The plight of low income hardworking seniors

This is the year that I become a senior citizen for the first and only time. I wrote a blog when I turned 60 for an online newspaper called ‘The Mark’ on what it means to turn age 60 when you are poor[1].

I spent the next four years on a self-motivated project called ‘Retiring on a low income’. I know from my ‘Google analytics’ that it is very popular as the material has been accessed about 45,000 times, mostly from new users. My blog on the subject, written in 2013, was the most popular blog on the Vibrant Communities website in 2014.

I now want to set my sights on the issues that beset those who have already turned 65 but continue to live on a low income. Catherine Porter has greatly assisted this cause with her front page article from Sunday March 29, 2015:

In an earlier blog from 2014, I attempted to point out that the very poorest seniors are taxed the most[2]. This just seems to be the way things are. The poorer and more voiceless you are, the higher the rate of confiscation from income taxes or programs. The earlier blog covers this well and others have written about the phenomenon[3]. So I won’t go on another rant about that topic here.

What I want to talk about here is how very hard it is to be a hardworking low income senior in Ontario today. If you have to go out and earn money to make ends meet, you can only earn $3,500 in any tax year[4] before you face a 100% taxback rate on the old age money that you get from Canada and Ontario.

If you are a poor single senior without any other income outside of your Old Age Security and Guaranteed Income Supplement (GIS), you can only work until the middle of March or so (at minimum wage) before your earnings reduce your GIS by 50 cents on the dollar.

But that’s not all! The provincial Guaranteed Annual Income System for the Aged (GAINS-A) also starts to reduce the benefits it provides by 50 cents on the dollar at the same point[5]. Footnote 5 links you to a really helpful excel file provided by the Ontario Government that reveals that for the first $1,992 that you earn after the $3,500 exemption you will lose that 50 cents on each dollar earned.

But fifty plus fifty equals one hundred. As our unsuspecting poor senior toils through the middle of March to the end of April, every single cent of her earning will be clawed back in equal measure by the governments of Ontario and Canada. With her GAINS-A payments exhausted, only 50 cents on the dollar will be clawed back for the rest of the year.

This is why I advise active low income seniors to work for two and a half months a year and then leave their employment. It’s just not worth it.

It’s also delicious to juxtapose a 100% rate of confiscation with the 15% Old Age Security clawback rate for seniors hauling in six figure incomes[6].

In April of this year, I am going to make my usual rounds of fast food joints and try to spot the women who look like they are my age or older. They usually work in these places because they have little or no other income. They are often single. I get inspired to look into the real faces of poor women who are working all of April for absolutely nothing. It’s an April fool’s joke but this time it’s for real and the joke’s on them.

So you may think it can’t get worse than this? Guess again.

Some active low income seniors take on speaking engagements. There are lots of programs like the Dream Team[7] where some members have reached age 65.  Like all low income speakers, they receive small honorariums from well-meaning agencies for their insights into their own lives. Some are very good at it. The idea is that the poor senior receives the honorarium to help defray the costs of travel and meals and maybe take home a small bit of income for themselves

But honorariums are not earnings. There are no CPP deductions taken off an honorarium – no EI deductions and no taxation at source. Accordingly, the honorariums do not qualify for the $3,500 exemption that relates to the Guaranteed Income Supplement (GIS) or GAINS-A.

Now what happens? You guessed it! The first $1,992 in honorariums received in any tax year are reduced by the Old Age income system at 100%.  So if a poor senior receives $500 in honorariums for four speaking engagements in a year, every single cent of it will be deducted from their Old Age income.

Thinking this through, it means that these unsuspecting senior speakers are paying the cost of their own speaking engagements. They have to prepare the material, get to the venue, pay their own way back home and receive a net benefit of absolutely nothing.

So has it always been like this? The answer is no.

Over the past few years, the Canada Revenue Agency (CRA) has begun to insist that community agencies, governments, educational institutions and non-profits issue T4A slips for honorariums. T4’s are for earnings. T4A’s are for what’s called ‘other income’ and other income (as noted) does not qualify for the seniors’ earnings exemption of $3,500 a year.

In one case where I have personal experience, a poor single woman (aged 65) received $3,700 in honorariums all of which triggered the issuance of T4A’s. The result was that she lost $2,846 off her seniors’ benefits (the first $1992 at 100% + $854 at 50%)

The moral of the story is once again that if you are really poor, you will be faced with the highest rate of confiscation that our governments can collectively dish out.

The obvious solution is to give voice to injustices like these. More and more seniors are going to have to find new ways to make ends meet and 100% clawbacks from the first dollar is just beyond senseless.

Mar 27-2015



[3] Mike Veall