no children provides only a partial picture of inequality because it costs a single person household more to live than a two adult persons household.

Review of Living Wage profiles shows that even though living wages are higher than minimum wage, living wages are “no walk in the park”.  A living wage which only covers basic needs still leaves low income households, especially those with rent or mortgages, suffering a ‘no frills’ lifestyle with an inability to save for retirement or emergencies or replacement of vehicles.

By excluding the two adults no children household profile from Living Wage profiles the single person household is an incomplete profile since it costs more for unattached person to live than the two adults household as shown in cost of living scales like Market Basket Measure (MBM).  Example:  if single person household has a value of 1.0, lone parent, one child or two adults household have a value of 1.4, one adult, two children 1.7 and two adults, two children 2.0.  It costs more for singles to live than couples without children.

Many politicians, married and financially illiterate believe that a living wage is a good income but it only provides the bare necessities of life. The living wage in Calgary is about $18 per hour and in Metro Vancouver is about $19 per hour.  There is no saving for retirement or maxing out of RRSP and TFSA accounts on a living wage (see example below for single person household with $50,000 income).

In a recent Conservative meeting, a Canadian Conservative Member of Parliament for Alberta stated he did not think the recent increase in minimum wage helped anybody, not even the poor.  When challenged that ‘this was quite the statement’ and ‘what was the answer to low wages?’, he said ‘he didn’t know’. As outlined below, the upside financial chickenshit mess that has been created by government and politicians for single person households and low income families is because more benefits with less taxes and no declaration of assets has been given to the wealthy and the married.  To create more financial social justice and equality, a drastic plan along the the lines of “Elizabeth Warren” and “Bernie Sanders” is needed so that the wealthy, married, and corporations pay their fair share.

The ‘Chickenshit Club’ of Single Person Household Poverty

Present day political parties and married/two person households with no children belong to the ‘Chickenshit Club’ when they fail to recognize, through financial illiteracy and financial discrimination, that single person no children households will likely face more income insecurity in their lifetimes.

From The Affordability of Healthy Eating in Alberta 2015 by Alberta Health Services (affordability-of-healthy-eating):

(Page 3) “In Alberta, more than 1 in 10 households experience food insecurity and more than 1 in 6 children live in a home where at least one member is food insecure. Nearly 80% of Albertan households who rely on social assistance cannot afford to purchase adequate amounts of nutritious food or regularly endure significant worry about access to food. Furthermore, more than 75% of all food insecure Albertans are actively employed yet still are unable to secure enough money to support both their nutrition needs and other indispensable life necessities, such as housing and clothing.”

(Page 9) The above report provides a more complete picture of income inequality because it identifies four household types – 1) a family with two parents and two children because this composition is used most frequently by other social, income and poverty reports across Canada, 2) a female lone parent due to the high prevalence of food insecurity among this household type, 3) a single adult under age 65 since this demographic experiences the highest rate of food insecurity and the least financial support through social policy, and 4) a single senior to highlight the ability of current social policy to effectively reduce the risk of household food insecurity in this population.  Unfortunately, the two adults person household is still not represented in these profiles.

Quote from the report (page 18): “Although Alberta remains the most prosperous region in Canada, it also maintains the largest gap in income inequality since the wealthiest 1% earns 18 times more than the average income in the province. Thus, the relative economic power of low income households in Alberta is weaker than low income households in all other regions across the country.  Despite a strong economy, the poverty rate in Alberta has remained around 12%, which is only slightly below the national average of 12.5%. Boom and bust cycles, increasing household debt and the high number of temporary, precarious and low-wage jobs put many Albertans at risk of falling into poverty. The Alberta populations at highest risk to experience poverty include:  single persons, families with children under 18 years old, families with more than one child, female lone parent families, women (not an inclusive list).

(Page 24 and 27) These statistical data sources also validated several important characteristics of Canadian and Albertan households that are at highest risk for household food insecurity:  low income households, individuals who rent their home (rather than own their home), women, lone parents, Indigenous Peoples, individuals who receive social assistance, individuals who work for low wages, unattached (single) people, households with children younger than 18 years of age, recent immigrants and refugees (e.g. in Canada for less than five years), people who have a disability.

(Page 28) Single adult – In Alberta, 40.7% of people aged 15 and older are neither married nor living with a common‑law partner and 24.7% of all households are home to only one person.  Unattached persons in Canada experience three times the rate of food insecurity compared to couple households without children.  In Alberta, single people represent five times more food bank users than couples without children.  The rate of poverty among single adults across Alberta is 28% whereas this value drops to only 6% for all couple families.

(Page 29) Single female – Unattached Canadian women are four times more likely than women in families to live in a low income household.  Sixty two per cent of minimum wage earners in Alberta are female.  Across Canada, 3 out of every 4 minimum wage earners older than 24 years of age are women.

(Page 30) Single adult 25–30 years old – Of all Canadian age groups, young adults between 20 and 34 years of age have the highest rates of moderate and severe food insecurity.  Both males and females between the ages of 20 and 29 have the highest nutrition needs of all adult groups and would therefore need to spend a greater proportion of their income on food to support their health and well-being.  By the time Albertans reach age 25, more than 83% are no longer living with their parents, so this age range would best reflect the reality of a young, single person at higher risk for food insecurity in Alberta.

(Page 31) Minimum wage – The percentage of 25–29 year olds who work for minimum wage in Alberta doubled between 2012 and 2014, and this is the largest jump for any working age group across the province.  More than 1 in 4 female minimum-wage earners and nearly 1 in 5 male minimum-wage earners are 25 years or older.  In Alberta, inflation has quickly eroded the contribution of every small increase to hourly minimum wage rates since the early 1980s.

(Page 39) Unattached persons in Canada experience three times the rate of overall food insecurity and seven times the rate of severe food insecurity when compared to couple households without children or with adult children. Single people represent the largest proportion in Canada, at 27.8% of all households, and they also constitute the largest share of food insecure homes at 38.2%. Single people without children also receive the least amount of government social support, as they are not eligible for the financial support of programs like family‑based tax credits and health benefits.

(Page 40) Single-person household based on the after-tax, low-income cutoff measure (LICO), the rate of low income in unattached male and female households has risen over the past decade while all other household categories have experienced a stabilized or decreased rate of low income.  Nearly 1 in 3 unattached people between ages 18 and 64 lives below the LICO in Canada, compared to only 1 in 20 of the same cohort living as part of an economic family.  An economic family refers to a group of two or more people who live in the same household and are related to each other by blood, marriage, common-law or adoption. The rate of poverty among single adults in Alberta is 28% but this value drops to only 6% for all couple families.  More than 40% of Albertans aged 15 and older are neither married nor living with a common‑law partner and nearly one quarter of all homes in the province are inhabited by only one person. Between 1961 and 2011, the proportion of one-person households in Alberta has more than doubled and now nearly matches the number of homes with families or couples without children.  Across the province, single people represent one third of all food bank users, and they outweigh couples without children by three and a half times.

(Page 40) Minimum wage is an important social policy because it intends to help lift low-paid workers above the poverty line so they have adequate income to meet basic needs for overall well-being.  However, unlike Canada Pension Plan (CPP) and Old Age Security (OAS), minimum wage is not regularly indexed to inflation through adjustments to match the increase in the Consumer Price Index.  This can lead to a hidden erosion in the value of this social policy since the general public tends to be unaware of how governments calculate changes to minimum wage rates over time.  In 1965, Alberta’s minimum wage equalled 48.5% of the average provincial income, but by 2010 this proportion had declined to only 35.5%. Alberta’s hourly minimum wage rate had been the lowest of all provinces and territories for several years, but recent increases have raised low-paid workers’ earnings to a minimum of $11.20 per hour as of October 2015.

(Page 41) There is a widespread misconception that most Canadians who earn minimum wage are teenagers who live with their parents, but more than 1 in 4 female minimum wage earners and nearly 1 in 5 male minimum wage earners are actually 25 years old or older. In addition, individuals who are older than 24 years of age are the most likely to live alone while they earn minimum wage.

(Page 42) …. In fact, unattached Canadian men and women between the ages of 18 and 64 are five times more likely to live on a low income compared to their counterparts who live in economic families.  Although the probability of living in a food insecure household is higher for females than males across all age groups and household compositions, income-related food insecurity affects unattached men at the same rate as unattached women.

(Page 44) Among all unattached Canadians, there are twice as many single adults younger than 65 years of age living below the after‑tax LICO compared to single seniors who live below this income.  In addition, the prevalence of household food insecurity is two and a half times lower for the elderly who live alone than for unattached adults who are younger than 65 years old.  However, the likelihood that a single senior will live on a low income is 10 times the rate for seniors who live as part of an economic family. This is significant since 25% of Albertans aged 65 years old and older live alone and unattached individuals are the most likely to rely on OAS and GIS.

“Social assistance soaring in Alberta, even as economy improves”, 2017 – Number of claimants on provincial income assistance programs has climbed to 54,374 in January of 2017, about 20,000 higher than at the start of the recession in 2015.  Makeup of claimants include individuals 69%, lone-parent families 24%, couples with children 5%, and couples alone 3%.  (Note:  Couples with children and couples alone only equal 8% of the total).  The Calgary Food Bank served a record 171,000 clients in 2016.

The real truth about the financial lives of unattached (one person) household

A single person household has to make an extraordinarily high income to achieve the same level of wealth as married with and without children households. A minimum wage means they will be living in poverty and with a living wage barely able to meet the financial necessities of life with no ability to max out RRSP and TFSA contributions.

Example of approximate average cost of living for a single person household (easily obtained from Living Wage Research):  Rent for bachelor apartment (including water, electricity, tenant insurance) $1,000, food $400, vehicle (gas, repair and insurance) $200, phone/internet $300, clothing/footwear $100, dental/eyecare $100, house tax and insurance if a homeowner $250, contingency saving for emergencies and replacement of vehicle (10%) $300.  Total equals $2,650 or $31,800 per year ($16 per hour based on 2,000 work hours). Totals do not include other expenses like bank fees, personal care expenses, household operation and maintenance, pets, vacations, entertainment, computer purchases and expenses, gifts, condo fees and professional association and union fees, etc.  Note: this does not include saving for retirement beyond Canada Pension Plan (CPP) contributions. The living wage for Alberta is about $18 per hour based on 35 hour work week or 1,820 hrs per annum. Single person households receive very little income from government transfers (municipal, provincial and federal).

The following three examples, although simplistic, are real life examples for single persons:

  1. Single person private sector employee with $50,000 income ($25 per hour based on 2,000 worked hours) will pay about $11,000 for taxes, CPP and EI deductions.  This results in a only a barely survivable net or take home living wage income of $39,000 ($19.50 per hour based on 2,000 hrs. or $3,250 per month). Using average cost of living of $32,000 from above paragraph, this person only has a reserve of about $600 per month.  It is impossible for this person to maximize RRSP ($9,000) and TFSA ($6,000) contributions (about $1,200 per month) even though many financially illiterate believe $50,000 is a good income for unattached individuals.  Moreover, as seniors their standard of living will likely be frugal and less equal to that of married/common-law households.
  2. Single person private sector employee with $60,000 income ($30 per hour and 2,000 work hours) will pay about $14,500 in taxes, CPP and EI contributions.  This results in a net income of $45,500 ($22.75 per hour or $3,800 per month). This person will not be able to max out RRSP ($10,800) and TFSA ($6,000) contributions (about $1,400 per month).  This still equals a frugal lifestyle (note expenses like vacations and eating out are not included in the average cost of living).
  3. Single person public sector employee with $75,000 income ($37.50 per hour and 2,000 work hours) will pay about $17,000 in taxes, CPP and EI benefits plus pension plan contribution of $7,500 (10 per cent).  Union dues are not included here. This results in a net income of approx. $51,000 ($25.50 per hour or $4,200 per month). This person may be barely able to max out RRSP ($13,500) and TFSA ($6,000) accounts (about $1,541 per month) at the expense of no vacation and eating out expenses and will have a public pension on retirement, but still will not have a standard of living equal to that of married/coupled households since they pay more taxes than married households and will not receive benefits of married persons (spousal RRSP, pension splitting, etc.)  Market Basket Measure shows it costs single person household more to live than married households.

Lessons learned:  A minimum wage of $15 means single person households will live in poverty and a living wage equals a very frugal lifestyle with no frills.

‘Chickenshit Club of women being paid less for equal work

From the above Alberta Report and Canadian statistics it is evident that a major problem still  exists of women being paid less for equal  work.

From Global News, report finds that women in Canada earn just 84 cents for every $1 earned by men, a gap similar to the one reported in official statistics. In 2017, Statistics Canada said Canadian women were making 87 cents for every $1 earned by men.  [T]he Glassdoor study went one step further, finding a four per cent pay differential between men and women even when factors like education, years on the job, occupation and professional title are taken into account. In other words, Canadian women are making just 96 cents for every $1 earned by men with the same qualifications, job and experience, something Glassdoor is calling the “adjusted pay gap.”

How many years is it going to take before women receive equal social justice on pay equity?  Instead of being ‘chickenshit political parties’ which political party is going to take this issue on?

