Liberal Leader Mark Carney recently proposed increasing the Guaranteed Income Supplement — a support for low-income seniors — by five per cent for one year.
For their part, the Conservatives have pledged to increase the basic personal amount for seniors by an additional $10,000. The basic personal amount is the amount of income an individual can earn tax free.
The parties are missing a move that could better help low-income seniors help themselves: increasing GIS earnings exemptions for low-income, working seniors.
The GIS provides up to nearly $1,100 a month to low-income seniors. While the benefit is tax free, it is based on a person’s income. For every dollar a person earns, 50 cents of their following year’s GIS payment is clawed back.
While this benefit has achieved the government’s goal of lifting the vast majority of Canadian seniors out of poverty, it has also created a disincentive to work by putting low-income seniors in one of the highest tax brackets in the country.
Currently, the data indicate it is only the highest income seniors who derive a material amount of their income from work. It could be that lower income seniors are foregoing work to avoid clawbacks to their benefits.
Over time, the government has taken some steps to address the disincentive to work by exempting small amounts of income from the clawback calculation.
Originally, this earnings exemption was set at $500 a year. In 2008, it was increased to $3,500.
But any earnings above $3,500 remained subject to the standard 50 per cent clawback rate.
In 2020, the government significantly expanded the GIS earnings exemption as part of its broader efforts to reduce poverty and increase workforce participation among seniors. The government expanded the definition of employment earnings to include self-employment income. And it raised the full exemption threshold to $5,000, while adding a partial, 50 per cent exemption on the next $10,000 of earnings.
By including self-employment income, the policy recognized the diverse ways seniors participate in the workforce.
However, even with these changes, there are still disincentives to work. A minimum wage earning senior could hit the $5,000 exemption threshold after working just two months of the year. And if they were to work full time for an entire year, their entire GIS benefit would be clawed back.
Some parties do appear to have this issue on their radar. In 2023, the Bloc Quebecois introduced the ill-fated Bill 319, which, among other things, attempted to increase the GIS exemption by 30 per cent.
Another potential model is the new Canada Disability Benefit (CDB). This benefit sets an overall income exemption at $23,000 a year, and a separate earnings exemption at an additional $10,000 a year. This means a single person could earn $33,000 a year before their income starts to be clawed back.
Whichever party wins this election should support further increases in the GIS earnings exemption to support seniors working beyond minimal part-time employment and self-employment.
Editor’s Note: This article initially misstated the Liberal GIS increase.
