Don’t look for detail from Chatbot GPT or DeepSeek – especially on the history of Old Age Security (OAS) funding
Today, I asked Chatbot GPT and DeepSeek for details on the history of Old Age Security funding in Canada. I tried using various different questions, year prompts, and program distinctions. Here is what I got back time and again:
ChatGPT said:
“The Old Age Security (OAS) program, introduced in 1952, replaced the Old Age Pensions (OAP) program, which was established in 1927. After the OAP legislation ended, the funding model for senior benefits in Canada shifted with the creation of the OAS program. Here’s how OAS has been funded since 1952:
Shift to General Revenue Funding
OAP Funding: Under the Old Age Pensions program (1927–1952), the federal government provided a cost-sharing arrangement with provinces, and benefits were means-tested. Both levels of government shared responsibility for funding.
OAS Funding: In 1952, the introduction of the OAS program established a universal pension for seniors aged 70 and over (later reduced to 65 in 1965). This marked a significant shift:
The federal government assumed full responsibility for funding OAS.
OAS was funded entirely from general tax revenues, collected by the federal government through personal and corporate income taxes, sales taxes, and other sources.”
DeepSeek virtually said the same thing – almost word for word.
One guesses they each look at the same websites.
Then I went back to good old ‘Search’ on Google and got what I wanted on the first page from the parliamentary research branch from March 14, 1990:
“The Old Age Security Act provided for an earmarked old age security tax to finance the universal pension. The special levy, effective in 1952, was actually a composite of three taxes – a tax on the manufacturer’s selling price ore duty-paid value of all items covered by federal sales tax, a tax on personal income, and a tax on corporation income. With the exception of the 1952 tax year, the tax rate was initially set at 2% for each component, with a limit of $60 per year on the tax on personal income as applied to the first $3,000 of taxable income. The combined levy became known as the “2-2-2 formula” and tax receipts were paid into an Old Age Security Fund kept as a separate account in the Consolidated Revenue Fund. No actual change in the overall sales tax rate occurred, since 2% of the 10% sales tax rate was re-allocated and credited to the new Fund. Benefits were paid out of the Old Age Security Fund, with the Minister authorized to make temporary loans to the Fund if pension benefits payable exceeded credits to it. The Minister was also required to review the state of the Fund annually.
In 1959, the 2-2-2 formula was changed to a 3-3-3 formula, so that the tax rate on each of the three components was increased, on a staggered basis, to 3% from 2%. As well, the maximum for the personal income tax component was increased to $90 from $60 annually. The personal income tax component was again increased effective 1 October 1963, with a 4% rate applied up to $120 per year.
When the means-tested Guaranteed Income Supplement (GIS) benefit was introduced in 1967, these payments were also charged to the Old Age Security Fund. To compensate for the additional demands placed on the Fund by the GIS and the progressive reduction of the age of eligibility for the universal pension from age 70 in January 1965 to age 65 in January 1970, the income tax component of the old age security tax was increased.
Effective 1 January 1967, the limit on the income tax component was raised to $240 annually, levied on the first $6,000 of annual taxable income. At that time, the Minister of Finance stated that changes to the personal income tax component would only partly meet the demands on the Fund, and raised the general sales tax from 11% to 12%, except for building materials, and production machinery and equipment.
This increase was intended to cover the balance, but was not earmarked specifically for old age security; however, a Fund deficit which would have to be covered from general revenues was not expected in the immediate future. The base of the sales tax component was eroded in September 1967 with the removal of the general sales tax from drugs, and was eroded further by the progressive removal during 1967 and 1968 of sales tax from production machinery and equipment.
The old age security tax was eliminated effective 1 January 1972, although the Fund was not abolished until 26 June 1975 by an amendment to the Old Age Security Act. The sales tax component became part of the regular sales tax, with no net change in the amount paid by the tax-payer. Abolition of the personal income tax component, beginning in the 1972 taxation year, was accompanied by a major restructuring of personal income tax rates implemented by the 1971 Income Tax Act. As well, each year the Minister of National Revenue was required to credit the Fund with an amount equivalent to the net amount lost by these changes. Currently, all old age security benefits are paid directly from the Consolidated Revenue Fund on a pay-as-you-go basis.”
‘Search’ ain’t dead yet!