# TFSA Upgrade Announcement



## Xander (Apr 3, 2009)

Harper is going to announce an "upgrade" to the TFSA today in Vaughan Ontario.
Any guesses as to what he'll be saying?


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## the-royal-mail (Dec 11, 2009)

Great idea - anything they can do to upgrade this type of account should prove interesting.

But, like most election promises I give this very little weight. It only matters if they actually implement it. And then of course some future liberal gov't will reverse all of this when they need to get elected. The beat goes on. Pardon my apathy but I'm just so disillusioned with politicians as I know their promises are purely opportunistic.


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## Rysto (Nov 22, 2010)

Xander said:


> Harper is going to announce an "upgrade" to the TFSA today in Vaughan Ontario.
> Any guesses as to what he'll be saying?


10 to 1 it will be yet another promise that won't be fulfilled under after the next election, I mean, after the budget is balanced.


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## Four Pillars (Apr 5, 2009)

I think he should make contributions, tax deductible. 

Seriously, I hadn't heard of this since I ignore all this election campaign crap.

However - I think the easiest, most logical upgrade to the TFSA, would be an increase in the allowable contribution each year going forward. 

Another option is to allow people to add contribution room retroactively prior to 2009 (very unlikely).


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## the-royal-mail (Dec 11, 2009)

http://www.theglobeandmail.com/news...nds-in-tax-free-savings-boost/article1974378/

"Since 2009 about 4.7 million Canadians have opened TFSAs, which have a combined market value of $18-billion right now."

_Interesting_. That makes their average value only about $383 each. Unless my math is wrong.


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## DavidJD (Sep 27, 2009)

For the record, my guess is...

Increase annual contributions by $500 or $1000 a year going forward.


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## Four Pillars (Apr 5, 2009)

the-royal-mail said:


> http://www.theglobeandmail.com/news...nds-in-tax-free-savings-boost/article1974378/
> 
> "Since 2009 about 4.7 million Canadians have opened TFSAs, which have a combined market value of $18-billion right now."
> 
> _Interesting_. That makes their average value only about $383 each. Unless my math is wrong.


You're close - I calculate an average of $3830, which seems more reasonable.


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## zylon (Oct 27, 2010)

*not a mind reader*

my hope is that i'm NEVER able to predict what a politician will say ... or know what it is thinking

speculation: how about ... increase TFSA to $100,000 effective immediately

but: forgo ALL claim to CPP and OAS

____________________________
be careful what you wish for


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## slacker (Mar 8, 2010)

the-royal-mail said:


> Great idea - anything they can do to upgrade this type of account should prove interesting.
> 
> But, like most election promises I give this very little weight. It only matters if they actually implement it. And then of course some future liberal gov't will reverse all of this when they need to get elected. The beat goes on. Pardon my apathy but I'm just so disillusioned with politicians as I know their promises are purely opportunistic.


Just like how they promise not to mess with Income Trust? Oh wait, that was a Conservative Finance Minister.


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## Toronto.gal (Jan 8, 2010)

DavidJD said:


> For the record, my guess is...
> 
> Increase annual contributions by $500 or $1000 a year going forward.


You're probably much closer than Zylon. 

Too bad they don't allow TFSA's for children under 18, but it's easy to understand their reasoning.


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## slacker (Mar 8, 2010)

the-royal-mail said:


> http://www.theglobeandmail.com/news...nds-in-tax-free-savings-boost/article1974378/
> 
> "Since 2009 about 4.7 million Canadians have opened TFSAs, which have a combined market value of $18-billion right now."
> 
> _Interesting_. That makes their average value only about $383 each. Unless my math is wrong.


You're wrong. It's $3830. I personally would welcome an increase, but I doubt the average Canadian has much more discretionary income left to contribute.


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## steve41 (Apr 18, 2009)

Just remember kids.... when you opt to plop your savings into the TFSA instead of the RRSP, you won't get a tax refund. Of course this is no big deal over time, because you won't be subject to tax 20-30-40 years down the road when you need the funds. The govt however won't be having to pay you that nice refund in the near term, taking (I'm thinking) a lot of pressure off the treasury. So, giving this TFSA goodie might be more of a gift to themselves than to the taxpayer.


