Published in Report Magazine ~ Talkin’ Bout My Generation: Why the Coming Demographic Collapse Will Hurt Taxpayers Coming of Age
The following article appears in the June 2009 issue of Report Magazine.
“People try to put us d-down.” That opening line from The Who’s 1965 hit ‘My Generation’ sums up, in reverse, the situation in which young and middle-aged taxpayers will soon find themselves. In fact, it is a lack of people paying taxes that will put ‘My Generation’ down.
As the federal government ratchets up spending and saddles future generations with an even larger debt, the issue of “who will pay for all of this?” needs to be back on the table. Indeed, paying down the debt – or even balancing the books – will become progressively more difficult as the baby-boomers move into retirement.
The birth rate required for a population to merely replace itself – let alone grow – is 2.1 children per woman. Canada’s currently stands at 1.6. Today, those aged 14 and under constitute only 17 percent of the population – a staggeringly low figure. Further, the “working age cohort” (those between 15 and 64), will also see steady declines. What’s alarming is that those aged 65 and up currently make up 13 percent of the population, growing to 16 percent in 2016 and 19 percent in 2031, using modest projections that include a very high rate of immigration.
A society with normal demographics usually looks like a pyramid when sketched out visually, with a large number of young people at the bottom with an ever narrowing top. A society that has an upside-down population pyramid is one that cannot sustain itself.
As the baby-boomers leave the workforce, the costs of pensions, healthcare and a vast array of other social services will skyrocket. Coinciding with this will be a shrinking base of taxpayers from who this system will be supported.
Simply put, this is unsustainable.
Currently, those that are net-contributors to government revenues make up 60 percent of the population. However, this figure is a best-case scenario as it includes all employed individuals (including part-time workers), regardless of income, instead of just taxpayers. In contrast, a minimum of 40 percent of the population are currently net-beneficiaries of government.
By 2016, those that are net-beneficiaries will reach 43 percent, by 2021, 45 percent, and by 2032, a staggering 50 percent. And that figure is likely much larger than stated due to the broad definition of “net-contributor”.
Faced with this, there will be only two options: raise taxes or significantly cut the size and scope of government. The status quo simply will not suffice.
Canada is already a high-taxed jurisdiction, and if federal and provincial governments decide to impose higher taxes, it will not only reduce productivity and make our economy less competitive, it will drive young taxpayers into other, lower-tax jurisdictions. Losing these taxpayers will only compound the problem, further narrowing the tax base.
Governments today already plead to the public that they cannot balance their books. Even with eventual economic recovery on the horizon, the long-term trend will not allow for Canada’s bloated welfare state to continue in its present form.
Without significant cuts to expenditures and not imposing progressively higher taxes, ‘My Generation’ will f-fade away.
June 10, 2009
Tags: Demographics, Report Magazine, State Dependency Posted in: Published
4 Responses
“Governments today already plead to the public that they cannot balance their books.”
Huh?
Governments and politicians today as yesterday and tomorrow must continually come up with new programs, laws and ministries to justify their existence and to be put forward in the media so they can climb the great ladder to the treasury keys and power.
It has never been the people of Canada that want nurturing from spoiled civil servants, just small fringe groups with government funding.
Once a country is set up with a constitution, an armed force, penal system( our “justice” system is a joke), and trade deals the effer can near run itself with a bare bones Federal government.
Government is the problem not the solution, less IS better, Federally, Provincially and Municipal.
Who else tells you to tighten your belt while voting themselves a forty percent increase in pay?
This report is flawed in that it does not consider that the up-coming baby boom generation of retirees are paying LOTS of money to the governments. I am the first year of the boomers and most of us worked all of our lives. I am retired and still in the top tax bracket as I have a good, fully taxable pension plan and plenty of good investments. We oldies will be taxed to the max until death and taxed again. I will never receive the OAS and my CPP is taxed at 46%. Don’t be alarmed – just spend less! Many of your generation never made their own curtains or used fabric-covered cardboard boxes for coffee tables in their 20’s.
I learned about this in high school in the late 80s/early 90s so I’m not sure why some people are still surprised by it and questioning it’s scare factor. We made charts and tables showing how much greater and greater the number of ‘over 65s’ there would be in our future and it was explained to us why that was a problem. And that while a lot of women were joining the work force, the generation above me (my mother’s group) were still not in high enough numbers to cover future pensions.
I also think on my own now about the greater amount of money needed now and in the future – what people were paying in taxes/CP/EI etc 10 20 30 years ago is not reflecting what people actually receive now to account for the higher cost of living. I make half of what my dad made 13 years ago, but pay almost double in deductions (I had 2 of his last pay statements before his death). The cost of living in my city has jumped enormously the past few years and anyone hitting age 65 soon will need a heck of a lot more money to live on than was put into the system via their own taxes and others’. The same can be said about EI – maternity leave is 52 weeks now, unemployment is the same I believe, and what I received in 2 months is more than I paid in over 15 years of work! Let alone what I received the rest of the year – all of that comes from other people’s taxes/deductions and empties the pot for the future. My mom has not worked since 1970 but will start receiving CP and OAP and whatever else next year. She will be living off money put in by others too. By the time I reach retirement age, let along my children, I can’t help but wonder where that money is going to come from.
This demographic tsunami is indeed a big deal. In Canada, this is also exacerbated by the First Nations population which is burgeoning in birth rates, struggles with high unemployment and social problems, and has numerous tax exemptions. Will this be straightened out by 2031? Hope so, but if not, oh boy…
Comments are closed for this entry.