No, he's a much taller fellow than I am.
CARP is pleased to support Bill C-305 to exempt from taxation 50% of United States social security payments to Canadian residents because of the number of calls, emails, and faxes we have had from those adversely impacted by the current policy. Nevertheless, I want to propose an amendment to the bill, which I'll get to in a few minutes.
As Mr. Watson pointed out, the history of this particular change of policy between 1995 and 1997 is quite convoluted, and again you can read what I've written there. But I'll just move on, because the main point of those two years was that the taxable amount on U.S. social security received by Canadians was raised by a whopping 35% in one fell swoop. The two years of experimentation in determining the amount to be taxed caused shock, uncertainty, and consternation among the estimated 100,000 Canadian recipients of U.S. social security living in Canada.
Those affected had no time or way to prepare for the high increase in the taxation amount that was imposed on them other than to reduce their quality of life. CARP heard terrible stories of how their well-being was thrown for a loop, and spoke out on their behalf to the government at the time and to Parliament about the change in policy.
Today some of the same U.S. social security Canadian recipients who were impacted by the change in 1997 are getting older and frailer. Some are beginning to move into nursing homes or are receiving home care, both types of services being quite expensive for them, regardless of which province they live in, as more costs are off-loaded onto seniors. By restoring the pre-1995 50% tax exemption, their quality of life during their twilight years can be greatly enhanced.
Of course, today the post-1997 older Canadians who worked and contributed to social security and were taxed by the American government when they did so and came home when they retired face the 85% taxable amount of their retirement income. Some welcome for our returning citizens or those Americans who choose Canada as their home and become citizens.
The tax regime for social security is quite different in the United States compared with that imposed on Canadian social security recipients. As noted, in the United States income tax is paid when contributions are first made to social security. However, a few years ago additional taxation of social security benefits was introduced, consisting of a sliding scale, depending on income, that ranges from 50% to 85%. It is our understanding that only about 20% of seniors in the United States actually pay any tax on social security, based on income and how the taxable amount is assessed.
I ask you to turn to the appendix, which is the way in which the system works in the United States, from an expert in these matters, for expatriate Americans. By the way, I spoke to the author, and she confirmed to me that this is the way the system works today. Most telling, taxing 85% of social security is the maximum in the United States based on income, whereas in Canada 85% is the only percentage for taxing social security, regardless of income.
I'd like to remind the committee that the change in the taxable amount was introduced as part of a bundle of pension income changes at a time when the Canadian government faced high deficits. That period is long past. Indeed, on the 10th anniversary of the rise by 35% of the taxable amount of U.S. social security received by Canadians, the opposite is true. As you all know, today the Canadian government enjoys very high surpluses—in fact, a continuum of high surpluses.
Can I just say that was recognized in yesterday's budget, when the age at which RRSPs have to be converted to RIFs was raised to 71 years, which is what it was prior to 1997. Moreover, the government's coffers should not be stuffed on the backs of the retirement income of older Canadians who have already paid tax in the United States on this retirement income.
At this point I'd like to introduce an amendment to Bill C-305 regarding the taxable amount of U.S. social security received by Canadians for this committee to consider.