Budget focuses on pennies, taxes and pensions focus
A special forum was held at the Sparwood Chamber of Commerce on April 17 for Member of Parliament (MP) David Wilks to update residents and media on the 2012 federal budget.
According to Wilks the impetus of the budget was to reduce the federal deficit and to continue creating jobs and growth within the Canadian economy.
The three main issues he touched on that affect the Valley were the tax exemption when crossing the border, the changes in Old Age Security (OAS) and the penny being taken out of circulation.
“The penny will be taken out of circulation on August 1,” said Wilks. It will still remain a currency and people will still be able to use it until such time as it’s completely removed.”
The penny currently costs 1.6 cents to produce and the government will save itself approximately $20 million a year by no longer producing it.
Businesses will have to round up and down to the nearest nickel although they must still accept pennies while they are still in circulation.
The Federal Government is going to encourage penny drives over the next couple of years. They will be collected and then taken into a bank for exchange and then once the pennies are in the bank they will be taken out of circulation.
Wilks said the tax exemption at the US border will increase.
“By increasing the tax exemption at the border, we are basically mirroring what the United States (US) has been doing for years for their citizens crossing borders,” said Wilks. “We are increasing the 24 hour limit from $50 to $200, the 48-hour limit from $400 to $800 and seven days or more will go from $750 to $800 so the exemptions are the same back and forth between Canada and the US.”
Border towns such as Fernie, Cranbrook and Creston are concerned that this increase will have a negative impact on local business.
“The fact of the matter is that people who go across the border, go across the border,” said Wilks. “They are not crossing the border because they don’t want to shop in Sparwood, they are crossing the border because they want to go to Kallispell or Eureka.”
According to Wilks, one of the things that Finance Minister Jim Flaherty will be taking a hard look at is how we can fix the disparity of pricing between the US and Canada. There is approximately a 20 to 30 per cent difference between what we charge and what they charge for the same items.
Finally, Wilks discussed changes in old age security.
If you are aged 54 or older, the changes to the Old Age Security (OAS) will not affect you. If you were born after 1962 you will not be able to collect your full OAS until you are 67-years-old.
In 1970 people had to be 70 years old before they could claim the OAS. Under Trudeau the age was changed to 65 but the government did not take into account the baby boomers 40 or 50 years down the road.
The reason for the change to 65 in 1970 was that the average Canadian male was only living to the age of 69 and the average female was living to the age of 73. Today the average male lives to 79 years of age and the average female lives to age 83.
In 1970 there were seven people working for every one person claiming the OAS. Currently the ratio is four to one and in 20 years it is projected that it will be a two to one ratio.
“The OAS is funded through general revenue, it’s completely different than how the Canadian Pension Plan (CPP) is collected,” said Wilks. “It is not sustainable on the current path so the government was faced with two decisions. The first was to raise taxes and the other was to raise the eligibility for OAS.”
According to Wilks, OAS today has $38 billion dollars in the coffers, that is how much is required to sustain OAS to date. By 2030 that number will be $180 billion.
“So the OAS is going to gradually implement the change starting in 2023 with a complete implementation date of 2029,” said Wilks. “What that means is if you are age 54 or older this will not affect you at all.”
OAS was designed for the very lowest of income seniors but the problem, according to Wilks, is that everyone has the ability to access it.
“If we were to leave it as it is now our children would not have OAS when they retire,” said Wilks.
For more information on the 2012 federal budget go to www.budget.gc.ca/2012