Here’s a very well thought out comment from one of the articles in the media :
Seniors and changing times.
It seems that we all feel that Seniors are hard done by. It is certainly true that Seniors in the previous generation, especially those who were born in the early part of the 20th century, went through a period where people lost everything and they had to build from nothing. My grandparents, on both sides, lived good lives, had good jobs, yet retired quite poor, with little in home equity and little in the way of any income – such as OAS or CPP. This was very common, especially until even 10 years ago.
Fast forward to 2018 – now my parents are Seniors. They are certainly not poor but they are not rich. However, they don’t deserve any pity, charity, special seniors discounts, break on taxes or any other form of financial subsidy. They will never be able to spend their wealth and thus, my sister and I will inherit something – which is more than my parents received from their parents.
The notion that Seniors are hard done by when they are on “fixed incomes” but when they also own – in reality – many millions in real estate – is frankly a very misdirected sound bite. It is interesting how we seem to measure financial stability and financial strength solely by the (taxable) income someone earns in a year, without any regard to accumulated wealth – or especially – the untaxed rent distribution that a person’s primary residence pays to them in the form of free shelter. At least the income generated from wealth that is invested is taxed – – but then – why shouldn’t the rent dividend paid by your primary residence also be taxed? The fact that it is not – is a huge subsidy for home owners – paid by renters – who must pay their rent with after tax money.
For sure there are Seniors, who live on fixed incomes, who may even be renters and who may not even have any significant assets. These people are truly poor – and we should take care of these people as much as we can with the existing social safety net. However, a Senior living in a $5 million house, fully paid off – is not in any way poor or deserving of any financial pity or subsidy. In fact, they should not have anything to complain about – given that they have made a very hefty tax free gain on their home and they continue to get to live in it – without have to pay any tax on the massive rent dividend their home is paying them.
One’s primary residence should form a portion of one’s long-term retirement plan – especially in the Canadian tax system. It is a huge tax shelter and one most people really should ensure they take advantage of. However, the gains realized in recent years have far exceeded what would have been seen as normal and expected. They also have been helped by government policies at all levels.
Now for someone to come along and start to claim that the Seniors – living in West Vancouver and other high priced areas of real estate, are somehow being truly penalized unfairly (and also somehow unfair in the overall balance of society) is doing nothing but merely giving sound bites which make them seem completely disconnected from the realities of the city of Vancouver and also completely disconnected from what the general public feels is right.
The changes in the tax rules are a step completely in the right direction. To bring the system partly back into balance, there has to be more taxation put on home ownership. Let me leave you with one thought – – What’s interesting is this – – a Senior living in a $5 million house, drawing a modest CPP of $15K per year, is somehow considered poor and destitute and should be subject to our pity. However – that same Senior could take their $5 million, invest the cash, rent that same house (for even $10,000 per month), earning 250,000-500,000 per year in investment income and gains – – and that senior would be considered very rich, subject to huge taxation on their income, and also be subject to a complete clawback of their OAS – – – even though – they live in the same place, have the same wealth, and generally have the same lifestyle. Why is that different? When you think of taxing those people – remember – their home is providing them a massive tax-free rent dividend and taxing that – even partially – is starting to even the playing field – if even only slightly. – They should all just shut up and be quiet and be happy it’s not worse – because it would be if it was fair.