Harper to Double TFSA Limit to $10,000

[August1991]

TFSAs are good for YOU, but only if you have money. It is of no value to those that don't .....you can't save what you don't have.... And the country has to replace the revenue somehow.... Now that I think of, sure, expand TFSAs, and replace the revenue with a VAT.

...

Icebound, about 70% of Canadians live in a home that they own. StatsCan

So, many Canadians have managed to save enough money to buy a home - which means that they saved or are saving as they reduce their mortgage.

IOW, Canada has this remarkable feature: high home ownership yet two official languages. We're a divided society but still rich. As John Lennon said, Imagine!

=======

Increase the VAT? In fact, Harper reduced the GST from 7% to 5%. (I happen to think that this GST reduction was bad on economic grounds but a stroke of political genius - a gift of Mulroney.)

BTW, the US is the only developed country without a federal VAT (sales tax/GST). In Sweden, the VAT is 25% and embedded in the price so buyers don't plainly see it - and don't see whether it's going up, or down.

Mulroney (and Michael Wilson) ensured that our VAT (the GST) would be visible to buyers and so made Harper's cut from 7% to 5% a route to 24 Sussex.

Make no mistake: Politicians win when when they credibly lower taxes.

Edited August 15, 2015 by August1991

[drummindiver]

Just another Conservative tax cut that benefits the wealthy (people with an extra $5,000 a year) over the poor.

Are you suggesting that not being able to save for retirement is usually a choice, rather than an economic fact that many families have to face?

Also, have you considered that the more people have in TSFA's, the more money the government will be paying out in senior's benefits? Particularly those tied to income, since interest "income" generated in a TFSA is not considered income, people with vast amounts of savings and sizable monthly "income" will qualify as "low-income."

Probably the worst platform announcement of the campaign thus far.

Seriously? Ppl buy things they cannot afford, ppl on welfare have iPhones with data plans. If you can't take advantage of the TFSAs, probably your own fault. I use it along with rrsps, gics, and under my mattress. Stop maxing out your credit cards and act like an adult.

[Argus]

IF I have $100,000, that can represent a significant tax on the interest going with forward. But with TFSAs, I will have the whole thing sheltered within 10 years... And so, beyond that the govt is getting zero.... Instead of the tax on interest .... Tax that could be about 200 a year forever, even at the lowest interest and tax rates. F O R E V E R.

You forget that all money put into the TFSA comes from after tax income. So someone had made a conscious decision, after paying their taxes, to save some of the remaining money for the future, likely for their retirement, instead of, say, taking a holiday down south. And you rant against this?

The government gives tax grans and breaks to people to accomplish a variety of aims, and it seems to me that saving for retirement ought to be among those. Once the money is withdrawn and spent the odds are the government will get more taxes from the HST. Which is a lot better than they'd get if someone spent the money on holidays instead.

[msj]

You forget that all money put into the TFSA comes from after tax income.

Yeah, so?

That's where the tax savings comes from for a TFSA: any income earned on the principal does not get taxed as compared to a non-registered account where dividends may be taxed anywhere from -7% to + 29% for eligible dividends, 20% to 45% for interest income and 10% to 23% for capital gains. (BC rates used for income above ~$37,000).

Once again, the principal, even in a non-registered account is not taxed again.

The income earned on it is taxed or is sheltered when held in a TFSA.

So, a couple who have $82,000 in their TFSA and it earns $1,500 in interest income each year leads to the government not receiving anywhere between $300 and $675 in taxes.

Times that by the number of people who will use these tax shelters and consider the implications of compounding and it will add up to a lot of tax savings for people able to save in these and a hole in government revenues.

This is not rocket science and these really are just the facts.

[msj]

Once the money is withdrawn and spent the odds are the government will get more taxes from the HST. Which is a lot better than they'd get if someone spent the money on holidays instead.

TFSA's are a major part of my retirement savings. I fill them up first, then RRSP, and then leave any excess in my small biz corp which is protected by professional liability insurance.

