The names of the panel meeting around the table might make an awesome corporate board of directors or blue-ribbon government advisory board. It's the furniture in this room that suggests otherwise. They are here as volunteers and their purpose is to get a fairer deal for low-income Canadians.



They were meeting at St. Christopher House, on the hillock at the corner of Dundas and Ossington in central-west Toronto. St. Chris has been part of the community for 90 years, offering social programs and generally helping those in need to participate in society.

In the last few years, the House began to accept that it had to both address the causes of hardship and get input into the social policies being adopted by the various levels of government. Thinking locally and acting globally, some might call it. That's why St. Chris formed their panel of experts. The goal was to get volunteers with expertise and experience in business leadership, policy development, financial services and taxation to put their talents to work for low-income Canadians.

It was St. Chris CEO Susan Pigott's idea to "marry the lived experience of low-income Canadians with expertise at the policy level," as she described it. To her surprise, everyone she approached to volunteer for the panel said yes.

Susan Pigott, panel member Peter Beattie

One reason she wanted to create this panel was her belief that "if social workers at the front line want to make any headway in getting attention paid to systemic issues, they have to work with different individuals than they are used to." With separate funding from a number of foundations, St. Christopher House and its panel of experts got started in 2001. Pigott is now hopeful of some success. "Governments can be receptive to change if they have clear recommendations put to them by people they respect," she said.

The "first" member of the panel was Richard Shillington, a consultant from Ottawa who had come to St. Christopher House for a few months in 2000 as part of a program to put those frontline social workers together with a social policy expert. That was around when Shillington was realizing the negative impact Canada's income support programs could actually have on low-income Canadians. Leading pension expert Malcolm Hamilton's research was coming to a similar conclusion. "And we're far apart politically," Shillington said.

The Guaranteed Income Supplement

One of the first issues the panel addressed involves the Guaranteed Income Supplement for seniors. About one-third of Canada's seniors, 1.4 million, receive the GIS, which is a supplement to the Old Age Security pension for seniors with low incomes. However, about a quarter of a million seniors who are eligible are not receiving it. A senior who is single, with income of less than $12,600, or a couple with income under $16,400 that meets the program's other requirements (like 10 years' residency in Canada), is very likely to qualify. Seniors with higher incomes may also qualify. GIS recipients received an average benefit of about $3800 last year.

Richard Shillington of the St. Chris panel learned that a huge number of eligible seniors were not receiving the GIS and the panel took up the issue. They deserve some of the credit for the fact that later this month the federal government will be sending notices to about 200,000 of the eligible seniors they know how to contact. (Do you qualify? See the box on the right.)

Seniors gather at St. Christopher House

Other issues around the GIS are still at the top of the panel's long 'to do' list. Like many of the issues the panel wants to address, it's complicated and they recognize this. Many government programs that pay benefits have what's called a 'clawback' provision or 'income testing,' which reduce or even eliminate the benefit for people with higher incomes. The GIS has a clawback of 50 per cent of the benefits, and it affects the one-third of GIS recipients who are paying income tax. Remember that only people with low incomes can qualify in the first place. Combined with the 25 per cent tax rate, that means that on their GIS income, they are paying an effective marginal tax rate of 75 per cent! The marginal tax rate (the proportion of income one pays to government on their last dollar of income) can be even higher for low-income Canadians than it is for people at the high end.

Here's an example of what happens. Take Mr. X. From 60 to 65 years old he contributed $2000/year to an RRSP. Like a million other RRSP contributors, his annual income was under $20,000. Now retired and widowed, he receives the GIS. He also withdraws $1000/year from the RRSP. Because of that $1000 income, he pays the government $250 in income tax (25% rate) and they clawback $500 from his GIS payment (50% rate). In twelve years the $3000 he earned in tax credits (also at the rate of 25%) while 60-65 compares to the $9000 he loses because of the RRSP.

And it gets worse for some seniors. Provincial top-ups to the GIS, social assistance programs like Meals on Wheels, social housing, home care, and drug benefits are all income-tested so low-income seniors could be hit with a marginal

Meals on Wheels, Calgary

tax rate over 100 per cent on their GIS benefits. In that case, receiving a benefit means they actually lose money. "One of the more disgraceful aspects of our retirement system is that it exploits low-income people who try to save money for themselves and the government is not at all forthcoming about this. You will not see anywhere that low-income Canadians who save for retirement are basically wasting their time," panel member and pension expert Malcolm Hamilton said in an interview.