‘Chickenshit Club’ of Canada Child Benefit

The present day ‘chickenshit club’ Canada Child Benefit does help to bring low income households with children out of poverty and food insecurity (this is a good thing), but only during the first eighteen years of the household’s entire lifecycle.  When children are grown, low income single parent households are back to ‘square one’ of the adult probability of living in poverty.

The Canada Child Benefit was implemented by Stephen Harper, previous Conservative Prime Minister, and was taxed.  Liberal Prime Minister Justin Trudeau made it non taxable.

All political parties have been complicit in perpetuating financial policies that increase middle class wealth to upper middle class status while forcing poor families and single unmarried individuals further into poverty.

Financial Post “Couple needs to cash in rental condo gains to make retirement work” (ditch-rental-condo-to-get-ahead) details a couple age 42 and 43 already having a net worth of $1.8 million, take home pay of $10,936 per month and receiving $286 in Canada Child Benefits for three children.

In 2018, Ontario couple with a child under six years of age would stop receiving CCB payments with a net income reaching $188,437.50 without other deductions such as RRSP (canada-child-benefit-is-a-win-for-most-families).  $188,000??? This is not an income of poverty.

The inequality of family benefits for the upper middle class and wealthy families is perpetuated even further by the compounding of benefits on top of benefits.  The article “Supercharge your Canada Child Benefit by making an RRSP contribution” (supercharge-by-making-an-rrsp-contribution) outlines how RRSP contributions are considered to be a tax deduction; therefore, they lower taxable income and can increase the amount of CCB payments.  The example of Ontario family with 3 kids under age 6 years of age and a family net income of $75,000 with full $13,500 RRSP contribution for the year (18% X $75,000) can expect a CCB payment of $13,215 and will pay approx. $11,814 in taxes.  Because of RRSP contributions in the previous year, their CCB payments increased by $1,465 for the present year. Additionally, they will save $1,401 in taxes and at a marginal rate of 29.65%, their RRSP contribution will also result in a tax refund of about $4,000.  The compounding effects of benefits means they will pay less taxes, get larger CCB payment and increase their RRSP wealth. The total family income with CCB is $88,215 (combined after tax and tax free) and they have increased their wealth by $13,500 RRSP for the year of contribution).

Using turbotax calculator for Alberta family with $250,000 gross income or approx. $160,000 net income ($13,300 per month) they should be able to max out maximum allowable 2019 $45,000 for couple to their RRSPs and $12,000 TFSA for the year.  Through compounding effect of benefits, including marital, they will pay approx.$21,000 less taxes, get larger CCB payment, increase their RRSP and TFSA wealth, own their home, and have approx. $181,000 minus TFSA $12,000 contribution or $169,000 ($84.5/hr.) spending capability annually.

It should be noted that there may be other credits and deductions that can be used which will further increase income available for spending.

What would anyone think that unattached individuals with no children don’t deserve to be angry because they know their hard earned money is used to increase the wealth of upper middle class and wealthy families since these families never pay their fair share in taxes because they can avoid taxes through multiple compounded benefits ???

“Ontario woman’s problem is too much debt and too little income” (forced-to-retire) is a very good example of what singles might face (i.e. on $3,750 income per month) when they are forced to retire early due to illness (doesn’t say if she is divorced or widowed).

Solution:  As per above example of $50,000 income it is impossible for single person household to have a meaningful financial life equivalent to that of married no children households.

Politicians need to get off their chickenshit politics, stop taking the easy way out, and do the hard thing by including assets and Market Basket Measure calculations in financial formulas so that singles and low income households get financial social justice and equality equal to that of wealthy and married households.

How about implementing legislation where never married no children persons should not have to pay any income tax on incomes below $50,000 so that get a benefit equivalent to that CCB and multiple benefits to families with and without children?

Chickenship Club of Climate Change

The Green Party keeps talking about a climate change plan, but like other plans and environmentalists/protesters it is all talk with very little information.  When is the Green Party (they are after all the Green Party) going to come up with a plan, for example, a line graph that shows what will happen in year one, year two, etc.  What is going to happen to all the gas combustion vehicles, gas furnaces and water tank heaters. Where are you going to dump them?  Apparently some gas combustion vehicles can be converted to electric. What are you doing about that? Are you going to shut very expensive oil refineries down that are still able to be used for another fifty years?

Many green earth technologies use rare earth minerals some of which are very toxic.  At the present time China produces 80 per cent of the rare earth minerals.  Just how do some extreme environmentalists and politicians think rare earth minerals get to Canada from China to be used in production of wind turbines?  The answer is probably by tanker.

The hypocrisy of the tanker ban is that it is only one way?  Does the  ban on tanker traffic address the tankers coming into Canada?

Elizabeth May was so impressed with India’s climate change plan.  However, India has just voted in again an authoritarian government with the help of far right Hindu religious voters.  India at present time has no middle class and the highest rate of unemployment in forty five years.

Any plan that is implemented by any country has to provide 100% climate change funds to the poor to convert from gas to electricity instead of excessive compensation of the wealthy who are the highest emitters of energy and the biggest consumers of natural resources.

Elizabeth May since her marriage has upped her membership in the ranks of the wealthy high super emitters of energy and super users of natural resources. Those with multiple properties (examples: second property hop farm owned by Elizabeth’s husband, Arizona and other vacation properties that sit empty for six months of the year and excess travel between these properties, huge motorhomes, etc.) should pay more for this privilege afforded to them by their wealth.

Green Party Reform of spousal pensions for those who have married after the age of 60 or retirement

The Green Party and particularly Elizabeth May belong to the chickenshit club of married/coupled financially privileged households.

From the ‘Surviving Spouses Pension Fairness Coalition’ May states she has lobbied to repeal legislation that denies pension benefits to spouses who have married after the age of 60 or retirement.  In one of her letters she states:  …The Green Party supports deleting these restrictive clauses in the Federal Superannuation Acts which penalize pensioners who have remarried or married for the first time after age 60 after retiring….these clauses serve to unfairly deny hard earned pension benefits to deserving partners.  These….clauses are causing great hardship to the survivor whose spouse gave a life in service to our country.”

Liberal Prime Minister Trudeau in his letter also supports this –  “I and the entire Liberal Caucus, believe that Canadian seniors are entitled to a dignified, secure, and healthy retirement. Retirees deserve financial security; they deserve a strong Canadian Pension Plan, and a government who is not only committed to protecting the CPP, but is dedicated to improving its benefits.  A secure and comfortable retirement is essential to achieving middle-class success, and Liberals believe that the federal government must do more to fulfill this promise. While the Conservative Government has left Canadians and the provinces to fend for themselves, Liberals support working with the provinces to create legislation that will make retirement security easier, not harder for all Canadians to achieve.”  (Shouldn’t the same apply to never married no children senior households?)

Tom Mulcair, NDP letter states – “New Democrats want to acknowledge the debt we owe our seniors and reward the years of hard work and dedication to our country.  That’s why we are committed to ending these archaic restrictions on benefits for pensions and their spouses.”

This is not the only pension plan where marriage for only a few years privileges the surviving spouse who hasn’t made any contributions to the pension.

Why, why, why do married persons believe they are entitled to benefits they haven’t earned?  These newly married persons never worked for and never made contributions to the pension of their spouses.  The reform of all spouses pensions similar to the above promotes the financial discrimination of never married, no children persons.  Why do these married persons who never worked for these pensions deserve to have a better lifestyle than never married, no children persons?  Never married, no children persons can never access another person’s pensions. As stated above, it has been shown that it costs more for never married, no children persons to live.  Why can’t a new widow because of death of the spouse live with the same financial realities as a never married, no children person? Afterall, the widow is now ‘single’.

Solution:  A proper financial justice solution would be to pay whatever is left in deceased spouse’s pension to the surviving spouse in the same way that whatever is left in the never married, no children person’s pension is paid to the listed benefactor.  If benefit after benefit is given to widows, equal financial remuneration equivalent to these benefits should also be given to never married, no children seniors.

Chickenshit Club of Conservatives Jason Kenney (Alberta) and Doug Ford (Ontario)

Jason Kenney is already showing his true Trumpian values by targeting most vulnerable residents at the lower end of the financial scale.  He is doing this by lowering corporate taxes and reducing teen minimum wage instead of making the wealthy pay their fair share of taxes. Just waiting for him to reduce progressive taxes back to a flat tax!  Doug Ford continues to do his damage by breaking election promises, attacking healthcare and public sectors and employees of these sectors, and implementing retroactive financial policies on budgets that have already been planned.

Where are the ‘Elizabeth Warren’ and ‘Bernie Sanders’ of Canadian politics that will promote social justice and financial equality by ensuring corporations and upper middle class families and the wealthy pay their fair share of taxes without the compounding of benefits that make them wealthier than single person and low income households?

Chickenshit Club of Liberal Party

The Liberals also belong to the Chickenshit Club of politics as they have done very little to promote social justice and equality where wealthy and corporations pay their fair share.  They are promoting ideas for the elderly to receive benefits if they have to work over the age of 65. How nice – make the senior poor work longer while giving benefits to the wealthy and married who have multiple compounding of benefits which allow them to retire at age 55.

Liberals keep talking about helping the middle class – the real truth is they are pushing the middle class up to the upper middle class while keeping unattached persons and low income families at the lower end of the financial scale.  With their plans there will be no middle class.

The Liberals have done nothing to mitigate the financial injustice and inequality of Conservative Tax Free Savings Account (TFSA) which benefit wealthy the most.

The following  was published in the Calgary Herald as this blog author’s opinion letter on TFSAs – ( Ted Rechtshaffen and Fraser Institute are telling half truths since only child rearing years are discussed on who is paying more taxes.  Wealthy Canadians with TFSA accounts pay no tax on investments earned; therefore, someone else is indeed picking up the bill, i.e. those who can’t afford TFSA accounts. Singles pay more taxes throughout entire lifetime).

“TAX LOOPHOLES NEED TO BE CLOSED”

Re: “Trudeau is right, 40 per cent of Canadians pay no income tax, Opinion, Feb. 8, 2019 (someone-else-is-picking-up-the-bill) ”

Ted Rechtshaffen and the Fraser Institute once again tell half-truths about who pays the most income tax.  Conservatives have created a TFSA monster at home (not offshore) tax loophole.

“They Want To Spend $50,000 In Retirement, Did They Save Enough?”(did-they-save-enough) outlines how an Ontario couple with large TFSA, RRSP accounts and a $600,000 house can retire at 55 and evade income taxes for 15 years while using benefits intended for low-income persons.

Canada, one of the few countries with TFSAs, has the most generous plan with the only limit being annual contribution amounts. Others (example Roth IRA) impose age, income and lifetime limits on contributions.

Without further addition of TFSA limits, the wealthy will pay less income tax than those who cannot afford TFSAs.

Chickenshit Club of Drug Cost and Advertising

All political parties are lobbying to cut drug costs.  Has anyone thought of limiting the amount of advertising drug companies can do?  Advertising is very expensive. Surely, this money could be used to decrease drug costs and to promote research for new drugs.  Why does one have to listen to advertisements on Peyronie’s disease, hemorrhoids, female and male sexual drive dysfunction, etc. over and over again.  Information on benefits of drugs should occur from discussion between the doctor and patient, not from advertisements. One solution would be to limit the amount of times each drug company can advertise in a given time period.

Chickenshit Club of Issues like Tanker Traffic Ban, Money Laundering, etc.

It doesn’t matter which political party it is – Liberal, Conservative, Green Party, BC NDP party, etc., all political parties with their chickenshit politics are trying as hard as they can to harm certain provinces and low income citizens in any way they can.  Governments at all levels have failed in controlling ‘dirty money’ and indeed have been complicit in promoting it. Some have hypocritically implemented legislation that negatively impacts only certain parts of the country.

Tanker Traffic Ban – on west coast, but not the east coast while increasing other revenue generating traffic such as cruise ships, ferry traffic and sightseeing boat traffic on the west coast.

Money Laundering in BC and Canada – The money laundering problem is prevalent across Canada but the egregious case of the ‘Vancouver Model’ of money laundering in BC shows how greed of chickenshit government overtakes the moral and ethical logic of doing the right thing.  BC governments failed to address the problem because of the huge amounts of money generated for the BC Lottery Corporation to be used for government programs. Since this also apparently involved real estate, housing prices rose to an exponential level.  Who is affected most of all? – low income persons who can’t afford housing, be it rental or ownership.

CONCLUSION:

Unless there is a major change to the upside down financial situation of politics and government where the wealthy, married and corporations stand to financially benefit the most (selective socialism for the rich), there is little hope that single person households and low income families will ever reach the middle class status so hypocritically touted by governments, politicians, families, and the elite. They should seek to right the biggest social injustices and financial inequalities, not go after the easiest solutions.