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## DavidJD (Sep 27, 2009)

steve41 said:


> Just remember kids.... when you opt to plop your savings into the TFSA instead of the RRSP, you won't get a tax refund. Of course this is no big deal over time, because you won't be subject to tax 20-30-40 years down the road when you need the funds. The govt however won't be having to pay you that nice refund in the near term, taking (I'm thinking) a lot of pressure off the treasury. So, giving this TFSA goodie might be more of a gift to themselves than to the taxpayer.


It is time we moved away from the 'either or' debate about RRSPs and TFSAs. The best move is to do both, or depending on you circumstance, more of one over the other until that changes (i.e. higher income).

Maxing out your TFSA should not be too difficult, compared to maxing out your RRSP room.


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## Toronto.gal (Jan 8, 2010)

steve41 said:


> Just remember kids.... when you opt to plop your savings into the TFSA instead of the RRSP, you won't get a tax refund.


Nor would you get the capital gain/dividend tax credits under the RRSP upon withdrawal.

For a young person, who might not be earning very much, I think it makes more sense maximizing the TFSA first.


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## al42 (Mar 5, 2011)

The proposal is to double the limit to $10000.00 per year but the catch is this would only take affect after the budget is balanced.


http://business.financialpost.com/2011/04/07/harper-to-pledge-tfsa-upgrade/


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## sags (May 15, 2010)

I will gladly pay you Tuesday, for a vote today...........


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## HaroldCrump (Jun 10, 2009)

al42 said:


> The proposal is to double the limit to $10000.00 per year but the catch is this would only take affect after the budget is balanced.


But guys, this makes logical fiscal sense.
Do you want your govt. to go handing out all kinds of tax breaks and tax credits with such a huge budget deficit?
If you were running a corporation or even your household, won't you defer such items until you have a balanced budget?
Frankly, some of the campaign promises by some of the parties is scaring the sth out of me.
Like everyone else, I would be happy to receive more tax credits, more TFSA room, more RRSP room etc. but let's be fiscally responsible as well.


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## lister (Apr 3, 2009)

HaroldCrump said:


> But guys, this makes logical fiscal sense.
> Do you want your govt. to go handing out all kinds of tax breaks and tax credits with such a huge budget deficit?
> If you were running a corporation or even your household, won't you defer such items until you have a balanced budget?
> Frankly, some of the campaign promises by some of the parties is scaring the sth out of me.
> Like everyone else, I would be happy to receive more tax credits, more TFSA room, more RRSP room etc. but let's be fiscally responsible as well.


It does make fiscal sense. I like the idea. I just get the feeling it's tied more to the Cons getting elected not once but twice since the possible implementation date is close to another election. I can just see the government saying that it'll have to be put on hold until after the election. Since when has the Cons and the previous Liberal government shown any fiscal sense?


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## DavidJD (Sep 27, 2009)

All hail lord harper!


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## steve41 (Apr 18, 2009)

Why wait until the budget deficit is balanced? If Joe Average plunks more money to his TFSA instead of to his RRSP, then the govt won't have to shovel out all those RRSP refund checks. This is an immediate relief to the deficit. Does no one see this?


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## Xander (Apr 3, 2009)

steve41 said:


> Why wait until the budget deficit is balanced? If Joe Average plunks more money to his TFSA instead of to his RRSP, then the govt won't have to shovel out all those RRSP refund checks. This is an immediate relief to the deficit. Does no one see this?


I was thinking something along the same lines. The TFSA is funded with after tax $. Why the need of a balanced budget? I can understand holding back on immediate tax breaks until the books are in the black but this makes no sense.


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## the-royal-mail (Dec 11, 2009)

I understand and acknowledge your point steve. It may well be the true reason they like the TFSA. The thing I struggle with is I have never seen any stats that show how much money they would save in RRSP cheques if they double TFSA limits now. Are these stats available? I am curious to know how much money we're talking about here.


