The C.D. Howe Institute recently released a study finding that the baby boomers in Canada are “loading” their grand kids with a high tax burden.
In particular, those born after 2005 will face an exceptionally large portion of the tax burden due to a high federal debt left to them by their grandparents.
The federal debt is now at $666 billion, roughly $18,000 per person if spread equally across the entire population, according to the Debt Clock.
“Inter-generational fairness” will be difficult to achieve
Parisa Mahboubi, Senior Policy Analyst from the C.D. Howe Institute, said that “the projected lifetime fiscal burdens of the youngest generation (born since 2005) and future generations are very high: higher than those of any other generations, especially those born from the mid-1950s to the 1990s.”
“Generally speaking, baby boomers and their children fare well … but the grandkids of baby boomers do not,” Mahboubi added.
With the babyboomers retiring, Canada will face a serious demographic shift. Through an analysis of current and future net revenue and spending, researchers found that the youngest generation will have to contribute a larger effort than their parents to support the older population.
Mahboubi says that ensuring “intergenerational fairness and sustainability,” means creating policies that “improve labour market outcomes of youth, women and immigrants, and that encourage a longer working life” and also “restraining the growth of health care spending.”
Health care spending will be one of the most burdensome expenditures on the next generation. The annual growth in health care spending is expected to be 1.3 percent.
Debt by province
Some of the provinces are in substantially more debt than others. Ontario has the most debt by far, with $322 billion. Quebec has the second most with $189 billion. British Columbia and Alberta come in third and fourth with $68 and $51 billion, respectively.
The large inter-generational imbalance may be subject to unexpected change. For instance, if future birth rates are lower than expected, and interest rates grow, then future generations will be even worse off.
For more information, read the full report here.