(Updated June 8, 2019)

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

FEDERAL BUDGET TOPICS: MIDDLE CLASS TERMINOLOGY, INDEXED LIVING WAGE, SELECTIVE SOCIAL DEMOCRACY, BANKRUPT COMPANY PENSIONS

FEDERAL BUDGET TOPICS:  MIDDLE CLASS TERMINOLOGY, INDEXED LIVING WAGE, SELECTIVE SOCIAL DEMOCRACY, BANKRUPT COMPANY PENSIONS

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

The January, 2018 blog post addressed the first part of the budget proposal for a housing allowance as one solution to the housing crisis.  This blog post is the second part of a Federal Budget proposal as presented to a Conservative Member of Parliament .  

TANGIBLE VERSUS INTANGIBLE TERMINOLOGY OF MIDDLE CLASS AND FAMILIES

All political parties and society spew terminology of middle class (who-is-the-middle-class) and families ad nauseum.  Middle class and families are intangible terms.  Nobody, including political parties, can define what ‘middle class’ is and ‘families’ politically is an emotional term, often excluding singles (never married, no kids) from the definition.  Singles are basically invisible.  Many of the wealthy think  they are middle class.  For God’s sake, stop talking about the middle class (middle quintile) if you are not going to include the poor (bottom fourth and fifth quintiles), and replace ‘families’ with ‘household’ terminology.  The word “household” includes everybody, even singles.

INDEXED LIVING WAGE

Fact Check:  Recent Liberal revision of Canadian Pension Plan will increase CPP pensions for the wealthy, but not for the poor, because the minimum wage is not increasing proportionately to CPP increases.  Schizophrenic political financial formulas will ensure increasing disconnect between CPP increases and minimum wage because CPP is controlled federally, but minimum wage is controlled provincially.  TFSAs are indexed but not minimum wage.

LICO for 2015 (statcan.gc.ca/census-recensement/2016/ref/dict/tab/t4_3-eng.cfm) as defined by Statistics Canada shows Low Income Cutoff of $20,386 (equivalent to $11 minimum wage per hour for 35 hour workweek) for one person household, $24,811 for two persons household, $30,895 for three persons household and $38,544 for four persons household for large urban centre population centres 500,000 persons or more.

However, Living Wage studies show it is impossible to live a decent and respectful lifestyle on $11 minimum wage per hour.

The time has come for governments to stop handing out giveaways to the wealthy and surreptitiously making singles and poor families even poorer.  Implementation of an indexed living wage financial formula based on equivalence scales or Low Income Measure (LIM) would ensure greater financial fairness for all Canadians.

Nobody says this better than Andrew Coyne in excerpt from  “Why Minimum Wages are Harmful:  

‘Rather than blithely decreeing that employers must pay their employees an amount the rest of us think appropriate, and hoping it all works out for the best, the option is open to us as a society to put our money where our mouths: to finance a decent minimum income for all with our taxes – which unlike wages are not so easily avoided.  Maybe this latest increase in the minimum wage will prove less harmful than feared, but it is certain to be more harmful than the alternative:  a minimum income, socially guaranteed and socially financed.’

An indexed living wage could be financed if government benefit programs such as Guaranteed Income Supplement (GIS), Old Age Security (OAS), child benefit and pension splitting programs were replaced with a guaranteed living wage program based on equivalence scales or LIM along with elimination of financial loopholes such as Tax Free Savings Accounts (TFSA) for the wealthy.

SELECTIVE SOCIAL DEMOCRACY

All political parties continue to practice selective social democracy (selective) benefitting the upper middle class and wealthy most.

Supporting documentation:

https://www.statcan.gc.ca/pub/75-006-x/2015001/article/14194-eng.htm Changes in wealth across the income distribution, 1999 to 2012

Assets and wealth – In 2012, families in the top fifth income quintile held 47% of all wealth held by Canadian families (and the 5% of families located at the top of the income distribution held 21%). Families in the fourth quintile held 23%, while middle income quintile families in third quintile held 16%. The second income quintile held 10% of total wealth, while families in the bottom quintile held 4%.  (Fourth Quintile average wealth $641,000 and median wealth $388,200.  Fifth Quintile average wealth $1,300,000 and median wealth $879,100.)  In other words, about 40% of Canadian families held 70% of all wealth.  Governments keep talking about the middle class (20% of population), but never talk about the bottom two quintiles or 40% also known as the poor.

Many Canadians are fed up with the selective social democracy practised by both Conservatives and Liberals which benefit wealthy, upper middle class and married over single marital status persons and poor when they don’t need it.  The fourth and fifth quintiles or 40% of Canadians have assets and wealth over $750,000 (about $650,000 in 2012), yet they are able to still get OAS, max out TFSA accounts, pension split, and have huge inheritances while paying less tax.  Once again, the poor and many singles are being forced further towards poverty because they cannot achieve the same levels of wealth.  Self serving Conservatives accuse the Liberals of social democracy when Conservatives are guilty of the same selective social democracy.

When handing out benefits assets and wealth, not just income levels, need to be included in financial formulas.  Income levels are already a part of income tax returns.  It would be very easy to add question about assets, wealth and home ownership (i.e. five broad categories) in income tax returns and adjust financial benefits accordingly. (TFSA is an egregious program which benefits wealthy the most.  In thirty years and 3.5 percent compounded interest return, couples will have $600,000 in their financial portfolios, all tax free, and that is just TFSAs.  TFSAs are not included in income, so a person with a $600,000 TFSA can claim poverty and receive GIS and OAS.  A limit needs to be placed on TFSA assets and TFSA assets need to be counted as income).

Example of selective social democracy (boutique-tax-credits) – Family with four children has paid for house and one spouse working.  These parents in their thirties already have a net worth of $500,000.  They are able to receive Canada Child Benefits to the point where they can fully contribute to Tax Free Savings Account and increase their wealth.  Why is this family receiving child benefits without income plus assets and wealth being taken into consideration?  Poor families should be the only ones entitled to child benefits when they do not have the assets and wealth that this family has.

Poor families and singles have been made to be financial scapegoats and sugar-daddies to the upper middle class and wealthy by the Conservatives and the Liberals.

PROTECTION OF PENSIONS IN BANKRUPTCIES

If corporations and private enterprise cannot control their own financial affairs and shareholder greed during hard times and bankruptcies so that their employees are the biggest losers, then governments need to take responsibility to implement procedures and policies to offset employee losses (pensions).  And governments need to stop bailing out corporations like Bombardier.

“Workers Deserve Better” by Hassan Yussuff (federal-government-can-and-must-put-pensioners-first

‘The aftermath of 2008 financial crisis and recession has been littered with the shaken futures of those who once worked for seemingly unshakeable Canadian…..icons like Sears…..We hear lots in the news about these giants, but pensioners are losing out when smaller companies shut down, too.The lesson from every one of these examples is clear: workers and pensioners should not and must not be at end of the line when companies go under.

All of these workers have every right to feel betrayed by their former employers. Especially when they see executives walk away with rich bonuses, their careers, savings and retirements intact. But it isn’t just the companies who have betrayed these workers and so many thousands before them, it’s the federal government.

The federal government can and should be doing more for pensioners. For starters, it can support legislation being proposed by the NDP that recommends changing bankruptcy laws so that pensioners are first in line, not last, when it comes to paying down creditors. The same has been proposed by the Bloc Québécois.  Critics argue that putting pensioners first in line would leave lenders less inclined to help companies in crisis. But that argument isn’t good enough given how many people’s futures have been shattered. It also ignores the reality that lenders have ample resources to inform the risks they take. Workers, on the other hand, have no option but to trust that their employers won’t just walk away from their obligations to employees.

The federal government can and must ensure bankruptcy laws put pensioners at the front of the line. And it can go one very important step further: working with the provinces and territories to create Canada-wide mandatory pension insurance. Such a system would guarantee monthly pensions up to $2,500 whenever an employer with an underfunded pension plan, like Nortel or Sears, files for bankruptcy. It would be paid for by pension funds, a fair trade-off, given their tax-exempt status.

Pension insurance isn’t just about protecting pensioners. It helps companies with no prospects of recovery or needing temporary help. It’s not a new idea. The United States and the United Kingdom are among other countries with nationwide mandatory pension insurance. Today, in Canada, only Ontario has a mandatory fund. Created in 1980, it guarantees pensions to a maximum of $1,000 per month. That’s expected to increase to $1,500 per month.

Mandatory insurance is required for most of the important assets Canadians have. We are required to insure our vehicles, our homes, and even our jobs — employers must pay into Employment Insurance and Workers’ Compensation to operate. Mandatory insurance exists because some things are critical to protect. And as Canada’s unions have long argued, pensions are among the most critical assets anyone will ever have.

The federal government must demonstrate it has the courage to stand up for pensioners.  Thousands dedicate their working lives to trying to make the companies they worked for successful, and they deserve to be treated with respect and dignity, not told they’ll have no choice but to work through retirement and turn to government services for support.’

 

“Sears Canada Legacy:  private profits and socialized losses” by Jen Gerson (sears-canada):

‘While Sears’ shareholders pocketed payouts of $3.5 billion, the chain’s pension plans remained underfunded to the tune of $270 million…..

Instead,…. Sympathies (are) reserved for the likes of….the 72-year-old retiree is now pulling shifts at Home Depot after working for 35 years selling appliances for Sears. Thanks to the nature of bankruptcy, his defined benefit pension is likely to be cut by as much as 20 per cent — although the lawyers and actuaries are still working out the details.

While Sears’ shareholders pocketed payouts of $3.5 billion, the chain’s pension plans remained underfunded to the tune of $270 million. While its executives enjoyed dividends, they also accepted multi-million dollar retention bonuses in the company’s closing months.  Maybe those incentives weren’t quite high enough. In the end, they didn’t seem to do much good. Regardless, none of them now need worry about how to make ends meet…..

However, if fair-minded businesses wish to reduce the cries of more onerous regulation, stories like senior employees don’t play well. Every senior pensioner who must trek back to Home Depot in his twilight years is going to raise questions about whether or not treating pensioners as secondary to other kinds of creditors in cases of bankruptcy is a fair ordering of priorities.

It’s not hard to imagine a world in which executive retention bonuses and dividend payouts are made contingent on fully funding pension plans, for example. If corporate boards are not willing to hold their executives to account, they should not be surprised to find a government eager to do so.

Ontario has attempted to ameliorate the plight of bankrupt pension plans by creating the Pension Benefits Guarantee Fund, which guarantees the first $1,000 of pension income lost in such a case; that figure has been set to rise to $1,500…..The PBGF strikes me as well-intentioned, but still fundamentally problematic. It’s using taxpayer funds to secure individual benefits at the expense of a province that is already deeply indebted.

Further, it gives us yet another example of privatizing profits and socializing losses; of placing those who were least responsible for Sears’ decline—( employees) on the hook for his bosses’ failures.

In the end, that could be what defines Sears’ legacy, far more so than mouldering catalogs and storied corporate histories.’

POSITIVE GOVERNMENT ACTIONS

It is only fair that if criticisms are doled out, then positive government actions should also be acknowledged where due.

Income sprinkling – The federal Liberals have done the right thing by modifying the income sprinkling loophole.  For example, dividends that would have been received by the primary owner of the private corporation, would instead be paid to the spouse, partner or kids of the primary shareholder, who are often in lower tax brackets; therefore, the family’s total tax bill would be reduced.  Since singles in their financial circle are basically financially responsible to themselves,‘Income sprinkling’ is of less benefit to single marital status entrepreneurs so they will pay more tax.  Singles get nothing that is comparable.  Modification of income sprinkling ensures financial fairness for singles.

Increasing the GIS supplement for single seniors is a positive, but still not enough – As the Conservative MLA knows, this author has lobbied for financial fairness and inclusion of singles in financial budgets.  The federal Conservatives did propose an increase for poverty stricken single seniors, but then were voted out and replaced by federal Liberals.

The Liberals in Budget 2016 proposed to increase the GIS top-up benefit by up to $947 annually for the most vulnerable single seniors starting in July 2016, which will support those seniors who rely almost exclusively on OAS and GIS benefits and may therefore be at risk of experiencing financial difficulties.

This enhancement more than doubles the current maximum GIS top-up benefit and represents a 10% increase in the total maximum GIS benefits available to the lowest-income single seniors. This measure represents an investment of over $670 million per year and will improve the financial security of about 900,000 single seniors across Canada.

While this is a step in the right direction, poverty stricken senior singles will receive only $947 annually while families with children are receiving Canada Child Benefits sometimes equaling thousands of dollars annually.  Financial fairness for all Canadians regardless of marital status with and without children would be ensured by having housing allowance and indexed living wage programs based on equivalence scales as outlined above.

CONCLUSION:

It is time for governments to stop the selective social democracy where the upper middle class and wealthy receive benefits and tax breaks they don’t need.  Assets and wealth in addition to income need to be included in financial formulas when handing out government benefits.  Corporations need to be held to greater accountability regarding bankrupt pensions and low income levels of their employees.

