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.