Tax Free Savings Accounts - TFSAs

[Wilber]

Too limiting for people who were promised by Flaherty to have a much larger capital gains exemption in the election. That is why both the Globe and Mail and National Post said the TFSA was a far cry from a capital gains change. The National Post said they liked the TFSA but would have liked a income tax reduction and a capital gains change even more.

I think Jeff Rubin is right.

The idea of a capital gains exemption is to get people to invest. Investing to make a profit is a form of saving. A 5K limit is a capital gains and dividend exemption for the little guy who choses to go that route.

Geez, you come at this from every position don't you. First you are against it because it is not inclusive enough and now you are against it because it doesn't benefit high rollers enough. Makes me think it is a good idea even more.

[jdobbin]

That's the interesting point. Why are Leftists against this idea?

Because it doesn't help people with their taxes now.

I reckon they don't understand it or are jealous that they didn't do it. Some Canadians just don't like anything new that requires a bit of effort to understand.

TFSAs will only show their worth in several years and only for those who save assiduously.

I reckon it is because the right wing doesn't like to reduce general taxes and are jealous that that the Liberals did it first.

[jdobbin]

I am not surprised that those on the left hate the TFSA but i think its great . My wife and i have already decided it is perfect for us and will put $ 90 a week each into an account which will allow us to pretty much max out on the plan . Kudos to the Conservatives for doing something for the middle class .

And you prefer this to having your taxes reduced immediately through and income tax cut?

[Keepitsimple]

And you prefer this to having your taxes reduced immediately through and income tax cut?

I personally prefer it. It goes to the heart of Conservatism - personal responsibility - helping to build your own future. Tax cuts are mostly invisible in that your paycheque gets a little bigger but you soon forget about it. Saving on the other hand, is a conscious decision - and many Canadians need a catalyst to jump start the process. I think you're seeing the Conservative agenda unfold step-by-step. Increasing personal exemptions to help the low income earners and seniors, income splitting to help seniors, a focus on helping families through the tax system, and now a plan for young people to start saving. It's back to basics - and not that scary. Don't get me wrong, taxes need to be kept in check - but I like the balance that the budget has introduced.

[jdobbin]

I personally prefer it. It goes to the heart of Conservatism - personal responsibility - helping to build your own future. Tax cuts are mostly invisible in that your paycheque gets a little bigger but you soon forget about it. Saving on the other hand, is a conscious decision - and many Canadians need a catalyst to jump start the process. I think you're seeing the Conservative agenda unfold step-by-step. Increasing personal exemptions to help the low income earners and seniors, income splitting to help seniors, a focus on helping families through the tax system, and now a plan for young people to start saving. It's back to basics - and not that scary. Don't get me wrong, taxes need to be kept in check - but I like the balance that the budget has introduced.

Since people are not filling their RRSPs because they don't have enough money, it seems a general tax cut would help stimulate the type of choices you are saying. People could chose to save, to spend or to pay off a tangible asset like a house.

I always thought the heart of conservatives was broad-based tax cuts. Even RRSPs are used by 60 to 70% of people. It is useful but flawed because it is easy to see that many people are in need of money now.

[Keepitsimple]

Since people are not filling their RRSPs because they don't have enough money, it seems a general tax cut would help stimulate the type of choices you are saying. People could chose to save, to spend or to pay off a tangible asset like a house.

I always thought the heart of conservatives was broad-based tax cuts. Even RRSPs are used by 60 to 70% of people. It is useful but flawed because it is easy to see that many people are in need of money now.

The problem with RRSP's is that most people have come to view them as one-time end-of-year investments that require $500 or $1000 to make sense. Save tax now is the common philosophy. And of course, once you put the money in - you can't easily take it out. Those are the reasons why many people don't use RRSP's - especially low-income earners. These TDSA's eliminate those problems - put in as little or as much as you can - leave it there as long as you can - create an investment vehicle - withdraw the money whenever you want.