A housing allowance, indexed living wage, and government subsidized child care (as well as paid for first and second year of post secondary education- added Feb. 26/18) would help to alleviate the housing crisis and poverty resulting in singles and poor families being pushed even further into poverty.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

DOING THE MATH ON FAMILY TAX CREDITS SHOW FINANCIAL DISCRIMINATION OF POOR, LOWER MIDDLE CLASS FAMILIES AND SINGLES-Part 1 of 2

DOING THE MATH ON FAMILY TAX CREDITS SHOW FINANCIAL DISCRIMINATION OF POOR, LOWER MIDDLE CLASS FAMILIES AND SINGLES-Part 1 of 2

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

The Canada Child Benefit (CCB) consists of tax-free monthly payments that began in July, 2016 and provide maximum annual benefit of up to $6,400 per child under the age of six, and up to $5,400 per child ages six through seventeen.  This benefit is income-tested (but not net worth and assets tested), such that the amount depends not only on the family income, but also on the number of children and their ages.  (These amounts start being reduced when the adjusted family net income (AFNI) is over $30,000 and also is dependent on number of children in the family.  On the portion of adjusted family net income between $30,000 and $65,000, the benefit will be phased out at a rate of 7 per cent for a one-child family, 13.5 per cent for a two-child family, 19 per cent for a three-child family and 23 per cent for larger families. Where adjusted family net income exceeds $65,000, remaining benefits will be phased out at rates of $2,450 and 3.2 per cent for one-child family,  $4,725 and 5.7 per cent for two-child family, $6,650 and 8 per cent for three-child family and $8,050 and 9.5 per cent for larger families on the portion of income above $65,000).

The following scenarios from “Doing the child benefit math” by Jamie Golombek (financialpost), Financial Post September 30, 2016 shows financial evaluation performed by Jay Goodis from Tax Templates Inc.  This evaluation shows the impact of CCB on various levels of income in 2016, the after-tax cash they would keep along with their effective tax rates.

Scenario 1 – Low-income family

A Manitoba family has two kids under five and two working parents, each earning $15,000 of employment income. They are eligible for the entire CCB of $12,800; after paying CPP, EI, and a bit of tax, they net $39,560 of cash.

What would happen if one parent was able to work more, or was to get a higher paying job, such that she now made $25,000 — an increase of $10,000?  While she’s still in the lowest federal and Manitoba tax brackets, once you factor in the loss of CCB, the additional tax, CPP, and EI, her take-home extra cash is only $5,563, resulting in an effective marginal tax rate of a whopping 44 per cent (39 per cent if you ignore the additional CPP and EI contributions.)

As Goodis observed: “The CCB skews the progressive tax system and imposes a high effective tax on low income earners with children.”

Scenario 2 – Median-income family

A British Columbia couple has two children under the age of five. Their family’s income, consisting solely of employment income, is $76,000 split equally between each spouse. Their $12,800 of CCB is reduced to $7,448; and after federal and provincial taxes, CPP, and EI, the family nets $69,135 of cash. In other words, even with the clawback of some of their CCB, the couple has kept 91 per cent of their earned income.

Scenario 3 – High-income earner

Finally, consider an Ontario professional with three kids, two under five and one teen, earning $200,000 annually.  His CCB will be about $750 for the year.  If he were to earn an extra $1,000 of income, he would keep only just under $400 of it, resulting in an effective marginal tax rate of just over 60 per cent once the loss of the CCB is taken into account. (His status is not stated, assume he is a single parent?)

child-benefit-math-3-scenarios

ANALYSIS

With a fuller analysis of the information the following assumptions can be made:

  1. Minimum wage-most minimum wages in provinces range between $10 and $11 per hour, so it is hard to imagine that family in scenario 1 (low-income family) only makes combined income of $30,000.  At 2,000 annual hours of work per year per person, each person’s hourly rate only equals $7.50.  One must assume they are working part time jobs and are unable to find full time work.  Net income after deductions and with CCB of $39,560 still equals net hourly wage of only about $10 per person.   (The other possibility is that this family is wealthy by having huge net worth and assets that are not considered in the CCB and, therefore, do not need to work at full time jobs). For scenario 2 (medium-income family) the net wage after deductions and with CCB earned per hour equals about $17 per person.  For scenario 3 (high-income earner) and assumed 50% tax plus $750 CCB on $200,000 the net wage earned per hour equals about $50 per person.
  2. Income tax reductions-in scenario 1 (low-income family) get none of the 1.5% Liberal tax reduction because each of their incomes do not fall in the $44,401 and $89,401 range.  The same applies to scenario 2 (medium-income family).  Scenario 3 (high-income earner) gets the 1.5% tax deduction for income between $44,401 and $89,401.  Only upper middle-class families with individual spouse’s income over $44,401 to $89,401 would quality for income tax reductions in these scenarios.
  3. Canada Pension Plan (CPP)-both scenario 1 and 2 families will not receive maximum CPP retirement benefits because their individual incomes fall below the 2016 YMPE $54,900 individual income level.  In scenario 3 (high-income earner), he will earn full CPP benefits.  (Fact:  Canada Child benefit tax-free income will not require CPP contributions, so income excluding CCB was used for calculation of CPP retirement benefits.
  4. Canada Child Benefit (CCB)-For scenario 1 (low-income family) this family receives full Canada Child Benefits.  For scenario 2 (medium-income family) reduction is $4,275 and 5.7% for $76,000 income for total $5,352 CCB reduction. Reduction for scenario 3 (high-income earner) is $18,200 minus $6,650 and 8% for $200,000 income which equals total $17,450 CCB reduction.
  5. Understanding other calculations-For scenario 1 (low-income family) it is stated that an additional $10,000 in income would ‘produce take-home extra cash of only $5,563, resulting in an effective marginal tax rate (tax rate paid on last dollar of income and rate likely to be paid on next dollar of income-it is usually more than what is actually paid because basic exemptions, etc. have not been taken into consideration) of a whopping 44 per cent’. (Fifteen percent federal income tax on $10,000 equals $1,500, about 12% Manitoba provincial tax equals $1,200 and 13.5% Canada Child Benefit reduction on $10,000 equals $1,350 for a total of $4,050 not including additional CPP and EI payments).In scenario 3 (high-income earner, ?single parent) it is stated that with only an additional $1,000 income he would keep just under $400 of it, resulting in an effective marginal tax rate of just over 60 per cent once the loss of the CCB is taken into account.  When one takes into account that he is possibly taking home over $8,000 per month, it is likely that he will be able to max out his RRSP and TFSA accounts and will have maximum CPP benefits on retirement at age 65 if he works 40 years as well as RRSP and TFSA accounts to supplement his retirement income).
  6. Under-reporting of actual benefits received-Marginal tax rate-Since Canada operates on tax brackets, taxpayer will pay more tax when more is earned. However, it’s worth noting that tax rate paid is based on the income in each bracket. So the marginal tax rate doesn’t reflect the total that is paid on income. In fact, what taxpayer actually ends up paying, in terms of a percentage of income, is probably going to be lower than the marginal tax rate.  It should be noted that further possible provincial child assistance and family employment, GST rebate benefits and basic exemptions are not included in these examples.  Therefore, each scenario likely has more benefits than have been described in the examples.

CONCLUSION

As stated above by the financial analyst, statement is repeated here again:   “The CCB skews the progressive tax system and imposes a high effective (marginal used in these examples) tax on low income earners with children.”  Unfortunately, they create financial silos by including only one benefit without taking into consideration of the effect of other benefits.  In this post, attempt was made to include Liberal income tax deductions and possible retirement benefits to provide a better ‘across the board’ analysis of how upper-middle class families and wealthy benefit most.

While many families may view the CCB to be a wonderful program, boutique tax credits when taken into consideration with other programs can be shown to be less financially beneficial to low income and middle income families, especially with a stagnant minimum wage.  A stagnant minimum wage (minimum-wage) with a Canada Child Benefit may provide a better income for low income families for twenty or twenty five years during child-rearing, but will result in lower Canada Pension Plan benefits for seniors during their twenty years as seniors.  A higher minimum wage during child-rearing years will result in a higher income during child-rearing years, lower CCB along with higher CPP during senior years.  It is in the eye of the beholder and financial analysts to determine which is the better scenario.  A higher minimum wage appears to be the better scenario.

Another negative thing that can be said about the Canada Child Benefit program is that reductions of the benefit appear to decrease slightly with the addition of each child (resulting in a little more CCB being paid out with addition of each child).  This progression in CCB reductions appear to not follow equivalence scales (finances) where it is shown that cost of living per family does not increase times each additional child, but rather decreases per addition of each child.  (Example: cost of living square root equivalence scale one adult 1.0, two adults 1.4, two adults one child 1.7, two adults two children 2.0, two adults three children 2.2).  In scenario 2 (medium-income family) CCB benefit would be $3,598 for 1 child under 5, $7,448 for 2 children under five and $11,670 for three children under 5.  So, in fact scenario 2 family with three children would receive $292 more per child than family with one child even though equivalence scales show the cost of living per child is less for three children than it is for one child.

As has been stated in past blog posts, both the Liberal and Conservative parties, while handing out marital manna benefits and family benefits, have at the same time handed out benefits that favor upper-middle class families and wealthy the most. (Singles get none of these family credits and are unable to purchase homes and max out RRSP and TFSA accounts unless they have substantial incomes.) Some of these benefits include Liberal income tax reductions, maximum CPP benefits and exclusion of net worth and assets testing while failing to increase the minimum wage to an indexed living wage.  Politicians and governments continue to financially discriminate against singles and the poor while allowing the upper-middle class and wealthy to increase their wealth.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

OPINION LETTER ON ‘LEFT’S BIG LIE…’ AND FINANCIAL DISCRIMINATION BASED ON MINIMUM WAGE CONTROVERSY

OPINION LETTER ON ‘LEFT’S BIG LIE…’ AND FINANCIAL DISCRIMINATION BASED ON MINIMUM WAGE CONTROVERSY

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

This blog post was submitted as an opinion letter to a local newspaper on October 27, 2016 in response to three opinion letters entered in the paper on left and right wing political parties.  It should be noted that this opinion letter was edited and shortened by the newspaper because there are often only so many words that can be submitted to newspapers. The title of the opinion letter was ‘Notley is a champion.’  The three opinion letters on which this post was based are outlined at the end of this blog post’.  The ‘The left’s big lie…’ does not appear in its entirety.

October 13 and 20, 2016 letters ‘The left’s big lie…’, ‘Only right and wrong’ and ‘Minimum wage increase won’t help anyone’ letters only produce financial misinformation and reduce political process to shoes (Conservative-minded folks are in the right and the wrong party Liberal -socialist species are in the wrong-the left should only refer to shoes).

Re ‘The left’s big lie…’ statements on socialism and left-wing politicians, analysis shows Conservative and Liberal policies surreptitiously and purposefully eliminate the middle class, thus practising ‘selective’ social democracy (democratic).  Advertently or inadvertently, future class system will consist mainly of the poor, upper-middle class and wealthy while favouring married or coupled family units with multiple ‘marital manna benefits’.  Square root equivalence scale (if value of ‘1’ is used for a single person, then a value of ‘1.4’ is applied for two adults since it costs them less to live) and ‘financial fairness for singles’ are ignored (singles-finances).

During federal Conservative and Liberal party reigns, even while reducing social programs helping vulnerable populations of aboriginals and veterans, introduced programs like pension splitting and OAS clawback particularly benefit the wealthy and married or coupled family units.  In OAS clawback only about five percent of seniors receive reduced OAS pensions, and only two percent lose entire amount.  The very program that is supposed to provide a ‘very modest pension to low and middle-income seniors’ has been redesigned to benefit the upper-middle class.

During provincial Conservative party forty year reign and oil boom, just 1,048 new affordable housing units in Calgary were built over the past 14 years.  Two thirds of shelter beds in Canada are filled by people who make relatively infrequent use of shelters and are more likely forced into shelters by economic conditions (due to structural factors, the state of housing and labour markets that destine the very poor to be unable to afford even minimum-quality housing).

Federal Liberals have continued Conservative benefit programs like Canada Child Benefit in perpetuity which is based on income and number of children, but not net worth and assets, so families may receive large tax free child benefits and continue increasing wealth even while already having huge assets (tax-credit).  

Elimination of the middle class is also evident in Liberals’ proposed Canada Pension plan enhancements (canada-pension-plan).  Premise remains the same – individuals with highest YMPE will receive the most CPP, while those at lower income levels will receive the least CPP benefits. Persons with highest YMPE of $82,700 (massive jump from 2016 $54,900) and forty years of contributions will receive 33 percent CPP benefit or about $2,300 per month, while those making a minimum wage of $15 per hour, $30,000 annual income with forty years of contributions will receive about $800 per month.  A single person earning $15 per hour minimum wage would have to work two and half full time jobs for forty years to equal the $82,700 YMPE.  

Schizophrenic political systems exist where CPP pension enhancements are controlled federally, but minimum wages are controlled provincially.  The continued unwillingness of government and business to promote minimum wage increases to indexed living wages means the poor will remain in poverty even with pension systems that are supposed to improve financial quality of life as seniors.

The words ‘hard-working people’ has been used again to ad nauseum.  The idea that minimum wage only increases having to pay more income tax is ludicrous. Yes, increase in minimum wage may increase income tax deductions by, for example, 20 percent but these recipients will also have 80 percent more income to spend which will be used to increase product and services.  Increasing CPP, but not increasing minimum wage means children in the future who are living in poverty will receive less CPP, while their wealthy CPP parents and family members will receive the bulk of the CPP enhancements.

