A simple stimulus plan

Posted on December 9, 2009
Filed Under Commentary, Economic & Political Philosophy | Leave a Comment

The Canadian government operates an income program that is so simple and efficient I think even I can explain it. It is the Old Age Security plan.

Also known as the old age pension, OAS is paid to every Canadian citizen who has spent his or her adult life here. We do not make direct contributions to it. It is financed from general revenues.

It is not a huge amount of money. This year it is $516.96 per month, $6,203.52 per year. The odd numbers come from the fact that it is indexed to the cost of living. At one time, every citizen over 65 got it and kept all of it. When Canada was battling runaway deficits, government decided to claw some of it back from the richest citizens.

This is accomplished very simply. When the recipient’s net taxable income exceeds $66,335, the Canadian Revenue Agency collects 15% of the excess via the annual tax return. If, for example, one’s net income, after all deductions, is $67,335, the amount subject to clawback is $1,000. 15% of that is $150.

When one’s net taxable income reaches $107,692, the clawback is 15% of the $41,357 excess over $66,335. 15% of $41,357 is $6,203.55. That is three cents more than the pension paid.

How many government programs do you know that can be explained that succinctly? How many government programs do you know that work so smoothly and efficiently to get money where it is intended to go?

I would like to propose a simple change to the program. Please don’t call 911 and summon the loon wranglers for me until you read it to the end.

I would like to suggest that every Canadian citizen be put on Old Age Security at birth. I think it would be a good investment.

It probably would not cost any more than all the programs we have now and would be a lot simpler to administer.

The best thing about it is that it would also allow a great many people out of the welfare trap. Over the years I have known a great many young mothers with a child or two and a year or so short of a university degree. I have known people who would like to get into the work force but dare not give up the steady welfare income for a part time or seasonal job. The real killer is the fact that people who come off welfare lose the supplemental health care benefits for prescription drugs, dental work and glasses for themselves and their children.

As far as I can see, that makes welfare a trap.

I think that if families knew they had $517 per month coming in for each member, some men and women would go back to school. Some would put their children in daycare and go to work. Given that Canadians know we must be better and better educated to succeed in the modern world, that would seem to be a good investment.

A lot of working people would put the extra income to work by investing in homes, home improvements, golf and curling memberships and any number of additional economic stimulators.

People with income, of course, pay taxes. People who consume, send money back up the line via every store and business. Stores and businesses pay property taxes, collect HST, and pay income taxes of their own.

Giving money to people ought to be economic stimulus at least as effective as as grants to irrigate golf courses, build curling clubs or finance more startups for  grantrepreneurs. I like the idea of the people having the money and businesses having the opportunity to earn and compete for it. You can count on people to spend money for food, shelter and clothing.

Another thing you can generally count on is that people who get some money generally develop an appetite for more. Many of them would be eager to get into the work force.

Consider this too. Over the past couple of years, I have had opportunities to get government financial help to make energy conservation improvements to my home and to take tax credits for home improvements.

Meanwhile, I hear stories of welfare moms using hair dryers to thaw door entrance hardware to open their doors on winter mornings.

Would it not be at least as good an investment to give her the same opportunity as me to pay for more energy efficient accommodation? If she could, could we not depend on landlords to provide such accommodation?

It could also make all of us feel better to know fewer children would wake up cold and hungry every day with little hope to ever escape the line of welfare generations.

If I am a dreamer, am I the only one?



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