[jdobbin]

The problem with RRSP's is that most people have come to view them as one-time end-of-year investments that require $500 or $1000 to make sense. Save tax now is the common philosophy. And of course, once you put the money in - you can't easily take it out. Those are the reasons why many people don't use RRSP's - especially low-income earners. These TDSA's eliminate those problems - put in as little or as much as you can - leave it there as long as you can - create an investment vehicle - withdraw the money whenever you want.

But you still need the tax relief from lower income taxes to create the environment for savings. It is a chicken and egg thing. I know some Conservatives are saying that the TFSA will encourage lower income people to save. I think it will be lower general taxes.

In the end, it could be neither. The instinct to spend has defeated both Britain and the U.S. in increasing savings.

I was a bit disturbed this year to see so many line items being added to the tax form for transit, for sports for kids, etc. The picking of favourite political hobby horses complicates the tax code and seems against fiscal conservatiism.

I know there are more Liberals and Tories who want to simplify the tax code and reduce tax rate. All I see is the rate getting more complicated and forcing the taxpayer to do this or that when it comes to calculating their taxes.

As the financial institutions have said in this thread, it will also have to create a whole new layer for administration for the TFSAs.

Edited March 4, 2008 by jdobbin

[Wilber]

Since people are not filling their RRSPs because they don't have enough money, it seems a general tax cut would help stimulate the type of choices you are saying. People could chose to save, to spend or to pay off a tangible asset like a house.

I always thought the heart of conservatives was broad-based tax cuts. Even RRSPs are used by 60 to 70% of people. It is useful but flawed because it is easy to see that many people are in need of money now.

People always think they need money now and some do but that is also the reason people don't save. Too many think they "need" a lot of crap they only want. Somehow people have to be encouraged to invest in their own future. If they don't, future generations will have to support them with their taxes. Their tax dollars going to welfare, OAP, GIS or other schemes to look after people when they can no longer work is not a choice they get to make. Planning for their own future is. Giving some tax relief to people who have had the discipline to look after themselves and reduce the burden on future generations is fair. As for those who truly can't, society will be looking after them regardless.

[jdobbin]

People always think they need money now and some do but that is also the reason people don't save. Too many think they "need" a lot of crap they only want. Somehow people have to be encouraged to invest in their own future. If they don't, future generations will have to support them with their taxes. Their tax dollars going to welfare, OAP, GIS or other schemes to look after people when they can no longer work is not a choice they get to make. Planning for their own future is. Giving some tax relief to people who have had the discipline to look after themselves and reduce the burden on future generations is fair. As for those who truly can't, society will be looking after them regardless.

I don't disagree that it is important for people to save. I think it is more important to give the taxpayer immediate tax relief.

[Wilber]

I don't disagree that it is important for people to save. I think it is more important to give the taxpayer immediate tax relief.

It's a savings plan. An RRSP gives immediate tax relief. A TSFA gives differed relief. You now have a choice.

I think what really rubs Liberals is if and when they form another government, getting rid of it will be even more unpopular than getting rid of income trusts but of course that would also apply if Conservatives have a change of heart. That's a good thing IMO.

[capricorn]

It's a savings plan. An RRSP gives immediate tax relief. A TSFA gives differed relief. You now have a choice.

Also, Canadians see RRSPs as a long term type investment not to be touched except for dire emergencies or retirement income. The TSFA is a different type of investment altogether. As you say, it offers a choice.

[jdobbin]

Also, Canadians see RRSPs as a long term type investment not to be touched except for dire emergencies or retirement income. The TSFA is a different type of investment altogether. As you say, it offers a choice.

The TFSA only really has big benefits as a long term investment due to compound interest. This is what some of the analysts have said in this very thread.

[jdobbin]

It's a savings plan. An RRSP gives immediate tax relief. A TSFA gives differed relief. You now have a choice.

I think what really rubs Liberals is if and when they form another government, getting rid of it will be even more unpopular than getting rid of income trusts but of course that would also apply if Conservatives have a change of heart. That's a good thing IMO.

Tax changes are made all the time. The Tories raised income taxes when they came into power.

Broad-based tax relief would be a better solution.

