Affordability: Who’s Ready to Revisit Canada’s Income Tax Structure by Elizabeth Macnab, Executive Director, OSSCO

Affordability: Who’s Ready to Revisit Canada’s Income Tax Structure by Elizabeth Macnab, Executive Director, OSSCO

OSSCO often gets questions for help on social themes including financial matters. Until recently I never connected the following issues i.e. CPP reductions when a spouse dies; struggling to eat; seeking affordable (geared to income) housing; finding subsidies for hydro /gas; and, outliving retirement savings, to a common root cause: tax inequality for single/single seniors.

After meeting Elizabeth Brown of Single Seniors for Tax Fairness (SSTF) and listening to her speak on taxes and the single person, I realized these problems were affordability issues affecting single seniors. In my research on www.singleseniorsfortaxfairness.com , I learned that a key component to affordability is to change our current Federal income tax structure to be more equitable for singles and single seniors. Tax reform could help 29% of Canadian households who are financially burdened by our existing tax policies.

Consider this. The number of single people (over the age of 18) has been steadily increasing since 2000.  According to Stats Canada, in 1941 just 6% of Canadians lived alone. By 2016, single-person households had become the dominant household type, making up 28% of the total. The number of single-person households rose again in 2021, to 29%. The number of Canadians living alone is now at a record high, yet our taxes are highest on this singles’ group.

Multiple generations would also be helped with an equitable tax structure. As a recently widowed Boomer, I didn’t grasp how much higher a tax burden and fewer financial breaks there are for a single household versus a couple. More than half of single Millennials (55%) and single Gen Z (58%) expressed that buying a home is unattainable. They pay higher rents, take on larger mortgages, delay or abandon homeownership, and start families later – not by choice – but as Canada’s tax structure leaves them with no alternative.

In 2022, there were 3.9 million senior women and 3.3 million senior men. This represents more than 18% of Canada’s population.  Stats Canada acknowledges that single low-income seniors living alone are more likely than other seniors to experience financial difficulties. They also may not qualify for the Guaranteed Income Supplement (GIS). Single low-income seniors make up a higher percentage than any other group of seniors, except single seniors who are women, persons with disabilities, newcomers, or, immigrants.

Within the seniors’ population women are the most financially disadvantaged group by gender. Women earn 89 cents on average for every dollar earned by a man. Women exit and re-enter the workplace for child and elder care or face job loss during their working lives. Women’s lower wages and lack of employer pensions make it almost impossible to save for retirement. Therefore, women enter retirement age with substantially lower earnings, and are reflected in lower Canada Pension Plan (CPP) they receive.  Women also live longer.

Nearly 10 years ago, Diamond Retirement Planning submitted to the federal budget planning committee how a ‘Living Alone’ tax credit could correct the tax and benefit discrimination against single seniors. They demonstrated with a quick calculation how a couple aged 65+ can have a household income of approximately $42,000 without having to pay any federal tax, but a single taxpayer aged 65+ would pay more than $3300 on the same income. While a single person might not have the same level of basic income as a couple, the basic costs of living are the same whether you are single or a couple. Additionally, a retired single person may already be financially constrained by a higher income tax rate over their lifetime, resulting in a smaller retirement “nest egg”.

In 2024, the Government of Canada’s Department of Finance wrote “Hard work should pay off. And Canada’s tax system should be fair.”  The Government of Canada recognized that the right tax remedies can help Canadians financially. They proposed ideas such as increased capital gains, helping Canadians save tax-free, reducing taxes on the middle class, modernizing tax filings, and crypto-assets. The concept of tax fairness for singles who make up 29% of the Canadian population was not included, nor considered. What will it take for the Federal Government to recognize the inequity of our tax system on single people, especially seniors?

A tax system should be neutral between individuals in similar circumstances. The University of Calgary’s Public Policy Department concluded that “higher-income families pay more taxes, and so, given an income-splitting policy, will receive a larger tax break. This is only because, under the current system, single-earner families have a higher tax burden than dual-income couples with the same household income. The current tax system is unable to provide a level tax burden for similar families with similar means, with the tax burden for single-earner families being higher than a dual-earner family with the same market income.”

In their 2022-2023 pre-budget submission, Single Seniors for Tax Fairness recommended that the government revise the tax laws to give senior singles similar privileges to those granted to senior couples. (Senior singles include all those without a life partner such as lifetime singles, widows, widowers, divorced and separated persons.). They proposed a tax credit concept like Diamond Retirement Planning and offered several ideas to reduce taxes on single seniors.

Politicians often talk about families – couples with or without children – and tax credits. They rarely recognize 29% of Canadian single-household families or the 39% of 7 million seniors who live alone and struggle with affordability: accommodation costs, food prices, carbon taxes, transportation, and more. The 43% of single women aged 75+ are never mentioned. We must also remember that during the life continuum, people of all ages and genders become single. Seniors who become widowed, or divorced shift from a favorable tax structure to immediately face the burdens of a new burdensome tax landscape.  No one should have to face the highest tax burden because of a change in relationship status.

There is no easy answer on how to resolve affordability. However, the Government must include reviewing the inequity of the income tax structure affecting a growing single/single senior population so that there is tax fairness for all Canadians. No matter what direction the tax policy discussions will take, we need to focus on creating an equitable tax structure for all taxpayers.

We must agree that single seniors, who are usually low-income, should not have to face the highest tax burden in society. We must improve affordability for 29% of the Canadian population through income tax reform. Isn’t it time that the Government comes up with a different tax model, one that creates tax equity for single/single seniors?  Which Federal Government, I wonder, will be brave enough to tackle this issue of tax equity and create a level playing field for all Canadians?