“These are the same people who paid their taxes all through their working lives and have funded their retirement in this way.”So, she is saying that it is an issue of tax fairness; boomers paid for their OAS benefits and would be cheated if these payments were reduced. Unfortunately, if we really introduced tax fairness it would decimate OAS. The reason for this is a combination of the way OAS is funded and demographics.
Unlike CPP, OAS is paid from current tax revenues. While the CPP amounts deducted for our pay are saved to cover future CPP benefits, OAS payments to retirees are paid for by current taxpayers. This means that boomers paid for their parents’ OAS and they will collect OAS payments from their children.
Boomers were in the middle of their careers around the year 2000. They will be in the middle of their retirements around the year 2030. Over that period of time, the ratio of the number of retirees to the number of working people will roughly double. This has happened because we’re having fewer children and we’re living longer.
As a group, boomers will collect roughly twice as much from OAS as they paid in. To achieve tax fairness, we’d have to cut their benefits in half. I’m quite certain that Ms. Eng would not support such a cut. I don’t support it either. But we do need to increase the age where OAS benefits start to reflect the fact that we’re living longer.