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## HaroldCrump (Jun 10, 2009)

steve41's point is true from the technical standpoint.
However, I believe, most people still consider RRSP a higher priority than TFSA when allocating between their savings.
Whether right or wrong is a different matter, but most people that have say $5,000 left over at the end of the year will choose to top up their RRSP and not the TFSA.
Also, many folks in their 20s, 30s and even 40s are not thinking about the substantial long term benefit of the TFSA in how withdrawals/gains do not cause clawbacks in social benefits.
So they continue to prioritize RRSP over TFSA, regardless of how much contribution limit the govt. assigns to the TFSA.

There is also the issue of the large section of the working population that do not have any appreciable RRSP limits due to DBP plan contribution adjustments, which is often a mandatory forced contribution rather than the optional RRSP type contribution.

So in effect I don't think increasing the TFSA room now vs. 5 years later will give the govt. any substantial benefit due to reduced tax refunds.

Philosophically, I'd rather prefer the govt. to reduce income taxes across the board rather than such targeted specific tax credits and tax saving schemes.
Reduced income taxes as a result of reduced govt. spending is much simpler for everyone and provides an immediate, direct benefit.
Increasing TFSA limits into the future reduces future govt. revenue, essentially postponing the problem to a future govt.
Some govt. 20, 30 years later is going to have a huge revenue gap because of all billions of tax free $$ in the TFSAs.
They won't have that problem with the billions in the RRSPs.


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## lister (Apr 3, 2009)

HaroldCrump said:


> Philosophically, I'd rather prefer the govt. to reduce income taxes across the board rather than such targeted specific tax credits and tax saving schemes.


I agree but that's not a sexy sell to the public. The GST reduction was done instead while practically all economists and financial types were saying that reducing income tax would be better. The GST is upfront that the public sees and easily understands while income tax cuts are more hidden. It's election strategy.


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## steve41 (Apr 18, 2009)

I am sure to be proven wrong, but I didn't see a lot of government ads hyping the RRSP deadline.... financial institutions do, but the gov't not so much. I can bet the fed's ad budget for the TFSA is pretty substantial, though.


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## the-royal-mail (Dec 11, 2009)

I've seen very few ads about the TFSA, even when the program was new, I saw bank ads but other than the publicity at the time, have not seen anything pitching the TFSA. I think many CDNs are in the dark about this. Just over 10% of us have them.


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## daddybigbucks (Jan 30, 2011)

who hoo.
I was on the fence even though i would like to see a majority Conservative government to make some real changes. (for a couple years)

But if they double the limit, that will knock about 5 years off my retirement age.

I say bring back the 5% GST, and double the TFSA right away.
Tax the spenders, reward the savers.


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## slacker (Mar 8, 2010)

daddybigbucks said:


> who hoo.
> I was on the fence even though i would like to see a majority Conservative government to make some real changes. (for a couple years)
> 
> But if they double the limit, that will knock about 5 years off my retirement age.
> ...


Ahem, you do realize that what they are proposing won't kick into effect for another 5 or 6 years right? That means they want your vote for the next 2 elections in exchange for the TFSA upgrade.


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## daddybigbucks (Jan 30, 2011)

slacker said:


> Ahem, you do realize that what they are proposing won't kick into effect for another 5 or 6 years right? That means they want your vote for the next 2 elections in exchange for the TFSA upgrade.


you had to rain on my parade eh?

oh well back to the salt mines.


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## HaroldCrump (Jun 10, 2009)

No, "bigdaddy" is asking for an immediate upgrade in exchange for his vote 
I would rather wait a few years if that means reducing the deficit.
However, the best way of doing that is cutting the spending.
The Harper group is placing a huge bet on Canada's GDP growth to wipe out the deficit without substantially cutting spending.
Cutting spending is never easy.


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## andrewf (Mar 1, 2010)

This might not be popular here, but let's call it what it is: another tax cut for rich people. This will also contribute to the phenomenon of rich people having millions in assets in their TFSA and being eligible for OAS/GIS.


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## slacker (Mar 8, 2010)

@andrewf: Yup, I'm happy with that personally, but I'm not a selfish jerk. It's actually more powerful than that. It permanently reduces the government's income, and ability to spend. Anyone who wish to change this in the future will have to endure the unpopularity of cancelling (or reducing) the TFSA. I believe it's called "starve the beast" strategy by the Bush administration.