[Wilber]

Also, Canadians see RRSPs as a long term type investment not to be touched except for dire emergencies or retirement income. The TSFA is a different type of investment altogether. As you say, it offers a choice.

I think a TSFA should be considered a long term investment as well but its biggest advantage is its flexibility compared to an RRSP.

[geoffrey]

Broad-based tax relief would be a better solution.

But that's unaffordable.

A .10 point cut in income tax isn't very marketable.

[jdobbin]

But that's unaffordable.

A .10 point cut in income tax isn't very marketable.

Of course it was affordable. There was a $10 billion pay out on the debt in this budget. A half percentage cut would have fueled the economy and would brought in as much money to the government.

Where did you hear that they couldn't afford it? And they could afford the $5 billion, it is estimated to cost on TFSAs?

[blueblood]

The only problem I have with TFSA's is the fact you can only put in 5,000 bucks. I'd like to be able to put more in instead of having to make a large purchase in order to make my money work and avoid the taxman.

[M.Dancer]

The only problem I have with TFSA's is the fact you can only put in 5,000 bucks. I'd like to be able to put more in instead of having to make a large purchase in order to make my money work and avoid the taxman.

$5000 per year...

[blueblood]

$5000 per year...

I know that, what's wrong with stashing more

[Wilber]

I know that, what's wrong with stashing more

Maybe because too much would be avoiding the taxman.

[blueblood]

Maybe because too much would be avoiding the taxman.

People avoid the taxman all the time by buying stuff anyways. Why can't people invest more, they're going to spend it anyway and it's going to be taxed on sales taxes.

What's wrong with paying your income taxes, stashing say 25 large that a person might have extra, and taking it out again?

[Topaz]

People avoid the taxman all the time by buying stuff anyways. Why can't people invest more, they're going to spend it anyway and it's going to be taxed on sales taxes.

What's wrong with paying your income taxes, stashing say 25 large that a person might have extra, and taking it out again?

It could be that when middle-income people get done, paying higher, natural gas bills, hydro bills, property taxes, users fees, gasoline, car care,increase food prices, then you have the middle-income with kids and then you really have no money left, you may be borrowing on your credit card to make end meet like in the US. Yahoo.ca did a poll and ask if Canadian were going tocontribute to their RRSP. 73 % said no because they couldn't afford it. The above list I never mentioned a mortgage or rent.

[HistoryBuff44]

Of course it was affordable. There was a $10 billion pay out on the debt in this budget. A half percentage cut would have fueled the economy and would brought in as much money to the government.

Where did you hear that they couldn't afford it? And they could afford the $5 billion, it is estimated to cost on TFSAs?

I respectfully disagree, debt reduction when times are good should be a priority. I think they made a good choice in not changing the rates more. Remember, many economists were saying we would weather the US downturn... right now those economists are busy pulling their feet out of their mouths. I dont think they (the govt) wanted to cut taxes more because they are worried there may be a deficit if they did; after this many years in the black, suddenly going in the red would be a definate no no.

[jdobbin]

I respectfully disagree, debt reduction when times are good should be a priority. I think they made a good choice in not changing the rates more. Remember, many economists were saying we would weather the US downturn... right now those economists are busy pulling their feet out of their mouths. I dont think they (the govt) wanted to cut taxes more because they are worried there may be a deficit if they did; after this many years in the black, suddenly going in the red would be a definate no no.

Canada already has a good debt payment plan is. Lowering the income tax would stimulate the economy and more tax would come in. Debt would continue to be paid off.

[blueblood]

It could be that when middle-income people get done, paying higher, natural gas bills, hydro bills, property taxes, users fees, gasoline, car care,increase food prices, then you have the middle-income with kids and then you really have no money left, you may be borrowing on your credit card to make end meet like in the US. Yahoo.ca did a poll and ask if Canadian were going tocontribute to their RRSP. 73 % said no because they couldn't afford it. The above list I never mentioned a mortgage or rent.

Obviously, but if I can afford to stash 25 large, why not then? The mid income people don't have to store 5 large, they can store 100 bucks if they wanted to.