When I retire the plan is to spend most of our time and money outside of the country.

So, yes, this is another drain on government revenues.

Not that I'm complaining - just pointing out the facts.

[Argus]

TFSA's are a major part of my retirement savings. I fill them up first, then RRSP, and then leave any excess in my small biz corp which is protected by professional liability insurance.

When I retire the plan is to spend most of our time and money outside of the country.

So, yes, this is another drain on government revenues.

Not that I'm complaining - just pointing out the facts.

And do you imagine everyone who saves for retirement plans on leaving Canada as soon as they can? I doubt many will. You're also ignoring the fact that the point of this is to encourage Canadians to save for retirement.

[msj]

There are lots of ways to encourage people to save for retirement.

Lowering income taxes across the board would do the trick while raising GST, fuel, tobacco and alcohol taxes would work.

The point is an economic gain is an economic gain: if I sell my labour I'm paying tax at marginal rates of 45%. If I earn a capital gain it's at 22%.

As if there is something magical about economic gains that come from capital that deserve this preferred treatment.

Of course, put it in an RRSP and eventually the tax rate could be at 45% on that capital gain.

Or earn it in a TFSA and pay no income tax on the gain.

But clearly the government is giving up revenue in order to encourage people to save.

This is a basic fact however hard people try to muddy the waters.

[drummindiver]

Yeah, so?

That's where the tax savings comes from for a TFSA: any income earned on the principal does not get taxed as compared to a non-registered account where dividends may be taxed anywhere from -7% to + 29% for eligible dividends, 20% to 45% for interest income and 10% to 23% for capital gains. (BC rates used for income above ~$37,000).

Once again, the principal, even in a non-registered account is not taxed again.

The income earned on it is taxed or is sheltered when held in a TFSA.

So, a couple who have $82,000 in their TFSA and it earns $1,500 in interest income each year leads to the government not receiving anywhere between $300 and $675 in taxes.

Times that by the number of people who will use these tax shelters and consider the implications of compounding and it will add up to a lot of tax savings for people able to save in these and a hole in government revenues.

This is not rocket science and these really are just the facts.

Lol..you're that much of a commie you begrudge a person saving 675 in taxes? And times it by how many? You are talking the maximum you could have in it at this point. I would hazard a guess that not many ppl have it maxed out. hell. The left are saying this is useless ecause most ppl dont have any money hey to put in it in the first place? Well, which is it?

[Argus]

But clearly the government is giving up revenue in order to encourage people to save.

This is a basic fact however hard people try to muddy the waters.

Sure, but the government gives up revenue in order to encourage <place object here>.

It does it with individuals, and it does it with corporations and business. It does it routinely and always has and always will.

[msj]

Lol..you're that much of a commie you begrudge a person saving 675 in taxes? And times it by how many? You are talking the maximum you could have in it at this point. I would hazard a guess that not many ppl have it maxed out. hell. The left are saying this is useless ecause most ppl dont have any money hey to put in it in the first place? Well, which is it?

Do I begrudge myself for saving a few thousand dollars in taxes when I sold Glentel after a 150% capital gain last year - for example?

No, as I have clearly stated above: not that I'm complaining, just pointing out the facts.

As for the savings of tax of $675. That is to simplify it for people.

Implement TFSA's for year after year, decade after decade, and this little thing called time value of money will deprive the government of significant tax revenue.

That is a basic fact: if 500,000 accounts are set up and they are saving $500 of taxes this year on average then that is only $250 million in reduced tax base. 10 years from now, depending on investment returns, contributions, etc just those 500,000 accounts could deprive the government of many billions of dollars.

Add it up for all of the accounts big and small and it will become a bigger and bigger number.

Once again, this is a basic fact.

It is also a basic fact that better off people will have the means to use TFSA's.

It's easy to save $20,000 in TFSA's and another $24,000 in RRSP's when I make $180,000, for example.

