Finance Committee on March 20th, 2007

[The Chair, Conservative, Brian Pallister]

No.

[William Gleberzon]

I had asked the clerk to distribute copies.

[The Chair, Conservative, Brian Pallister]

He can't, Mr. Gleberzon, because—

[William Gleberzon]

It's not in French.

[The Chair, Conservative, Brian Pallister]

That's correct.

[William Gleberzon]

Well, then I suppose we'll get it translated and we will have it sent to you.

[The Chair, Conservative, Brian Pallister]

Yes. That would be very good, sir, because depending on what the committee wishes, I'm fearful we're going to run out of time to deal with clause-by-clause. So that would work effectively, if you'd like to do that.

[William Gleberzon]

Okay. Thank you.

[The Chair, Conservative, Brian Pallister]

Members, the clerk will endeavour to make sure that as soon as it's translated it will be sent around immediately in both languages.

[William Gleberzon]

Thank you very much.

[The Chair, Conservative, Brian Pallister]

Thank you, sir, for your presentation.

By the way, thank you to you all for your patience while we were dealing with the previous bill. We appreciate the fact that you were here on time and that we made you wait. It's not something we like to do at this committee.

We'll continue now with Canadians Asking for Social Security Equality.

Mr. Thrasher, we'll turn the floor over to you for up to five minutes.

[Bill Trasher, Spokesperson, Canadians Asking for Social Security Equality]

Thank you very much for this opportunity to tell you our story. I collect U.S. social security so I'm well involved with the facts.

During the Christmas season of 1995, residents who spent part or all of their working careers in the United States received a letter that shattered their lives. The letter was from the U.S. social security administration stating that beginning January 1, 1996, there would be a 25.5% non-refundable withholding tax applied to their benefits. Why? Because Canada and the United States agreed to a new treaty that was amended to allow the country that issues the benefits to collect the tax. For decades prior to this amendment, the country of residence collected the taxes.

Pain and anguish cut through the hearts of retired citizens like a knife. Many of these seniors never had to pay any income tax before because their income was so low. Now they had just lost 25.5% of their social security benefits. How would they pay for food, and rent, when they already lived a meagre lifestyle?

The Honourable Herb Gray, M.P., Windsor West, told the Windsor Star on December 27, 1995, that he was assured that Canadians will not pay more in tax and could pay less. There was never any hint that the government felt recipients were not paying their fair share. In fact, it was said that we just fell through the cracks and that they were really after those few who didn't report their U.S. income on the Canadian returns. CASSE, Canadians Asking for Social Security Equality, a grassroots organization, sprung to life out of desperation and anger to fight this tax agreement. Expecting 25 people to show up at our first meeting, we were overwhelmed when more than 200 people crowded into the Viscount Estates clubhouse in Essex, a little town close to Windsor.

Two more meetings were held that year, each attended by 1,500 seniors, many of them handicapped by physical impairments. CASSE is made up of ordinary people who, in spite of their ages, were prepared to do battle with big government. They passed the hat for donations to support their cause. This was not some big business that could afford to pay millions of dollars to hire lobbyists to wine and dine powerful lawmakers. This was a group of ordinary people fighting for their pensions and the right to stay in their homes, and some in their nursing homes. Only when it became evident that these seniors were ready to fight for their rights did things start to happen.

Talks between Canada and the United States treasury finally resulted in a tentative agreement agreed to April 9, 1997. That agreement came full circle to what existed prior to 1996, with one major exception. Whereas 50% of social security benefits were taxable prior to 1996, Canada now taxes 85% of those benefits. This represented a 70% increase in tax on those social security benefits.

In Canada, premiums for CPP are deducted from wages before taxes are applied. In the U.S., wages are taxed before premiums for U.S. social security are deducted. Since 1962 the premiums for U.S. social security could be used as tax credits on Canadian taxes. In the United States, less than 20% of social security recipients pay any tax on their benefits, and less than 6% pay tax on 85% of their benefits. In Canada, every person is required to include 85% of their U.S. benefits for tax purposes, regardless of income.