We are all responsible for not fighting financial greed of plutocracy, big government and corporations like Walmart, tax loopholes, Wallstreet, outrageous salaries and prices in the entertainment, sports industries, housing and gentrification of cities.  This has resulted in small businesses not flourishing and poverty increasing to an unprecedented level. Failure to increase the minimum wage instead of dealing with real underlying problems equals fighting the wrong fight.

More champions for the vulnerable like Rachel Notley and Bernie Sanders are needed. Bring it  on!  (End of opinion letter)

The three opinion letters that this blog post refers to are included as follows:

‘The Left’s Big Lie…’ October 13, 2016 local newspaper

The totality of this article talks about climate change and ‘The radical environmental movement as well as left-wing Canadian political parties, most notably the Alberta NDP, are telling the BIG LIE about our energy industry and the global environment.’…..To explain, it goes back to the goal of socialism, which is to “restrict private enterprise and control the economy”…..If we continue down the path dictated by our left wing politicians, the standard of living in Alberta will continue to decline…..Albertans must come together and take back government from these politicians who put their radical ideology ahead of the interests of all the hard-working people in our great province.’

‘Only right and wrong’ October 20, 2016 local newspaper

‘Great letter (The left’s big lie).  However we have to get this right and left idea straight.  The only thing in my home that is left is my shoe.  In politics, it should be referred to as follows:  Conservative-minded folks are on the right.  Liberal-socialist species are on the wrong.  Wrong being the proper opposite of right unless you are describing an object such as my shoe.’

‘Minimum wage increase won’t help anyone’ Oct 20, 2016 local newspaper

‘I do believe all people should make a living wage, but driving up the minimum wage does not have that effect.  If you look at the numbers according to the Government of Alberta website there are 290,000 people in Alberta that make minimum wage.  If they all get $1/hr. raise at approximately 40 hours per week the economy needs to breakout an additional $638 million, with no real increase in product or service.  The cost of all things go up and still we have no living wage, but those on minimum wage now pay more income tax.  So, now the NDP has made political points as well as more tax revenue, while some have lost hours or jobs.  All fixed income people, like vets and seniors, are hit most because they get no raise in pay.’ (End of post)

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

WHO IS THE MIDDLE CLASS? AND FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

WHO IS THE MIDDLE CLASS? AND FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice.)

There has been much discussion in the last few years about who the middle class is and whether the middle class is disappearing.

Certainly, if one looks back technology has improved the quality of life.  Some of us older folks, but not that old, remember housework like laundry that included heating water on the stove, wringer washers and drying clothes on the line.

Other changes over the decades include the following:

  • Families have become smaller so income goes further (due to socio-economic pressures)
  • Day care and  college/university education have become very expensive, but health care and grade 1-12 education are covered under government programs
  • Certain occupations face high operating costs (farm machinery and price of farmland)
  • Social issues and cyberspace has made child rearing more complex
  • Knowledge’ and automation revolutions have replaced certain higher wage jobs with low wage jobs (service)

The definition of the stereotypical ‘American Dream Family: ’they own their own home, have more than one car, can afford to send their children to college, have access to healthcare and benefits, and have spare time to vacation or simply have free time in general.

INCOMES AND NET WORTH OF THE CANADIAN MIDDLE CLASS

In Canada it would appear that the middle class primarily includes those earning between $40,000 and $80,000.  However, when the Canadian population is divided into unattached family units and family units of two or more persons, the income levels are quite different. According to Statistics Canada 2013 (statcan.gc.ca/daily) the median after tax income for unattached persons over 65 is $25,700, for unattached persons under 65 $29,800, and female lone parent families $39,400.  For two parent families with children the median after tax income is $85,000 and senior families $52,500.  (After-tax income is defined as the total of market income and government transfers, less income tax).

The median net worth according to Statistics Canada 2012 (statcan) is as follows: Unattached person under 65 $22,700, unattached person over 65 $246,000, senior families $650,000, non-senior families couples only $365,200, non-senior families with children under 18 $302,100, lone parent families $37,000 and other non-senior families $423,000.

The following information from MoneySense shows Stats. Can. 2011 income and net worth data divided into quintiles:

INCOME TABLE (MoneySense based on Stats. Can. 2011 macleans)

INCOME (PRE-TAX) – HOW DOES YOUR PAY STACK UP

Quintiles Unattached Individuals Families of Two or More
Bottom 20 % $0 to $18,717 $0 to $38,754
Lower-Middle 20% $18,718 to $23,356 $38,755 to $61,928
Middle 20% $23,357 to $36,859 $61,929 to $88,074
Upper-Middle 20% $36,860 to $55,498 $88,075 to $125,009
Highest 20% $55,499 and up $125,010 and up

NET WORTH TABLE

Quintiles Unattached Individuals Families of Two or More
Bottom 20 % Negative to $2,468 Negative to $67,970
Lower-Middle 20% $2,469 to $19,264 $67,971 to $263,656
Middle 20% $19,265 to $128,087 $263,657 to $589,686
Upper-Middle 20% $128,088 to $455,876 $589,687 to $1,139,488
Highest 20% $455,877 and over $1,139,489 and up

(Caveat:  It is difficult to determine if unattached individuals includes widowers who often have more net worth than ever singles, early in life divorced persons and single parents).

DEFINING MIDDLE CLASS IN CANADA

Defining middle class in Canada by Sanita Fejzic (middle-class) article gives an interesting perspective on the middle class.

‘There are two ways of looking at the middle class. The first is to focus all the attention on the baby boomers and define middle class based on their experience. While this is problematic, it also makes sense for two reasons: (1) baby boomers make up a large portion of Canada’s total population, so, in terms of simple number crunching, their experience results in a national average and (2) because baby boomers are the majority, their votes become valuable and therefore most of the political rhetoric on middle class inevitably revolves around their experience. The hiccup with this scenario is that middle class baby boomers are relatively financially wealthy.

The second way of seeing middle class acknowledges the situation from an intergenerational point of view.

“Data suggests it’s really important to be careful about using the language of the middle class squeeze,” adds Paul Kershaw, Interim Associate Director, Human Early Learning Partnership at the University of British Columbia and Founder of Generation Squeeze Campaign. “While this language is popular among some political parties, it hides the reality that the squeeze is much more of an age issue.”

As Kershaw points out, high housing prices explain why the median 55-64 year old today reports wealth that has nearly tripled compared to the same age group a generation ago. “That’s not a middle class squeeze,” says Kershaw. “That’s the middle of a demographic nearing retirement with more wealth than the country has ever seen.”

High home prices that were good for people who bought homes decades ago are crushing their kids and grandchildren’s dreams of home ownership. “Gens X and Y pay housing prices that have nearly doubled after adjusting for the CPI, with wages that are down $3/hour, even though they are more than twice as likely to have post secondary [education] today compared to the past, and take jobs that are far less likely to pay generous pensions,” he explains. “In sum, the squeeze is primarily on younger generations.”

Political focus is on the baby boomer middle class.

As 93% of Canadians (see link) self-identify as middle class, all three political parties have high stakes when it comes to winning the hearts of middle class voters.

The middle class is the political battleground,” states  Leslie Pal, Professor of Public Policy and Administration and Director of the Centre on Governance and Public Management at the University of Carleton. “And it’s not about which parties benefit the middle class but how they are appealing to an older, greying middle class.”

In other words, the three parties are either completely ignoring the generational aspect of the problem or simply don’t understand it. Instead, their energy is going into securing the votes of middle class baby boomers.

According to Pal, there are two broad directions the three parties have taken to appeal to the baby boomer middle class. “One is what I call the jelly bean policy and the other is policy that tackles major problems,” he says.

In jelly bean policy, small offerings are made to baby boomer middle class voters because they’re already living relatively comfortably and have no sense of urgency.

Here we see the Conservatives’ tax breaks on sports equipment, bus passes and policy that unbundles cable packages and the NDP’s messages regarding high ATM fees. “They’re tiny policies,” says Pal. “Like giving jelly beans, it’s sweet and tasty, but it doesn’t fix the problem.”

The other direction solves larger problems, with a focus on reforming the pension system. Much has been done to this regard and there is much to do.

“The use of the term middle class [in the political arena] is rhetorical to some extent,” says Pal. “The Tories have crafted a package whose appeal is sharper [to the baby boomers.]” They’re tough on crime, focused on tax breaks and have strict immigration policy.

The Liberals’ middle class rhetoric is lighter on policing and immigration and focuses on minorities, making ends meet and affordable education, while the NDP is focusing on household debt and lowering credit card fees. The NDP has created a number of social support systems that have safeguarded the middle class, including Medicare. However, their focus has traditionally been about protecting main-street workers and minorities.

But none of the three parties are drafting policy that addresses the threat of a disappearing middle class in the future. As they get ready for the 2015 election — and with the help of sophisticated technology to micro-target various demographic groups — they’ll have to remember to tailor real policies aimed at the group that’s potentially got the most to lose, generation squeeze’. (End)

THE DISAPPEARING MIDDLE CLASS AND HOUSING

(disappearing-middle-class) An Excerpt from Joel Kotkin’s Forthcoming book The New Class Conflict

‘…..This process has been greeted with enthusiasm by financial hegemons, who have stepped in with billions to buy foreclosed homes and then rent them; in some states this has accounted for upwards of twenty percent of all new house purchases. Having undermined the housing market with their “innovations,” notably backing subprime and zero down loans, they now look to profit from the middle orders’ decline by getting them to pay the investment classes’ mortgages through rents.

Part of this shift has been exacerbated by the movement of large investment groups like Blackstone to buy up single family houses for rent, representing a kind of neo-feudalist landscape, where landlords replace owner occupiers, perhaps for the long-run.

The very idea of homeownership is widely ridiculed in the media as a bad investment and many journalists, both left and right, deride the investment in homes as misplaced, and suggest people invest their resources on Wall Street, which, of course, would be of great benefit to the plutocracy. One New York Times writer even suggested that people should buy housing like food, largely ignoring the societal benefits associated with homeownership on children and the stability of communities.  Traditional American notion of independence, permanency and identity with neighborhood are given short shrift in this approach.

This odd alliance between the Clerisy and Wall Street works directly against the interest of the middle and aspiring working class. After all, the house is the primary asset of the middle orders, who have far less in terms of stocks and other financial assets than the highly affluent. Having deemed high-density housing and renting superior, the confluence of Clerical ideals and Wall Street money has the effect on creating an ever greater, and perhaps long-lasting, gap between the investor class and the yeomanry’.  (End)

INCREASE OF SQUARE FOOTAGE IN HOUSING SINCE THE 40’S AND 50’S

“Why Canada’s houses are getting smaller”, Tristin Hopper, National Post, July 13, 2012 (shrinking-home)

‘From post-war bungalows to 1990s McMansions, the Canadian House has spent the last 60 years progressively ballooning into one of the largest domiciles in history….In 1947, to accommodate a wave of post-war home construction, houses were often no bigger than 1,000 square feet.  Then came powder rooms, family rooms, enclosed garages; by 1975 home sizes had jumped to 1,075 square feet.  But still, their children, the Baby Boomers, shared bedrooms and cope with the weekday morning ritual of waiting for a spot in the home’s only bathroom.

Crazed for elbow room, when the Boomers finally seized the reins of home ownership in the 1980s, all hell broke loose.  Wide hallways, gargantuan entrance halls, mud rooms.  By the turn of the millennium, Canadians lived in some of the world’s largest houses – and were filling them with some of the world’s smallest families….

But then, by 2007, the meteoric growth of Canadian houses began to a slow to a trickle…the average new home size had dropped to 1,900 square feet – well down from a mid-2000s peak of 2,300 square feet….over the years, lot sizes stayed pretty much the same, but builders added storeys, dug out basements and pushed the front steps to the sidewalk….Canada, too, is witnessing the slow death of walk-in closets, hobby rooms and even the once-ubiquitous living room…..

The Millennials, the generation born from 1983 onwards, enjoyed a childhood free of bunk beds or even shared bathrooms.  Growing up in plush mega homes undoubtedly helped them become, in the words of one author, ‘self-centered, needy, and entitled with unrealistic work expectations.  Oddly, it also spawned a group of people patently unimpressed with backyards and breakfast nooks….

Under current economic forecasts, Millennials are poised to spend their early adulthood decidedly less affluent than their parents.  They are also facing a housing market that has outpaced income growth for well over a decade….

Except, of course, in Alberta, in the land of $85,000 median wages and dirt-cheap housing lots, young families are still snapping up giant, single-family homes like it’s still 1985….Edmonton has more space per person than any major city in Canada….In Calgary, even the condos are 4,000 square foot ‘monsters’.’ (End)

WHAT DETERMINES HOW THE MIDDLE CLASS IS CREATED

Michael Lind, “Are We Still a Middle-Class Nation?” The Atlantic Monthly 293, no. 1 (January/February 2004) (issues).

