Younger Canadians face a much higher fiscal burden than baby boomers and their children, a study from the C.D. Howe Institute says, suggesting that current policies are unsustainable.
Author Parisa Mahboudi used generational accounting—estimating government revenues and future spending plus net debt—to show that the lifetime fiscal burdens of those born since 2005 are much higher than for those born between the mid-1950s and the 1990s.
However, the study projects that future generations’ tax burden will be slightly lower than newborns’, “implying relative intergenerational balance looking out into the future.”
Factors such as higher-than-expected interest rates and lower-than-expected population growth could tip the balance and increase the tax burden on future generations, the study says.
“Also, should the cost of public healthcare grow at a faster pace than the 1.3% rate assumed in the report’s baseline scenario, for example at an average 3.3% rate (as happened during the period of 1996 to 2010), it would shift the resulting tax burden to future generations and render a large and untenable imbalance,” the study says.
Read the full report here.