When we were in our 20's it was difficult to save more than about $200 per month when there were student loan payments and we made about $40,000 per year total as we were just getting started in our careers.

Once again, basic facts - easier to save $45,000+ per year when you make more than $45,000 per year.

Once again, this is not rocket science.

I also recommend people familiarize themselves with the power of compounding: http://stockshastra.moneyworks4me.com/basics-of-investing/compound-annual-growth-rate-cag/

Edited August 16, 2015 by Charles Anthony
fixed malformed quote

[msj]

Sure, but the government gives up revenue in order to encourage <place object here>.

It does it with individuals, and it does it with corporations and business. It does it routinely and always has and always will.

I know this and that is the point.

There are many ways for the government to tax and spend and this government has chosen one method over many others that could be better.

In fact this government loves the boutique tax cut: give a small tax cut to a small segment of people for political reasons while making the tax system more expensive to comply with and to administer.

I'm sure people like you love the fact that there are bureacrats in Surrey, and Winnipeg and Ottawa who are getting paid good money while my staff upload receipts for children's art programs and soccer camps for them to scrutinize to ensure my clients get that $75/$150 tax break.

In the meantime, I make easy money as people can't be bothered to figure this out on their own so the end up spending the tax savings on my fee.

So I'm not exactly complaining other than it is a stupid policy that distorts the economy for stupid reasons.

[Argus]

I know this and that is the point.

There are many ways for the government to tax and spend and this government has chosen one method over many others that could be better.

In fact this government loves the boutique tax cut: give a small tax cut to a small segment of people for political reasons while making the tax system more expensive to comply with and to administer.

Agreed. I'm not a fan of much of this. Why should I have to give a refund to some guy so his kid can take music lessons anyway? Then again, what is a national daycare program but a very expensive way to cut daycare costs for parents?

What is Trudeau doing increasing my taxes so he can give a tax cut to those earning up to $89,9k?

[Icebound]

====

When people in the street ask me about the difference between a TFSA and a RRSP, I say: "If you're the kind of rational, disciplined person who can refuse chocolate while on a diet, then choose a TFSA. Otherwise, if you're irrationally human, lock your money in a RRSP."

That's the difference.

Well, not exactly.

The RRSP merely defers taxes to a later date, while the TFSA kills the tax revenue forever.

...

[Icebound]

Actually, let's stop these partisan tweaks to the tax system to favour one group,or the other and just... Eliminate all income and corporate taxes and implement a blanket FTT .... https://en.m.wikipedia.org/wiki/Financial_transaction_tax. ...

...and be done with it

[drummindiver]

Well, not exactly.

The RRSP merely defers taxes to a later date, while the TFSA kills the tax revenue forever.

...

Clearly not the case. You may not be taxed taking it out of your TFSA, but a healthy chunk will go to sales tax, or taxes on whatever you use the money for. this way, it only gets taxed twice..once hen you get paid, once when you use ir

[Argus]

Actually, let's stop these partisan tweaks to the tax system to favour one group,or the other and just... Eliminate all income and corporate taxes and implement a blanket FTT .... https://en.m.wikipedia.org/wiki/Financial_transaction_tax. ...

...and be done with it

So you think most people shouldn't pay taxes?

[msj]

Clearly not the case. You may not be taxed taking it out of your TFSA, but a healthy chunk will go to sales tax, or taxes on whatever you use the money for. this way, it only gets taxed twice..once hen you get paid, once when you use ir

A $10,000 capital gain earned in a non-registered account will lead to ~$2,200 of income taxes. That leaves $7,800 which say is spent in Ontario so another $1,000 in HST. Leaving an after tax amount of ~$6,800 spent.

$10,000 capital gain earned in an RRSP and pulled out leads to tax of ~$4,500 leaving $5,500 to be spent leading to $715 of HST for a final amount of $4,785 spent.

$10,000 capital gain earned in a TFSA leads to no income tax and then $1,300 of HST for a final spent amount of $8,700.