Michael Lind goes so far as to claim “each of America’s successive middle classes has been artificially created by government-sponsored social engineering—a fact that is profoundly important for us to admit as we think about the future of middle-class America.” (End)

Andrew Coyne: “Forget the Liberal mythology, Canada’s middle class is not struggling” (middle)

This has always been implicit in Liberal rhetoric about “the one per cent,” but now it is policy. If the rich have been “taking” from the middle class, then the Liberals want you to know they will take it back: a cut of one-and-a-half percentage points in the lower-middle bracket, paid for by an increase of four percentage points in the top rate of tax. Fairness demands nothing less.

Seldom have the politics of “gimme that” been expressed quite so nakedly. It is one thing to redistribute from rich to poor, or from the broader society to those on its margins. But the beneficiaries in this case are not the poor, or even the median: as the NDP helpfully pointed out, the $44,701 threshold at which the Liberal tax cut would kick in would benefit only the top one-third of tax filers.” (End)

CONCLUSION

Wants have changed, it seems new homeowners all want hardwood floors and granite countertops and will pursue those dreams and accumulate high debt even with out of reach house prices.

Many wealthy Canadians (mainly married or coupled person family units)  think they are only middle class, but own their homes outright, have multiple properties, recreation vehicles, winter in Arizona or Florida, and have huge net worth and assets. Many also have multiple income sources from their net worth and assets in their senior years.  Many will buy properties with their increased wealth to rent out to those at the bottom of the wealth pile.  The rent charged is set at levels of greed to not only cover the mortgage and other costs, but also make 3 or 4% profit on their investments (affordable)

As stated above, 93% of Canadians believe they are in the middle class.  Yet MoneySense statistics presented above shows that 40% of Canadian families of two or more persons have incomes above $88,000 and have net worth and assets above $600,000.  THIS LAST STATEMENT BEARS REPEATING AGAIN.  Forty per cent of Canadian families have incredible wealth and yet think it is okay to lie to themselves and other Canadian singles and poor families about their wealth. They continue to spin these lies and this spin is perpetuated by government and politicians.

As has been shown in past blog posts, government and politicians have created upside side down and schizophrenic financial policies that benefit upper middle class families more than ‘middle of the road’ middle class families, singles and the poor (government-program).  Baby boomers and families because of their voting power are considered to be more financially important than other generational persons such as millennials.

What’s the point of hard work and common decency if the financial system is stacked against singles and the poor?  The values that have actually enriched the wealthy and upper middle class appear to be greed, over consumption, arrogance, dishonesty and telling lies upon lies upon lies about their wealth (especially with regards to affordable housing) .

‘Hard working’ phrase is used ad nauseum, but many middle class families  think they should not have to work til age 65 due to a sense of entitlement.

Even with having one of the highest standards of living in the world,  middle class Canadian families are still unhappy and want more and appear to have no qualms about financially discriminating against the lower middle class, singles and the poor.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

CANADA PENSION PLAN JUST ANOTHER GOVERNMENT PROGRAM PROMOTING FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

CANADA PENSION PLAN JUST ANOTHER GOVERNMENT PROGRAM PROMOTING FINANCIAL DISCRIMINATION OF SINGLES AND THE POOR

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

(singles-need-to-learn-how-to-articulate-financial-discrimination-of-singles)

Our last post discussed the financial discrimination of Old Age Security (OAS).  This post discusses the financial discrimination of the Canada Pension Plan (CPP).

CPP is part of the Pillar 2 plan of Canada’s retirement income system for seniors.  Some of the attributes of the plan are:

  • Federal government and Provinces are joint stewards of the CPP
  • Provides retirement, survivor, and disability benefits
  • Universal coverage of all workers in all industries
  • Employees and employers make equal contributions (4.95% each – 9.9% combined in 2015?) on earnings up to annual maximum of $54,900 (2016)
  • Defined Benefit – up to 25% of the average wage
  • Fully portable
  • Inflation-indexed to CPI
  • Actuarially sound for the next 75 years
  • The maximum CPP benefit for 2016 is $1,092.50 per month.

Unfortunately, most Canadians do not realize that the average Canadian will not receive the maximum CPP on retirement.  In fact, most will only receive about $643 per month of CPP maximum.  Why is this so?

Jim Yiu from ‘Retire Happy’ in his article “How much will you get from Canada Pension Plan in Retirement?” states (words in italics are my words):  

‘When planning for retirement, the first piece of advice given is not to plan on getting the maximum.  When you look at the average payout of CPP, it’s just a little over $643 per month in 2016, which is a long way from the maximum. In other words, not everyone gets the maximum. At the most basic level, the amount you get from CPP depends on how much you put into CPP.

Why is it that so many people do not qualify for the maximum amount of CPP? The best way to answer that is to look at how you get the maximum retirement benefit. Eligibility to receive the maximum CPP benefit is based on meeting two criteria:

  1. Contributions – The first criteria is you must contribute into CPP for at least 83% of the time that you are eligible to contribute. Essentially, you are eligible to contribute to CPP from the age of 18 to 65, which is 47 years. 83% of 47 years is 39 years. Thus, the way to look at CPP is on a 39-point system. If you did not contribute into CPP for at least 39 years between the ages of 18 to 65, then you won’t get the maximum. If so, then you might get the maximum but there is another consideration.
  2. Amount of contributions – Every year you work and contribute to CPP between the age of 18 and 65, you add to your benefit. To qualify for the maximum, you must not only contribute to CPP for 39 years but you must also contribute ‘enough’ in each of those years. CPP uses something called the Yearly Maximum Pensionable Earnings (YMPE) to determine whether you contributed enough. (For 2016 the YMPE is $54,900 – EQUIVALENT TO ABOUT $25 PER HOUR).

Basically if you make less than $53,600 of income in 2015 ($54,900 in 2016), you will not contribute enough to CPP to qualify for a point on the 39-point system…..As you can see, it’s not easy to qualify for full CPP especially with the trend of people entering into the workplace later because of education and people retiring earlier.  If you have 39 maximum years of contribution you’ll get the maximum CPP amount. If you have 20 maximum years of contributions you will get approximately half the maximum (you might get some partial credits for part years).

Planning your retirement needs and income requires some understanding of how much you will get from CPP. Many people either assume they will get the maximum or assume they will get nothing at all because they fear the benefit may not be there in the future. Both these assumptions have significant flaws. Take the time to personalize the planning by understanding how the CPP benefit is calculated and how much you will receive.’

ANALYSIS

Reasons why CPP is financially discriminatory to singles with low/moderate incomes and the poor:

    1. The YMPE 2016 salary to get maximum CPP benefits is $54,900 (up $1,300 from last year).  If average annual hours of work equals 2,200 hours then YMPE salary will be approximately $25 per hour.  Many singles and the poor do not have $25/hr. jobs.  In addition politicians, government, and businesses generally refuse to increase the minimum wage or ensure a living wage for all Canadians. If the YMPE is increased by $1,300, why aren’t the wages increased by the same amount for the poor so they can also contribute more to CPP?  Even those persons who work faithfully at full time jobs for forty years, but don’t have $25 per hour jobs will not receive full CPP benefits.  (Is this really what they deserve after working faithfully for their country for forty years)?  So who benefits most from CPP?  It is the middle class and wealthy who have at least $25/hr. jobs and, therefore, are able to get full  CPP benefits.
    2. Early retirement – who gets to retire early?  It is generally the upper middle class and wealthy married or coupled family units because of the marital manna benefits they receive, high incomes and the net worth they have.   In reality many of these families really do not need full CPP benefits.  From personal experience of this blog author, some married or coupled spouses will say both spouses do not need to work when really both spouses should be working or because of their high income only need one spouse working.  (To get full  CPP benefits each Canadian born citizen needs to contribute into CPP for at least 39 years between the ages of 18 to 65.   And, Canadians must not only contribute to CPP for 39 years but they must also contribute ‘enough’ to maximum of YMPE in each of these years).
    3. Marital manna benefits – Married or coupled family units have received many marital manna benefits that allows them to achieve more wealth than many singles and the poor.  One such example is the Child Rearing Drop-out Benefit.  CPP benefits may be increased for years that spouse did not generate income because of staying home to rear child from ages 1 to 6.  This is not necessarily a bad thing in and of itself, but those who are more likely to be able to stay home for child rearing are those with healthy incomes.
    4. Perception of financial  need –  Many politicians, governments, and financial planners have misconceived perceptions that financial goals should be for Canadians to have equal or higher pension income than while working.  In other words, if poor, it is okay to always be poor even in retirement.  For middle class or wealthy they say the goal should be equal or more pension income than working income even with high net worth and assets.  In reality, institutions like the OECD states less wealthy need 100% retirement income  of working income, while wealthy need retirement incomes that are much less of working income.  What is left out of these perceptions is quality of life.  Equal or higher pension income than income while working for singles with low/moderate incomes and the poor especially if paying rent or mortgage in retirement often does not equal a good quality of life.
    5. Proposed enhancements to CPP contributions and benefits – Proposed enhancements where CPP retirement pensions will be higher if taken after age 65 and./or will be higher if person works past age 65 are very good things. However, it is likely that singles and the poor are not the ones who will be able to postpone receiving their CPP benefits, and it is also more likely that singles and the poor are the ones who will need to work longer.  As for increasing CPP contributions now so that CPP benefits can be increased in the future, this generally is a good thing; however, the stress of having to contribute more will be more financially distressing for singles with low and moderate incomes and the poor rather than the middle class and the wealthy.

CONCLUSION

It seems to be more important for politicians and governments to ensure that upper-middle class and wealthy maintain their standard of living than it is to treat ever singles, early divorced singles, single parents and the poor fairly in benefits they receive (cpp).

Upside-down financial systems (upside-down) and marital manna benefits have created a nanny state where married/coupled persons want it all and once these benefits are in place, it is very difficult to eliminate them because of voter entitlement.  Upper middle class and wealthy married/coupled persons have been made irresponsible by their own politicians and government.  Many are not living an equal life style in their retirement, but a much better lifestyle.  A further question is whether these programs will be financially sustainable because upper class and wealthy married or coupled family units have not contributed enough to pay for these benefits.

Much is required of all family units regardless of marital status to educate themselves on what their actual retirement income will be.  If you don’t work, you won’t get CPP.   You won’t get CPP if you don’t work.  You won’t get CPP if you don’t make CPP contributions, for example, working ‘under the table’.  (And, wouldn’t it be nice for parents to pass this financial information onto their children so that their children will also make wise financial decisions)!  Much is required of financial planners to educate themselves on quality of life issues, not just equal or higher pension incomes.  Much is required of politicians and governments to educate themselves on how financially discriminatory many of the pension benefits are and to make changes so that there is financial equality and fairness in distribution of pension benefits for every Canadian,not just middle class married or coupled family units and the wealthy.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

OAS CLAWBACK OUTRAGEOUSLY BENEFICIAL TO UPPER MIDDLE-CLASS MARRIED OR COUPLED SENIORS, BUT FINANCIALLY DISCRIMINATORY TO SINGLES AND POOR

OAS CLAWBACK OUTRAGEOUSLY BENEFICIAL TO UPPER MIDDLE-CLASS MARRIED OR COUPLED SENIORS, BUT FINANCIALLY DISCRIMINATORY TO SINGLES AND POOR

(These thoughts are purely the blunt, no nonsense personal opinions of the author about financial fairness and discrimination and are not intended to provide personal or financial advice).

(six-reasons-why-married-coupled-persons-are-able-to-achieve-more-financial-power-wealth)

Occasionally, there are topics that give one pause resulting in questioning as to the efficacy of the  formulation behind the topic.  The OAS Clawback (proper name is OAS Recovery tax as per Canada Revenue Agency) and the financial discriminatory properties behind the program is one such topic.  One way to resolve the questioning is to look at the topic in detail.

OAS is a federal social program designed to provide a very modest pension to low- and middle-income retirees.  It is part of the universal government benefits for seniors (pillar 1) to ensure income security for senior Canadians.  In 2016 the OAS maximum amount is $6,680 for a single person and $13,760 for a couple. OAS clawback which began around 2011 does very little to clawback the income of upper middle class persons, particularly married or coupled family units.  The clawback of OAS benefits in 2016 starts with a net income per person of $72,809 (couple $145,618)  and completely eliminates OAS with income of $118,055 (couple $236,110).  The repayment calculation is based on the difference between personal income and the threshold amount for the year. The repayment of OAS is 15 percent of that amount.  All OAS is clawed back if personal income is over $118,055.

According to Human Resource Development Canada, only about five percent of seniors receive reduced OAS pensions, and only two percent lose the entire amount.  This program benefits wealthy couples and widowers the most.  OAS clawback for couple only begins at net income of $145,618 ($72,809 per person) thus allowing them to receive full OAS of $13,760 as a couple.  There are not many ever single seniors, early divorced in life seniors and single parent seniors who could hope to achieve a net income of $72,809; however, for wealthy widowers this may be easier to achieve and they are the ones who complain about clawback.