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## the-royal-mail (Dec 11, 2009)

andrewf said:


> This might not be popular here, but let's call it what it is: another tax cut for rich people. This will also contribute to the phenomenon of rich people having millions in assets in their TFSA and being eligible for OAS/GIS.


There are no rules saying that only the rich may have a TFSA. The TFSA is available to everybody equally.

I don't see how anyone can accumulate millions in their TFSA. If you did 30 years of full contributions, that would only be $150K plus growth. I figure, if you manage to save that much money, that is good for you. That is money you earned and is the equivalent of a POSA since it's after tax money. There's no inequality here and nobody is being left to die in the gutter as a result of some being better savers than others. Focus on improving your lot in life through more education, sacrifice and hard work and you will improve your own chances of being able to max out your TFSA. That choice is up to you, not the gov't. If you don't choose correctly, don't blame the gov't and don't blame the rich.


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## HaroldCrump (Jun 10, 2009)

slacker said:


> It permanently reduces the government's income, and ability to spend. Anyone who wish to change this in the future will have to endure the unpopularity of cancelling (or reducing) the TFSA.


You think so?
I have my doubts.
The govt. on that date will simply dream up some new tax, some new levy to increase its revenue.
Never underestimate the infinite creativity of the govt. to invent new taxes.
This basic instinct of governments goes back hundreds, if not thousands, of years.


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## steve41 (Apr 18, 2009)

> ...knock 5 years off my retirement age...


 Uh, it is unlikely to knock any years off your retirement age if they double the TFSA limit. Nada.


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## andrewf (Mar 1, 2010)

the-royal-mail said:


> There are no rules saying that only the rich may have a TFSA. The TFSA is available to everybody equally.
> 
> I don't see how anyone can accumulate millions in their TFSA. If you did 30 years of full contributions, that would only be $150K plus growth. I figure, if you manage to save that much money, that is good for you. That is money you earned and is the equivalent of a POSA since it's after tax money. There's no inequality here and nobody is being left to die in the gutter as a result of some being better savers than others. Focus on improving your lot in life through more education, sacrifice and hard work and you will improve your own chances of being able to max out your TFSA. That choice is up to you, not the gov't. If you don't choose correctly, don't blame the gov't and don't blame the rich.


There is, however, a rule that only rich people can contribute 18% of their income to their RRSP and still have $10k left over for TFSA.


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## daddybigbucks (Jan 30, 2011)

steve41 said:


> Uh, it is unlikely to knock any years off your retirement age if they double the TFSA limit. Nada.


really?

if you take the TFSA limits for yourself and your wife till your retirement age.
You take this total amount and put it into dividend paying stocks that pays >3% annually.
If this monthly dividend amount surpasses your monthly living expenses, your good for retirement.

Now double those TFSA limits, dont you think your retirement age would drop?

Now since i explained my theory, I would like to hear yours about "NADA"
or any flaws in my strategy.


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## andrewf (Mar 1, 2010)

You're assuming you wouldn't otherwise save that amount in a non-registered account, which is not a very good assumption.


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## slacker (Mar 8, 2010)

HaroldCrump said:


> You think so?
> I have my doubts.
> The govt. on that date will simply dream up some new tax, some new levy to increase its revenue.
> Never underestimate the infinite creativity of the govt. to invent new taxes.
> This basic instinct of governments goes back hundreds, if not thousands, of years.


You seem correct. The Bush administration than proceeded to sign in the most expensive piece of legislation in history. (medicare)

This just shows that there is no true fiscally conservative government in recent history. All of them are populist governments with spending problems, regardless if they're Liberal or Conservative.


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## gibor365 (Apr 1, 2011)

Great news about TFSA! Another reason to vote only Harper !!!


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## gibor365 (Apr 1, 2011)

the-royal-mail said:


> There are no rules saying that only the rich may have a TFSA. The TFSA is available to everybody equally.
> 
> .


