The GIS clawback story
March 2019 Liberal budget update: $1.76 billion more for low-income seniors
The Guaranteed Income Supplement (GIS) gives low income seniors up to $11,000 per year but it had a punitive clawback rate of as much as 76%. Two thirds of GIS recipients are women.
Consider a 65-year-old woman working at Tim’s, grossing $16 an hour. Because of the GIS clawback, she could be netting less than $4 per hour. This is because her GIS payment next year would be reduced by up to 76% for every dollar she earned. Compare $4 per hour net to Ontario’s minimum wage of $14 per hour.
Virtually no one in Canada was aware of this vicious clawback rate. Three prominent websites, taxtips.ca, moneysense.ca and retirehappy.ca all stated the GIS clawback rate is only 50%. A government website agreed. I posed as a confused senior and the government, through ServiceCanada, both on the phone and in-person, stated “There is no GIS clawback”. I emailed the ultimate authority, the Office of the Superintendent of Financial Institutions. They office stated “You are right. The GIS clawback is as high as 76%.”
Tragically, there were thousands of seniors working for a net of as little as 24% of their gross pay but they had no idea. They simply cashed their GIS cheque without realizing it had been sharply reduced because they went to work.
CARP, the Canadian Association of Retired People, has 330,000 members and is the most prominent seniors’ organization in Canada. Our Minister for Seniors listens to them carefully and passes on any viable requests to our Minister of Finance who then legislates new policy.
After receiving repeated pleas from me in 2018, CARP’s two Vice-Presidents of Advocacy finally took notice. To illustrate the complexity of the GIS website, Vice-President Wanda Morris, a certified accountant, had to contact me to determine how I arrived at a 76% GIS clawback. (What chance does a low-income senior have in understanding how the GIS works if a certified accountant needs help determining the clawback rate?) I explained how the tables worked and she agreed.
In CARP’s FACES program submitted to the Liberal government in Fall 2018, they asked Finance Minister Morneau to
“Lower the claw-back rate on the GIS top-up to 50% to provide respite for our poorest seniors – who are overwhelmingly women.”
At a CARP press conference on October 9, 2018, both Vice-Presidents showed me the FACES brochure proudly, with a “We added this request for a GIS clawback rate reduction because of your persistence.”
Then the Liberal government, not wanting to see a newspaper article entitled
“Liberals gouge unknowing, low-income seniors’ with a 76% GIS clawback rate”
acted. The March 19, 2019 budget reduced the clawback rate substantially as this example from the Budget demonstrates.
“Eunice is 66 years old, has $5,000 of CPP income and lives in Toronto. She loves vintage clothes and is considering part-time work at a vintage clothing store, where she would earn minimum wage.
Currently, Eunice would only get to keep about $6,650 of her roughly $14,600 from the part-time job, or 45 cents of every dollar earned after the GIS benefit clawback, federal and provincial taxes, tax credits and other benefits are taken into account.
With the proposed enhancement to the earnings exemption, Eunice's take-home pay would effectively increase to almost $9,600, leaving her with nearly $2,950 more of her earnings to spend on things like healthy foods, a new bicycle and gifts for her grandchildren…
It is estimated that improving the economic security of low-income seniors through the enhanced GIS earning exemption would cost approximately $1.76 billion over four years.”
There is still injustice. The clawback rate still applies to Canada Pension Plan pensions. Even though a senior has contributed, for example, enough for a $10,000 annual pension, her total income might only increase by $3,500 because of the GIS clawback. Conversely, those four million wealthier pensioners not receiving GIS would “only” pay taxes on their CPP pension, resulting in a cash increase of double or almost triple what struggling low-income seniors receive.
If the CPP ever declares a deserved surplus distribution, hopefully the GIS clawback rate will not apply and low-income seniors will receive the full amount.
There seems to be a conscious government effort to confuse seniors so that they can keep the deficit lower. Two years ago, I gave GIS staff basic advice on how to simplify their GIS website so that seniors could better understand. The website remains unchanged.
Moreover, www.fixthecpp.ca demonstrates how our government is concealing the news of a $271 billion CPP fund surplus for political reasons. CARP is suspiciously silent.