An example of OAS clawback is the following example:  

The threshold for 2015 is $72,809.  If your income in 2015 was $80,000, then your repayment would be 15 percent of the difference between $80,000 and $72,809:

$80,000 – $72,809 = $7,191

$7,191 x 0.15 = $1,078.65

You would have to repay $1,078.65 for the July 2016 – June 2017 period.

Many financial advisors will give strategies on how to avoid the clawback while benefitting married or coupled family units the most.  This is just another example of financial marital manna benefits and manipulation of assets that within the legal limits of Canada Revenue Agency’s laws allows married or coupled person to increase their wealth (manipulation-of-assets).  This also is just another example of the upside finances perpetuated in this country by politicians, government and businesses that benefit married or coupled persons the most (quality-of-life).

From a financial advisor comes this statement (claw-back):  “I also want to put the impact of the claw back into perspective. Although no one likes to give up $6,600 in free money, it’s not like you were going to get to keep it all anyway. As the OAS is taxable, most people in the claw back zone would have paid back over 30% of it in taxes.

Secondly, some clients look at paying claw back as the cost of doing business; while they may not love it, they look at it as a price of their own financial success and as money they really don’t need anyway. Moreover, they might correctly see that in some cases combatting the claw back isn’t worth the effort. For example, although the rest of the article will focus on how dividends are often bad news for retirees trying to avoid the claw back, these same people might also be reluctant to modify their investments to produce other types of investment returns, especially if that means unnecessarily courting more investment risk or triggering a big capital gain in order to rebalance their portfolios”.

Limiting OAS Clawback

There are a few strategies you can implement to reduce clawback amounts (strategies):

  1. Split your pension with your spouse. If your spouse has a lower income, you can transfer up to 50 percent to your spouse, which should reduce your overall income. This could also include a Registered Retirement Income Fund and annuity income.
  2. Dip into your Registered Retirement Savings Plan before you turn 65. An RRSP is only a tax deferral, meaning that at some point, you’ll have to pay those taxes. Consider taking funds out before reaching the age of 65 so you do not lose the OAS.
  3. Use your tax-free savings accounts to generate investment income, which is non-taxable and would not count towards your net income.
  4. Interest on funds borrowed to earn investment income can be deducted and could reduce your net income.
  5. Watch for capital gains. If you are planning a sale of an asset that could trigger large capital gains, consider selling it before you turn 65.

From another financial planner (minimizing-clawback):  “At the end of the day, more people’s concern over OAS clawback will not be such a big deal simply because there are not a lot of people over the age of 65 making more than $72,809 of income. The people that do may have significant pensions or continue to work and earn and income over the age of 65. There will also be a group of people that trigger significant capital gains from the sale of second property or investments but the good news is they will only lose part or all of there OAS in the one year that the capital gains is realized and reported on the tax return. But if you happen to be one of the few that will get affected, make sure you plan ahead accordingly”.

CONCLUSION

The OAS clawback (implemented by Conservative party) is just another example of how politicians and government have ensured that senior upper middle class married or coupled family units with incomes between $72,809 to $118,055 net income per person will benefit more from the OAS government program. These same politicians and government agencies have financially discriminated against ever single seniors, early divorced in life seniors and single parent seniors by ensuring only five percent of seniors will receive reduced OAS pensions, and only two percent lose the entire amount.  Note we have specifically stated upper middle class married or coupled family units because wealthy married and coupled family units have already been excluded from receiving OAS pension by virtue of the $$118,055 (couple $236,110) net income limit.

To add further insult, politicians and government have ensured that the upper middle class will receive benefit upon benefit upon benefit to reduce the effects of the OAS recovery tax program.  The Liberal party (now ruling federal party) implemented a 1.5% reduction in income tax for incomes between $45,282 and $90,563.  These are middle class incomes, not incomes of the poor. Pension splitting is another program that reduces the possibility of OAS clawback.  As stated above, past governments have also ensured that marital manna benefits and ability to manipulate assets have been been given primarily to married or coupled family units all within legal limits of financial laws.  All of these benefits perpetuate an upside-down financial system where the upper middle class and the wealthy are able to achieve greater wealth than ever single, early divorced in life and single parent seniors.  In other words, the OAS Recovery Tax program (supposed to provide income security for poorer seniors) is a failed program which ensures greater wealth for the upper middle class and greater poverty for singles and the poor.

SOLUTION (added August 31, 2016)

Equivalence scales (scales) and net worth –  how many times can it be said over and over again that wealthy and upper middle class married or coupled family units are increasing their wealth by government programs designed to give more to these family units?  To correct this financial discrimination and upside finances for singles and the poor, equivalence scales and net worth need to be applied to these programs.  Monies saved could then be redistributed to the poor regardless of marital status.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

EVALUATION OF MONEYSENSE ARTICLES RE THE COST OF RETIRING WELL: COUPLES VERSUS SINGLES, DECEMBER, 2014 AND JANUARY, 2015.

EVALUATION OF MONEYSENSE ARTICLES RE THE COST OF RETIRING WELL:   COUPLES VERSUS SINGLES, DECEMBER, 2014 AND JANUARY, 2015.

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.

SOURCES OF INFORMATION FOR THIS BLOG POST

MoneySense, December, 2014, “The Cost of Retirement Happiness” by David Aston (couples) /the-cost-of-retirement-happiness/

MoneySense January, 2015, “Single Retirees: The Power of One” by David Aston (singles) /single-retirees-the-power-of-one/

Kudos to MoneySense-they are one of the few sources of information that identify what it truly costs singles to live in comparison to married/coupled persons.

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The above articles for couples and singles were presented in two different timeframes by MoneySense.  financialfairnessforsingles.ca thought it would be an interesting exercise to combine the figures from both articles and complete an analysis of the figures for the married/coupled retirees versus the singles retirees.  (It is important to note that the definition of ‘single’ status by MoneySense is not the same definition used by financialfairnessforsingles.ca and Statistics Canada.  The only person who is truly single in the six profiles is Spencer as an ‘ever’ single person (never married, no children), while Reynolds is divorced and McDonald is widowed.  This is based on and justified by the Canadian Income Tax forms where the status of the tax filer has to be entered re status of married, single, divorced/separated or widowed and Statistics Canada definitions of marital status).

MoneySense Comments on Retirees Incomes

Couples – According to MoneySense author, a couple should be able to have a middle-class retirement lifestyle spending $42,000 to $72,000 a year including income taxes and assuming there is a paid-for home and no debt.  After tax, that will leave about $38,000 to $62,000 a year to spend as couples choose.  The minimum of about $38,000 (excluding taxes) should be sufficient to cover the basics, including operating a car and eating healthy.  Money Coaches Canada advises keeping annual spending on the basics within the $25,000 to $35,000 range, while trying to ensure there is at least $10,000 for extras, (Dec. /14, article).

Singles – According to MoneySense author, a middle class single retiree should count on spending approximately $30,000 to $50,000 a year including taxes and assuming there is a paid-for home and no debt.  This is about 70% of what is required for a couple since it costs about 70% of the couple’s rate for a single to maintain the same lifestyle as a couple.

For $30,000 income, taxes would be about $2,000 to $3,000 for older singles and $3,800 to $5,100 for younger singles below age 65.  After taxes and if budget is tight, singles should allow at least $20,000 to $25,000 a year for the basics (including shelter, groceries, transportation and clothing) and at least $5,000 for the extras like entertainment and travel, (Jan. /15, article).

Detailed Financial Information

Couples

Case #1 – It is stated that the Taylors live frugally but comfortably.  They have a paid-for three-bedroom home in a nice neighborhood and a ten-year old mid-level car. They eat out occasionally and take regular vacations.  They spend just over $25,000 on the basics, which leaves enough left over to spend almost $12,000 on the extras.  They both have university educations and held high-paying jobs in the technology industry while raising one child, who now lives independently.  Their modest spending habits allowed them to build their savings quickly while working, so they were able to retire in their early 50s and have a large nest egg.

Many advisers tell prospective retirees that they need to replace 70% to 80% of the peak income they had while working, but the Taylors live on less than 20% of the $250,000 they earned while working.

Case #2 – The Statscan couple depicts the average spending by senior couple.  (Source: Statistics Canada, Survey of household spending in 2010) plus inflation adjustments using the Consumer Price Index.

Case #3 – The Coopers, both close to 70, have lots of money to do the things they consider important, but don’t live a lavish lifestyle.  They spend modestly on the basics, which leaves plenty for the extras that give them the most satisfaction, like travel.  Their basic spending, at just under $45,000, isn’t much more than that of the Statscan couple.  But by economizing on the basics, they can afford to spend about $36,000 on the extras.  They learned frugality early on in life.  During their working years, they lived on his public sector professional salary while she had primary responsibility for the household and raising three children.  They also benefitted from his pension plan and saved by living well within their means and invested wisely. They have two vehicles (buy them used and keep them well beyond ten years).  Now they have far more money than they need to support their accustomed lifestyle.

The Coopers love to spend money for the benefit of their extended family.  They have a two-bedroom condo in the city as well as a vacation property.  They use their $16,000 travel budget for regular vacations.  They even spend some of their budget to cover the cost of extended family joining them on vacation.  They also contribute to their grandkids’ RESPs.  And while the $6,000 they budget for charitable and personal gifts is not enormous, they have distributed around $500,000 to their kids over the years to give them a good start.

Singles

Case #1 – ‘Ever’ single Spencer is in her early 60s and had to stop working at her physically demanding public sector job over a year ago due to a repetitive stress injury.  She hopes to return to work in some role, but even if she is unable to work again she feels she can live comfortably and sustainably on what she now has in savings, as well as government and employer pensions.  She has a $38,000 budget and pays $5,000 in income tax. Based on having a paid-for home she will spend about $23,000 on basics which leaves about $10,000 left for the extras.  She recently made the choice to move to a small town, mainly for the small town lifestyle, but also for the lower cost of living as well.  Money has been set aside to purchase a modest home.  (She does state that earlier in life she had some bad spending habits; however, she has learned to make careful, purposeful spending choices).

Case #2 – Reynolds in her early 60s (split up with her partner about ten years ago and no children?) is intent on making the most of retirement and has above-average means to do so.  Recently retired after a career in the public sector, she has a budget of $73,000 a year, including about $33,000 for the basics, and a sizeable $25,000 for the extras.  She likes to travel and has about $6,000 a year allocated to it.  In the early years of her career she was fixated on saving, which helped provide the ample nest egg she has today, including a group RRSP.

Case #3 – McDonald, a widower in his late 60s, has an above average budget of about $81,000, including $41,000 for the basics and $21,000 for the extras.  He uses his money to support hobbies, travel and spending on his two grown children and their families.  He is trying to find a balance between spending his money and leaving a large legacy.  He takes two to three trips a year with his $10,000 budget.  His budget also covers some travel for his children and relatives.  He spends quite a bit on groceries and restaurants, including paying for meals with extended family.  He happily spends less than his ample means would allow.

Qualifying Statements by MoneySense about the two articles

The MoneySense author along with Money Coaches Canada notes that the category ‘shelter’ includes property taxes, utilities, maintenance, house insurance, rent and mortgage payments.  Case #3 Statscan figures include a small proportion of costs attributable to a second home.  For the ‘vehicle’ category, $2,000 a year has been added for depreciation.  The category ‘home and garden’ includes cleaning supplies, furnishings, appliances, garden supplies and services.  The category ‘recreation and entertainment’ includes computer equipment and supplies, recreation vehicles, games of chance, and educational costs.

The author also makes the following qualifying statements: “If you are single, you know that retirement planning is tougher for you than it is for couples.  You have no one to rely on but yourself, and you can’t share expenses or split income.  As a result, you can’t just take the cost of retirement for couples and divide it by two. Situations vary, but a single person will need to spend roughly 70% as much as a couple to enjoy an equivalent lifestyle in retirement…The figure for couples isn’t twice the figure for singles–it is only about 40% higher because spouses are able to share costs for things like housing and cars.  The higher per-person income singles need also results in higher taxes”.

Table

The following table combines the financial profiles of the three couples and three singles from the two articles into one table.

Following the table are financialfairnessforsingles.ca comments evaluating the results of the financial profiles.

moneysense cost of retiring well

Analysis of the Financial Profiles of Couples Versus Singles

Marital Status

First, it is important to get one fact straight.  Couples who divorce/separate and persons who are widowed are not singles.  The only person who is truly single in the six profiles is Spencer as an ‘ever’ single person (never married, no children).  The profile of the ‘ever’ single person shows that she is likely at the bottom of the financial status list in terms of wealth as she is the one with a modest home in a small town where it is cheaper to live.  The separated person likely has a better financial profile because she was able to accumulate wealth as a coupled person for twenty-five or thirty years and was separated later in life (if she had separated earlier in life, she likely would have a financial profile more equal to the ‘ever’ single profile).  All of the other profiles show that they have more wealth and homes in nice neighborhoods and even second homes (Coopers).

Benefits

Marital status also determines who is likely to have more benefits.  It can be assumed that the couples have the higher financial status simply because they are married or widowed.  The married profiles will most likely pay less income tax than the single profiles because couples receive two of everything, have the ability to pension split and can get survivor benefits when widowed, etc.   As retirees, the two profiles that lose on benefits are the ‘ever’ single person and the person who is separated.

