Quote:
Originally Posted by Innsertnamehere
SS from my understanding is "self funded", but it's not funded in the same way CPP is.
CPP operates like a pension plan, a dedicated fund which has to be set up to make payments for a minimum period (right now it's funded into the 2070's or something). There is no risk to taxpayers to have to make up the difference.
SS is direct funded - payments made to beneficiaries are directly funded from payments made that same year by contributors. If there is a gap between the two (i.e. beneficiaries need more money than there are contributions), the federal government has to make up the difference. SS does have a fund to make up differences from previous years of surpluses of collections - but it has begun to draw on these funds and will likely drain them over the coming years, leaving the federal government liable to make up the difference.
This is closer to how OAS operates - a direct liability to the government. Most of SS is funded through payroll deductions sort of like CPP, a sort of indirect tax, but the general tax fund is liable for it as well.
As of today, SS accounts for nearly 1/4 of all US federal government spending.
SS also is actually far worse than OAS in that its income cut offs are much higher and its payouts much larger. The average SS payment is almost triple that of CPP., and max contributions top out at over $170,000 USD - nearly $250,000 CAD.
OAS is worse in that it's actually costing the Canadian federal government a ton of money *today*. SS is more of a future liability for the US fed, but one which will be a much more expensive, larger problem, if changes aren't made.
If PP does one thing federally to fix the budget, it will be to fix OAS. Reduce the income cutoff, eliminate the 10% bonus for those over 75, and roll back eligibility to 67 again like Harper did. That will fill an absolutely massive hole in the federal budget.
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This is more or less a correct summary. Social Security is paid based on contributions whereas OAS is completely separate from tax payments. So it is more redistributive. You need to live in Canada 40 years to get the max but don't need to have worked. A low income person in the US will only get a CPP level payment but someone who worked for a higher income will end up with even more than OAS and CPP max even without a clawback.
Your ideas are a good start would be politically toxic for very little savings.
10% 75+ bonus would save a decent chunk but 75+ must be less than half beneficiaries so 4-5% savings?
67 start date would have to be phased in so won't really book a lot of savings unless they do it rapidly. Harper had a long phase in beginning in 2023. A bold and brave budget could actually revert to almost that schedule. Saying essentially we are sorry Trudeau lied to you but we are reverting to that as of Jan 1. 2025. (You need to wait a few months) and fully implementing by 2029.
The income cutoff you propose is also not huge. The vast majority of seniors are making well less than anu cutoff and if you clawback OAS many will find ways to reduce their taxable income further. You also have unintended consequences. My Uncle still works full-time at 73. Makes just over the clawback and gripes about it constantly. (I see his argument labour income could be considered differently than rich seniors living off fat cat defined pension plans or more commonly off of investments). If he was looking at losing all his OAS he would probably stop working. So we'd lose the $30k in income tax he pays to save $6k in OAS.
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