Now, remember that better off people will be able to save more in their TFSA's than poorer people.

These people are also more likely to be able to travel and spend their money abroad thereby paying less consumption taxes within Canada.

So there is significant tax leakage that will be occurring in the future.

No wonder the lesser off shouldn't like TFSA's.

[Icebound]

So you think most people shouldn't pay taxes?

Wouldn't have to, if governments got their revenue through FTT.... at least, not income taxes

Edited August 17, 2015 by Icebound

[August1991]

$10,000 capital gain earned in a TFSA leads to no income tax and then $1,300 of HST for a final spent amount of $8,700.

I love this term "capital gain".

msj, do you really know something others don't?

If not, your proposal is also called "timing the market" or "rent-seeking". At a micro level, I have no objection to individuals buying lottery tickets; I wonder, at a macro-level, about the sustainability of a society based on such individual behaviour.

Hence, in learned, civilized Western society nowadays, I reckon that "buying lottery tickets" is not considered a good individual strategy. Elsewhere, I can't say....

Edited August 17, 2015 by August1991

[August1991]

The RRSP merely defers taxes to a later date, while the TFSA kills the tax revenue forever.

I love this English expression: "Same difference" or as I learned it: "Same diff." In French, it's not as good: (Pareil au même.)

TFSA or RRSP, CELI or REER.

Same diff.

Edited August 17, 2015 by August1991

[Argus]

Wouldn't have to, if governments got their revenue through FTT.... at least, not income taxes

The idea that all our taxes could be done away with if we just got rich people to pay more is pure fantasy.

[Argus]

A $10,000 capital gain earned in a non-registered account will lead to ~$2,200 of income taxes. That leaves $7,800 which say is spent in Ontario so another $1,000 in HST. Leaving an after tax amount of ~$6,800 spent.

Or hey, why not just double capital gains taxes? Oh, wait... that's what the NDP have already promised to do.

You know you can run the same calculations for a vast array of government programs, right? All of them either 'cost' the government money, or have the government not taxing money in pursuit of some goal or other. How about the 30% of Canadians who pay no income taxes? I bet the government could make a lot of money by introducing a minimal tax on them!

[Icebound]

I love this English expression: "Same difference" or as I learned it: "Same diff." In French, it's not as good: (Pareil au même.)

TFSA or RRSP, CELI or REER.

Same diff.

Not even close. In an RRSP, I defer taxes on my income NOW.... And I pay taxes on it (and ON ANY DIVIDEND, INTEREST, GAIN, etc. generated by it) ....at some point in my aging future... And if I kick the bucket before I finish paying those taxes, my heirs have to pay it for me.

In a TFSA I pay taxes on my income, but I NEVER EVER pay taxes on the DIVIDEND, INTEREST, whatever....income generated.

Never ever.

And if I can shelter 10k every year, in ten years I am sheltering 100k, in 20, 200k. And the investment income generated by that is not taxed ever...EVER.

How can you at all say: same diff?

[Icebound]

The idea that all our taxes could be done away with if we just got rich people to pay more is pure fantasy.

Well, good. Then let's implement FTT, simplify the tax code, and EVERYBODY gets to pay FTT.

How can you argue with that?

[msj]

Or hey, why not just double capital gains taxes? Oh, wait... that's what the NDP have already promised to do.

Sure, why not?

That would make it the same rate that wages and interest is taxed at.

An economic gain is an economic gain.

Then lower tax rates across the board to make it revenue neutral.

Don't want to pay any tax on capital gains? Then save money in your TFSA.

Want to defer tax on it? Then save in your TFSA.

A reasonable compromise.

Either that, or cap TFSA limits at, say $100,000 lifetime and adjust them every 20 years or so.

One way or the other something will be done by a future government to mitigate the tax leakage.

The longer this is left to fester the more likely the changes will be draconian.

But Haper won't care because by then he will be drawing down his gold plated pension.