It is stated that most of the couples have lived so frugally that they now have more money than they need, but at same time have three bedroom houses in nice neighborhood, vacation home, and can retire in their 50s and 60s with a very comfortable lifestyles.  This implies, even with frugality, they had plenty of money to spend and save as married/coupled families with children.

The single person is the one that has to move to a smaller town to lower living expenses while others are living in what appears to be substantial housing.

Taxes

On examination of the profiles, it is easy to see that the persons who are paying the most taxes are the ever single person, the separated person and the widowed person.  The Taylor couple pays the same taxes as the ‘ever’ single person (Spencer), but they have approximately $5,000 more in income and appear to have much more wealth in terms of assets (must be the pension splitting).  It pays to be married.  The Statscan couple pays less income tax (almost one half of the amount equal to 13.4%) than the separated Reynolds person (20%), but her income does not come even close to double of the Statscan couple.  The Coopers are paying only $20,000 on $100,000 income (20%).

The widowed person (McDonald) with all of his wealth is most likely receiving survivor benefits.  Did he pay extra for these benefits and why is he portrayed as being single?   If he is now single why should he receive anything more than the ‘ever’ single person and the separated person?

Benefits to Families of Coupled People

The profiles of the coupled persons and the previously coupled person (widower McDonald) blatantly state that they have more money than they can spend and have given generous monetary gifts, paid for the meals of their kids, grandchildren and extended family members, etc.

Married/coupled people or previously coupled people are often able to give exorbitant gifts, inheritances, etc. to family and extended family.  Does this not create a sense of entitlement for family, children and grandchildren who begin to expect this all the time? How does this extravagance teach frugality?

Emergency Monies

Where in any of these profiles has money been set aside for emergencies?  The person most likely to be unable to pay for financial emergencies due to illness, financial issues, etc. is the ever single person with the least accumulation of wealth.

Education, Education, Education!!!

It is beyond comprehension on how governments, families, society and think tanks lack knowledge and are financially illiterate on the true facts of how ‘ever’ singles and divorced/separated retirees are financially robbed to subsidize married/coupled retirees by paying more taxes while getting less benefits like pension splitting and widower benefits in this country.

Singles require 70% of the income/wealth of Couples

How many ways can this fact be stated and how many different sources of information does the government and society need to make changes on how singles are financially discriminated against in this country??  Do Members of Parliament ever think to include singles when making important decisions like pension splitting and benefits that benefit only the married/coupled and families of this country?  Government, businesses, society and media only ever talk about middle class families. Singles meanwhile have been financially discriminated against by their government and society.

 How expensive is it to raise a child?

So how expensive is it to raise one child, two children, and three children and still come out on top in terms of wealth in the personal profiles?  Governments, society and families, think tanks continue to talk about how expensive it is to raise a child, and yet many families are able to leave large legacies/inheritances to their children.  Unfortunately, based on the facts this seems to be based on the half-truths and lies of governments, society, families and think tanks.

Profiling

Singles are often profiled as having excessive spending habits/lifestyles while married/coupled persons are usually profiled as being frugal.  Married/coupled persons in their retired state are still profiled as being frugal even though they can give extravagant gifts (in one case around $500,000) to their children and grandchildren and spend more money on items like vacations.

 Happy, happy, happy!!!!!

In both articles the profiles and the author comments seem to imply that everyone is happy, happy, and happy with their financial status.  ‘Ever’ singles and divorced/separated retirees are blatantly told they should be happy with what they have even though they have been discriminated against financially.

‘Ever’ single persons and divorced/separated persons not so lucky to have achieved equivalent wealth (70%) of married/coupled persons as shown in above examples wish to state they are not happy with being financially discriminated against on every level of government and society.  They are not asking for more than married/coupled people.  They are asking for financial fairness.

FINAL STATEMENT

Governments, businesses, society, families, think tanks all maintain that the middle class is being affected most by poverty.  The real truth is that ‘ever’ singles, singles with kids, persons divorced/separated early in marriage/coupling, and families with low incomes are being affected most by poverty.  Singles (‘ever’ and divorced/separated) in this country are not happy with always being excluded from financial formulas and conversations.  They are human and in their humanity are equal to married/coupled people, and it is time that they are treated with the same financial fairness, dignity and respect as married/coupled people.

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.

FAMILY: INCLUSIONARY OR EXCLUSIONARY TERM AND FINANCIAL DISCRIMINATION

FAMILY:  INCLUSIONARY OR EXCLUSIONARY TERM AND FINANCIAL DISCRIMINATION

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.)

Today, February 15, is designated Family Day in Canada and was originally created to give people time to spend with their families, but also provides a day off between New Year’s Day and Good Friday as they are approximately three months apart.

The word ‘family’  can have many different meanings.  One definition is “a fundamental social group in society typically consisting of one or two parents and their children.” While this definition is a traditional definition, there are other family units excluded by this definition, such as couples without children or other variations on the family unit. Another definition is “two or more people who share goals and values, have long-term commitments to one another and reside usually in the same dwelling.”  In addition to a more universal family definition, there are many who consider a group of friends to be family, and adults who consider pets also to be members of the family unit.

The Statistics Canada definition of ‘family’ indicates there must be two persons legally living together to be defined as a family.  When census information is collated, the population is called:  “Census families and persons not in census families”.  Singles are included in the “persons not in census family” category.

For Canada Revenue Agency income tax purposes, singles are persons who have never married or whose marriage has been legally annulled.  (Those who  live with a common-law partner are not included in this category).

The word ‘family’ can be inclusionary or exclusionary depending on the closeness (or distance) of the relationship of the persons in the family unit.

It is interesting to note that present political discussions both in Canada and the USA talk about the financial decline of the ‘middle class family”.  Singles and low income are left out the discussion.  Many benefits have been given to the married/coupled persons and family units with children, but singles are generally left out of the benefits or receive less in benefits.

An example of financial discrimination in Canada is the targeted tax relief for seniors where senior singles pay no tax on $20,000 and married/coupled seniors pay no tax on $40,000.  For single seniors this amounts to only $1,700 per month, but for married/coupled seniors this amounts to approximately $3,400 per month.  Living costs are inadequately covered for singles, but are more adequately covered for married/coupled seniors.  It is a well known fact that singles require approximately 70% of living costs for married/coupled persons living together as a family unit.

The mentality of government, decision makers, businesses and families in this country is to serve only the rich and middle class families while generally ignoring singles, low income and no income individuals and families.   Families will often talk about how important the family unit is for them in regards to maintaining close ties to friends and families.  They talk about about how their ‘hearts are eternally and inexplicably changed’ when bearing their children, but same hearts appear to become ‘hearts of stone’ when these same children become adult singles, low income or no income persons and families.  These disadvantaged persons are tossed out or are less important in financial  formulas and decision-making processes.

CONCLUSION

The definition of family as to whether it is inclusionary or exclusionary is in ‘the eye of the beholder’ and depends on which ‘side of the fence’ is beholder is on.   An exclusionary example is the one given above on targeted tax relief.  The financial ‘family’ by devaluing singles and low income takes on a ‘Dr. Jekyll and Mr. Hyde’ persona, or also could be said to take on an ‘about-face’ persona or doing the exact opposite where the greed of business and personal gain takes on more importance than treasured family values.

Financial fairness of singles, low income and disadvantaged would be better served if they were financially treated as equal family members instead of being financially categorized as ‘worth less’ or ‘worthless’ to the rich and married/coupled persons in financial formulas. This would give more truth to why Family Day is celebrated on this day of February 15.

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.

 

ARE FAMILIES REALLY MORE FINANCIALLY INTELLIGENT IN MANAGING FINANCES?

ARE FAMILIES REALLY MORE FINANCIALLY INTELLIGENT IN MANAGING FINANCES?

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.

Financial Post personal finance profile “Put Cash Toward the Kids’ Education” and in Calgary Herald on January 16, 2016 (financialpost)

The following is a condensed version of the financial profile of Harry 39, and Wendy 38, a British Columbia couple with two children ages two and a few months old.  (Question:  Did they marry later in life resulting in a low net worth at this time in their life because it is more difficult to accumulate net worth while single than as married/coupled persons?)

Their take home pay is $9,100 a month plus $240 take home universal child care benefits put into place this year by the federal government for total annual take home pay of $112,000.  They both have defined benefit retirement pension plans, so it should be noted that contributions to their plans have already been deducted before take home pay total.

Their expenses include real estate mortgage, property tax, and home repair $3,489, car costs $550, food and cleaning supplies $1,200,  clothes/grooming $150, charity/gifts $200, child care $850, entertainment $120, restaurant $280, travel $150, miscellaneous $626, utilities $350, phone/cable/internet $200, home and car insurance $325.

For savings they contribute $800 to TFSA (Tax Free Savings Account), and $50 to RESP (Registered Education Savings Program).

Their assets include house $500,000, cars $20,000, savings including RRSP Registered Retirement Savings Plan), RESP, TFSA (Tax Free Savings Account) and cash $40,700.

Their net worth equals $150,700.

What they want:

  • retire at age 55
  • buy a condo for the children’s grandparents to use when they are in town and to rent out at other times

Financial Planner Analysis

  • they haven’t made wills or appointed guardians for their children
  • they have no term life insurance
  • they can’t retire at age 55, but they can retire at age 59
  • they can’t afford to buy a condo as they don’t have the money for down payment
  • they should fully contribute to their children’s education plan into order to get the government benefit

Retirement plan

  • if they retire at age 59 assuming they remain with their present employers, their total income would be $96,732 plus Harry’s $9,570 CPP(Canadian Pension Plan) and Wendy’s $12,060 CPP.
  • At age 65, with the addition of OAS (Old Age Security), their total income will be $111,146 before income tax.  There will be no clawback on OAS and with pension splitting, they will  pay only 14% income tax and have a monthly take home income of $7,965 to spend.

Other Financial Analysis By Blog Author

  • they want to retire at age 55, but their children will only be ages 15 and 16,  and their mortgage won’t be paid off until Harry is age 63.  How financially intelligent is this?
  • they are not taking advantage of ‘free’ government benefits of $500 per child by not maximizing children’s RESP.
  • Harry is an immigrant who came to Canada at age 30 (nine years ago), and he wants to retire at age 55.  He will have contributed to Canadian financial coffers for only 25 years.  If he retires at age 59 he will also get what could be a 15% tax reduction with pension splitting at age 65.  Canadian born singles and single immigrants do not get these same benefits and are subsidizing married/coupled immigrants who in many cases have taken more from the Canadian financial coffers than they have put into it.
  • with pension splitting and no clawback on OAS, they will only pay 14% income tax. Singles with equivalent pension income pay a lot more income tax.  (It is stated elsewhere in the article that Wendy’s tax rate at present time while working is 29%).
  • their food and restaurant (including some cleaning supplies) budget is over $1400 a month for two adults and two very young children (does not include entertainment budget of $180 month).  Their restaurant budget is $280 alone and yet many families think singles should live on only $200 a month for food.

Lessons Learned

  • married/coupled persons and families receive marital manna benefits while they are parents and while they are retired.  One could say the only persons who contribute fully to the Canadian tax system while getting less benefits are singles.
  • married/coupled persons and families are not any more financially intelligent at managing their finances than single persons.
  • married/coupled persons and families all want to retire at the age of 55 regardless of their financial circumstances.  Most singles do not have this option.  Why should families bringing in $9,000 a month after tax income get $240 after tax child benefits and child education benefits and, then when they retire early at age 59, also get what is probably a 15% pension splitting tax reduction resulting in take home income of $8,000 at age 65 when their children are grown up?  This is a very rich retirement income that most singles cannot aspire to.
  • Families, governments and decision makers all talk about expensive it is to raise children.  For one Canadian child, the cost is about $250,000.  So if cost is spread over 25 years of the child, cost per year is $10,000 per year, or in the case of this family $20,000 per year for two children.  Their total after tax income is almost $10,000 per month, so approximately two out of twelve months income will be spent raising their children.  The remaining income is for themselves.  Add in another month of income for the children’s education ($10,000  times 20 years equals $200,000 not including government top up) and that still leaves them with nine month of income for themselves.  So again, how expensive is it to raise children when this family has over $80,000 a year to spend on themselves?
  • When families (including married later in life) in top 40% Canadian income levels can retire at age 55 and 59, they spread the family financial myths and lie to singles, low income families, themselves, the world and God about how expensive it is to raise children and why they need income splitting and pension splitting.  Low and middle class families are paying more and getting less for government programs.  Singles of all income levels are paying even more and getting less (singles are considered to be in the upper 20% quintile of the Canadian rich with before tax income of only $55,000 and up.  Wow, that is really rich).
  • singles know that they are paying more taxes and getting less in benefits.  They also know they are subsidizing families when they work 35, 40 years without using mom/baby hospital resources,don’t use EI benefits at same level as families for parental leave, and don’t get marital manna benefits during retirement.
  • singles know they have been financially discriminated against by being left out of government financial formulas and are not seen as financial equals to married/coupled persons.

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.