What to do

The panel has put forward several recommendations to address these problems with the GIS: Reduce the clawback rate from 50 per cent to 25 per cent for seniors paying income tax. Gradually remove the overlap between receiving the GIS and paying income tax. "RRSPs work well for those who don't need them," observes Richard Shillington, with a note of sarcasm. For those low-income Canadians who currently lose out by having an RRSP, he argues that the U.S. has a better program. With the Roth Individual Retirement Account, low-income Americans who contribute do not receive a tax deduction, the fund grows tax-free and when they withdraw the money after retirement it is not counted as income, so eligibility for GIS and other benefits is not reduced.

"The system has a problem and the villain is the status quo," Bob Brown says. And he has the experience to know. He made a "quite lucrative" living from advising wealthy clients how to benefit from that system. Now he is volunteering his time to change the status quo in order to benefit low-income Canadians. He recognizes that won't be so easy. Even when governments see there is a problem, they "find it easier to stay where they are. It's hard to find agreement on solutions," he said. He views the panel as a 10- or 20-year project.

Another issue the panel is addressing involves RESPs (Registered Education Saving Plan) and here a solution sounds simple. The federal government encourages Canadians to save for their children's post-secondary education through RESPs but social assistance recipients are not allowed to have significant financial assets. The panel wants federal and provincial governments to exclude RESPs from the asset tests for social assistance eligibility.

Malcolm Hamilton sounds less hopeful about change than some other panel members . "The fact is we cannot change it, only politicians can change it. And it is very hard to get them interested, it is a little too complicated for them and it's a story they don't like hearing, which is their programs are taking advantage of low-income people who are doing what they say is the right thing. You'd be amazed how little concerned they are about that. That's the thing that always dismays me and I find that very disappointing. They literally couldn't care less, most of them."

Several of the panel members noted the irony that the benefit programs and the way they mesh together are so complicated that it is really low-income Canadians who are most in need of financial advisers. There is no "financial equivalent of legal aid," observed David Perry of the Canadian Tax Foundation. Perhaps there should be.

The volunteer members of the panel are:

Don Bean
He was president of Wood Gundy in the 1980s and been a volunteer at St. Christopher House for decades, serving as its president in the 1970s. His background is in corporate finance. "I try to keep focusing on the idea that people who qualify for benefits should get them."

Peter Beattie
The law firm McCarthy-Tetrault has been involved with St. Christopher House almost since the beginning. Senior partner and corporate-commercial lawyer Peter Beattie is one of several of the firm's partners who has served as president at St. Chris. He got involved with the panel after learning "how the GIS (Guaranteed Income Supplement) and other government programs were working to the disadvantage of some recipients." He describes his involvement as, "helping to identify who has the knowledge, skills and access to move this along."

Bob Brown

Brown was chairman and CEO of Price Waterhouse in the 1990s. He has been a tax consultant to various governments and an advisor the Paul Martin, the federal minister of finance. This is "an opportunity to work in a good cause and to contribute on an issue that interests me," Brown said.

Martin Connell
He is a businessman and long-time volunteer. He is co-owner of Ace Bakery and was chairman of Conwest Exploration Ltd. (which merged with the now merging Alberta Energy Corp.). He is the founder and president of Calmeadow, which makes loans to very small businesses. He has served on the boards of several other charities and companies, including as chairman of the Canadian Centre for Philanthropy.

Malcolm Hamilton
He is often described as Canada's leading pension expert and provides that crucial expertise on the panel. He is managing director of William M. Mercer Ltd. Hamilton joined the panel because, "It seemed like something I should be supporting. It's an issue I feel very strongly about and it's very hard to get anyone to pay attention to it."

David Perry

One of Canada's leading tax experts, Perry has been with the Canadian Tax Foundation for 34 years, now as senior researcher and spokesman. "Our members are working with the income tax form on a daily basis and they have all sorts of opportunities to plan [for their clients] around unintended consequences and serious drawbacks within the system, but people who are the target of the panel are people who cannot afford that kind of assistance," he said in an interview. The Foundation, "tries to promote the dissemination of information on the tax system and problems in the tax system so this was a natural for us and a natural for me to do it as the spokesman."

Bill Robson

Robson is the economic policy analyst at the C. D. Howe Institute. He got involved out of concern that, "the clawback aspect of many income support programs would discourage people from working and saving, as well as dovetailing with questions of fairness."

Richard Shillington
In 2000 he came to St. Christopher House as the first (and so far only) policy expert to be part of their "Community Undertaking Social Policy Project," funded by The Atkinson Foundation, with the support of Massey College at the University of Toronto. Shillington is an Ottawa consultant and statistician specializing in social policy. Much of his work has been with social-change and anti-poverty groups. It was their experience working with Shillington that led the House to establish the panel.

Adam Zimmerman
He retired in 1994 from the chairman's job at Noranda Forest after a long career at the top of several large corporations. Four decades ago he was president of Woodgreen Community Centre. He brings his political connections and business experience to the panel.

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