Exactly!!! I'd understand some whining if new proposal would say that you can invest into TFSA up to , let's say, 10% of your income. Even though personally I'd like this idea very much, that would encouradge lazy ppl to work and earn some money


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## andrewf (Mar 1, 2010)

For context, to max out this extra contribution room, you'd have to save 28% of your after-tax income if you're earning $100k per year. So, we're essentially absolving people from paying any tax at all on their savings. Maybe that's okay, but it is going to disproportionately help wealthy people.


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## andrewf (Mar 1, 2010)

gibor said:


> Exactly!!! I'd understand some whining if new proposal would say that you can invest into TFSA up to , let's say, 10% of your income. Even though personally I'd like this idea very much, that would encouradge lazy ppl to work and earn some money


Yes. People are poor because they are lazy.


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## andrewf (Mar 1, 2010)

Let me explain a bit further. This will eventually cost billions per year. That money would be better used lowering the marginal tax rate. That is how you increase incentive to work.


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## Toronto.gal (Jan 8, 2010)

Some arguments really get tiresome indeed!

The TFSA is simply an investment vehicle to encourage people to save, nothing sinister/complicated about that. I might add that it was an incentive that should have been implemented long, long ago, but better late than never!


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## gibor365 (Apr 1, 2011)

andrewf said:


> Yes. People are poor because they are lazy.


Yeap  or stupid or sick (but this is another story)....please explain me why our family who are new immigrants without Canadian education and experience can max TFSA, RRSP, RESP?! Because we're working and not whining. So, why I should pay huge taxes on my hard earned money ?!


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## lister (Apr 3, 2009)

daddybigbucks said:


> I say bring back the 5% GST, and double the TFSA right away. Tax the spenders, reward the savers.


You mean 7% GST.


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## Sampson (Apr 3, 2009)

andrewf said:


> For context, to max out this extra contribution room, you'd have to save 28% of your after-tax income if you're earning $100k per year. So, we're essentially absolving people from paying any tax at all on their savings. Maybe that's okay, but it is going to disproportionately help wealthy people.


I was going to say the same thing.

Saving $64k per couple per year takes some big income.

It also benefits older or richer people who may already have savings in non-registered accounts and will simply move all investments into non-taxable or tax-deferred accounts.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> Let me explain a bit further. This will eventually cost billions per year. That money would be better used lowering the marginal tax rate. That is how you increase incentive to work.


Actually, for a change, I'm in agreement with that.
Income tax is a disincentive to work...a penalty against work ethic and productivity.
Provided, it is a substantial and an across-the-board personal income tax rate cut otherwise it won't be equal to the TFSA in terms of its effect.
Often, income tax cuts are teensy weensy 25 or 50 bps cuts targeted to benefit certain groups or vote banks, and are often used as instruments of income re-distribution.


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## onomatopoeia (Apr 8, 2009)

gibor said:


> Great news about TFSA! Another reason to vote only Harper !!!


_in four years when this promise would be valid....if the books are balanced. maybe....if nothing happens in the world to unbalance them...like a tax cut that has already been promised.

oh wait._


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## Toronto.gal (Jan 8, 2010)

gibor said:


> Yeap  or stupid or sick (but this is another story)....please explain me why our family who are new immigrants without Canadian education and experience can max TFSA, RRSP, RESP?! Because we're working and not whining. So, why I should pay huge taxes on my hard earned money ?!


Welcome to Canada gibor, hope you will be happy here!

In all fairness, there are people who have unfortunate situations, bad luck, illness as you mentioned and a whole host of other reasons that is beyond their control to get ahead. 

It's understood however, that such comments exclude the above mentioned and people should not take offense.


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## CanadianCapitalist (Mar 31, 2009)

andrewf said:


> For context, to max out this extra contribution room, you'd have to save 28% of your after-tax income if you're earning $100k per year. So, we're essentially absolving people from paying any tax at all on their savings. Maybe that's okay, but it is going to disproportionately help wealthy people.


I agree that increasing TFSA contribution room will disproportionately benefit wealthier Canadians. Only a tiny minority of Canadians are able to save the equivalent of 1/3rd of their pre-tax income. 

Cut income taxes instead which will benefit all Canadians. Having said that, this promise is so far out that the PV of this promise is close to zero.