There are some who use the argument that they made a choice to retire in Canada and therefore should accept Canadian tax rules. They made that choice based on the rules that were in effect at the time of their retirement. Most chose Canada because of their attachment to family and country. Many wanted to be near their children and grandchildren during their twilight years.

I'm going to get right down to the end page because I want to say that in 1999 all three Windsor MPs, Susan Whelan, Rick Limoges, and the Honourable Herb Gray, all representing the Windsor area, publicly stated they favoured grandfathering the tax rules.

Prosperity in border communities is due in part to the huge workforce that crosses the border every day and retires in those communities, where they spend their salaries and pension benefits on cars, on homes, in local shops, and on charities. The economy benefits from those U.S. cheques, as do the federal, provincial, and municipal governments by way of GST, PST, and other taxes. That is another reason we support the passage of Bill C-305.

The present rules seem to be telling those who work in the U.S. to retire there, and those who now live over there to stay over there. Will the cities, provinces, and country be better off by telling these people we don't want their American money? Can we afford to say we don't need the $0.5 billion U.S. that they spend on goods, services, and taxes every year in Canada?

Dividend income is treated differently from interest income because it is not the same kind of income. Social security income should not have to be taxed the same as CPP income, for the same reason. They differ in country of source, in rules, premiums, amount of earnings taxable, eligibility for benefits, and so forth.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Thrasher. I am sorry to cut you off, sir, but as you know, we have to have time for questions from the committee members.

We appreciate all of your presentations, and thank you.

Of course the committee is master of its own destiny, which is sometimes a good thing, committee members, but what I propose to do is allow for five-minute questioning periods, which will take us past the time we've allocated. That's how I'll proceed.

I'll begin with Mr. McKay, for five minutes.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair. It's really quite fortunate that we don't have to bring you onside every once in awhile.

I want to thank you for your testimony.

First of all, I want to establish the pool of people we're talking about here, in numbers. What would be the number of people who would be affected by this particular bill?

[Bill Trasher]

In 1996 there were approximately 100,000 people in Canada collecting U.S. social security.

[John McKay, Liberal, Scarborough—Guildwood, ON]

What would it be now? That was ten years ago.

[Bill Trasher]

These people were 65 years and older, or probably 65 to 99 in that year. That was eleven years ago, so probably 60,000 or 70,000 are still alive, but I don't know.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So that would be the outside limit of the number of people.

[The Chair, Conservative, Brian Pallister]

But let's be clear here. This bill proposes to change the rules for all in receipt of such income.

[John McKay, Liberal, Scarborough—Guildwood, ON]

That's my next point.

What are the other implications? Is it simply a group of retirees living in and around Windsor, or does this have other implications beyond what is arguably a significant hardship on those folks living in Windsor?

[Jeff Watson, Conservative, Essex, ON]

I'll speak briefly about this. We've had some real difficulty in securing numbers from the Department of Finance about what the current status is in terms of the numbers of people affected by this change today.

Just to correct Mr. Thrasher, the original number was roughly 85,000. The number of those originally affected would be significantly lower now. Mr. Thrasher is 74 years old, and he was one of the last to retire under the old rules. You can begin to figure out, in terms of the original pool, that the number is going to be significantly lower.

In terms of the new ones who have come in over the last decade, I don't have a firm number. I wish the department could have provided that for us.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Yes, because you're asking for a significant legislative change, when there might in fact be a realistic possibility that there could be some administrative fix to this.

Okay, so we can't deal with facts here.

My second question here is—

[The Chair, Conservative, Brian Pallister]

I'm going to intervene here. I believe we have departmental officials somewhere back there who can assist us with some information. At the very least, if they can't answer questions today, they will be able to assist us in obtaining some answers to those questions.

Welcome. Come forward.

If you have a question—

[John McKay, Liberal, Scarborough—Guildwood, ON]

Just don't take this off my time.

[The Chair, Conservative, Brian Pallister]

No, I won't.

Could you identify yourself? Would you like to respond to that question?