Alexandre Laurin

Canada’s Looming Retirement Challenge: Will Future Retirees be Able to Maintain Their Living Standards Upon Retirement?

A key question in Canada’s pensions debate is whether Canadians will be able to maintain their living standards in retirement, and if policy needs to respond to the risk that some will experience painful declines.To date, it has been very difficult to estimate how current trends might affect various members of the population in the long run. In this study, we used LifePaths – a sophisticated simulation tool developed at Statistics Canada which integrates a large amount of data on the socio-economic experience of Canadians – to project consumption before and after retirement for Canadians who have not yet reached retirement age. Consistent with other research, the study finds that Canada’s retirement system has supported post-retirement consumption relatively well, especially for lower-income individuals and those who reached retirement age in the last twenty years. If ongoing behavior and economic circumstances were to persist indefinitely, however, more Canadians may find maintaining their working-life consumption in retirement more difficult.

Income Splitting for Two-Parent Families: Who Gains, Who Doesn't, and at What Cost?

In the 2011 Canadian federal election, the Conservative Party pledged to allow couples with minor children to split up to

Comparing Nest Eggs: How CPP Reform Affects Retirement Choices

50,000 of their incomes each year for tax purposes. Tax savings would arise to the extent that the spouses’ marginal tax rates differ. Advocates of splitting claim an inequity in tax burdens for one-earner couples versus two-earner couples and often invoke the image of the traditional family with mom at home minding the kids. This report provides a quantitative analysis of the economic impacts of the federal income splitting proposal including the effects if the provinces adopted a similar scheme.

Off Target: Assessing the Fairness of Ottawa's Proposed Tax Reforms for 'Passive' Investments in CCPCs

Important changes are now underway to Canada Pension Plan “adjustment factors” that will increase the penalty for those who retire before age 65, and will raise the amount of additional CPP benefits available for those who delay retirement beyond 65. The new pension adjustment factors have moved in the right direction, but still fall short of offering many Canadians who retire at different ages the same value for their CPP benefits. In particular, those affected by the GIS clawbacks continue to face substantial financial disincentives to working longer. The simplest remedy would be to sever the link between work after age 60 and lower future GIS payments by exempting the actuarial-adjustment portion of the CPP earned by delaying retirement past 60 from GIS clawbacks.

Job One Is Jobs: Workers Need Better Policy Support and Stronger Skills

In July 2017, the Department of Finance launched consultations on a series of tax proposals affecting owners of Canadian-Controlled Private Corporations (CCPCs). The proposals on the treatment of “passive income,�? from investments such as equities and government bonds, have attracted particular controversy. The proposed regime would end passive investment income-tax refundability for CCPCs – ie., taxes paid on investment income in a CCPC would no longer be tracked and refunded upon dividend payments. Although there are other versions of proposed changes, this is seemingly the one the government favours. Private corporations – and by extension their owners – would be taxed on their passive investment income on the same basis as if they were individual investors in fully taxable accounts. There would be diminished incentives to defer business consumption, and less income and business saving available for spending on capital equipment. The same is true of small business income retained for personal purposes – there will be greater incentives for immediate personal consumption of business income rather than saving it for retirement or other purposes. But is the current system inequitable? Our tax simulations show, overall, it is not – when benchmarked against the tax treatment afforded to personal retirement savings. Saving for retirement in tax-assisted plans – on a “consumption-equivalent�? tax basis with a steeply graduated tax rate structure – is widely accepted in principle and in practice, because such treatment does not discourage saving as a pure income tax would do. Considering that additional administration, accounting, and tax compliance costs need to be incurred in corporate accounts, one could reasonably conclude that passively reinvested small business earnings receive a tax treatment similar to that of RRSP/TFSAs in a variety of possible portfolio compositions. Besides, successful businesses earning income above the small-business threshold enjoy no significant tax “advantages�? on passively reinvested earnings. As laid out, these proposals risk delivering a blow to the retirement planning of many small business owners, not to mention their potential negative impacts on entrepreneurship and risk taking. Further, the playing field with respect to tax-assisted saving opportunities is already largely unequal. Outdated current tax rules allow career defined-benefit (DB) pension plan participants, particularly in the public sector, to end their careers with tax-assisted retirement wealth worth multiples of that practically achievable in RRSPs. If the government proceeds with changes along the lines it has outlined, fairness suggests that it should level the playing field so business owners have tax-assisted retirement saving opportunities comparable to those available to most public-sector employees in DB plans and Members of Parliament. The most ambitious reform would establish a lifetime accumulation limit of personal tax-assisted savings, in lieu of the current system of annual limits. A lifetime accumulation limit would ease the transition to the new proposed regime, and provide needed contribution flexibility and room to everyone, including small business owners, to accumulate sufficient retirement wealth.

Tax Reform Priorities for Canada: Creating More Wealth to Go Around

Canada’s policy makers should focus on four priorities to spur growth in Canada’s economy, according to a new report from the C.D. Howe Institute. In “Job One is Jobs: Workers Need Better Policy Support and Stronger Skills,” author Craig Alexander outlines the key policy priorities that will reduce Canada’s labour market vulnerabilities.

The 8 Percent Solution: A Sensible Tax Compromise for Albertans

Canada faces a deep long-term fiscal challenge, as its population ages and its labour force growth slows, states a new report from the C.D. Howe Institute. In “Tax Reform Priorities for Canada: Creating More Wealth to Go Around,” authors Craig Alexander and Alexandre Laurin address how the superior approach to meeting Canada’s long-term fiscal challenge is to look for ways to boost productivity and competitiveness, and zero in on the tax system as a place to start the examination of boosting productivity.

Supersized Superannuation: The Startling Fair-Value Cost of Federal Government Pensions

A revenue-neutral tax swap would improve Alberta’s fiscal prospects, according to a report released today by the C.D. Howe Institute. In “The 8 Percent Solution: A Sensible Tax Compromise for Albertans,” authors Colin Busby and Alexandre Laurin propose a change that would better equip Alberta’s government to meet its longer-term fiscal challenges, which include plunging resource revenues and growing budget deficits.