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## daddybigbucks (Jan 30, 2011)

CanadianCapitalist said:


> I agree that increasing TFSA contribution room will disproportionately benefit wealthier Canadians. Only a tiny minority of Canadians are able to save the equivalent of 1/3rd of their pre-tax income.
> 
> Cut income taxes instead which will benefit all Canadians. Having said that, this promise is so far out that the PV of this promise is close to zero.


you dont have to max out your tfsa to get the benefit.
its a great saving tool

A lot of people that have money in the tfsa have that money invested in the TSX, which in turn builds stronger Canadian companies.

TFSA helps poor and rich, its helps those that want to help themselves.


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## gibor365 (Apr 1, 2011)

CanadianCapitalist said:


> I agree that increasing TFSA contribution room will disproportionately benefit wealthier Canadians. Only a tiny minority of Canadians are able to save the equivalent of 1/3rd of their pre-tax income.
> 
> Cut income taxes instead which will benefit all Canadians. Having said that, this promise is so far out that the PV of this promise is close to zero.


It all depends, we're middle class and have house in Mississauga, so we can contribute into TFSA 10K or 20K or even 30K per year (just as somebody mentioned move savings from cash account). However, if we'd buy house in Forest Hill -> forget about TFSA at all. . We like to save and not to spend money on expensive clothes and luxuary cars. So, everyone has his own preferences.

Cut taxes is also excellent idea, i support everything that I can save more

But again, only stupid can beleive that Ignatiev (even if he changed last name to Ignatieffffff) gonna reduce taxes... Why do you think NL likes Liberals so much with their 20% unemployment rate?!


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## andrewf (Mar 1, 2010)

gibor said:


> Yeap  or stupid or sick (but this is another story)....please explain me why our family who are new immigrants without Canadian education and experience can max TFSA, RRSP, RESP?! Because we're working and not whining. So, why I should pay huge taxes on my hard earned money ?!


You didn't have to immigrate to Canada. I understand there are plenty of places that offer attractive tax rates. As I understand it, Somalia is completely tax-free.


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## gibor365 (Apr 1, 2011)

andrewf said:


> You didn't have to immigrate to Canada. I understand there are plenty of places that offer attractive tax rates. As I understand it, Somalia is completely tax-free.


As a alternative, I can offer you to immigrate to Cuba or North Korea 

And BTW, I completely support last PM (Harper) and last goverment, so I'm in right country. With our help Harper will get majority and Ignatiefffff won't destroy Canada.


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## gibor365 (Apr 1, 2011)

andrewf, if you are so poor...seriously, you are whole day (or days) sitting on this forum ... start working and you'll have money to invest into TFSA


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## steve41 (Apr 18, 2009)

daddybigbucks said:


> really?
> 
> if you take the TFSA limits for yourself and your wife till your retirement age.
> You take this total amount and put it into dividend paying stocks that pays >3% annually.
> ...


A different take..... a 40 yearold with just $10K in his RRSP earns $65K, plans to retire at age 65, die broke at 95, full cpp&oas entitlement, living in BC.

In one case he decides to invest going forward in his TFSA, in the other case he opts for his RRSP. The punchline.... the RRSP strategy delivers him a constant (pre&post retirement) ATI/lifestyle of $41,213 and opting for the TFSA will deliver a constant die-broke ATI of $41,166. Just slightly less than the RRSP option.
RRSP strategy
TFSA strategy


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## andrewf (Mar 1, 2010)

Seems like we agree, gibor: the money used on any increase to the TFSA is better used cutting marginal tax rates.

I wouldn't hold your breath on any of these changes though, as they aren't going to happen.


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## andrewf (Mar 1, 2010)

gibor said:


> andrewf, if you are so poor...seriously, you are whole day (or days) sitting on this forum ... start working and you'll have money to invest into TFSA


My TFSA is maxed out. I'm just not a selfish ingrate. I think it's okay to pay some taxes now in exchange for the many great public services I've received that got me to where I am today. Your "I've got mine, Jack" attitude has bitten many countries in the backside when they ignore their poor.


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## daddybigbucks (Jan 30, 2011)

steve41 said:


> A different take..... a 40 yearold with just $10K in his RRSP earns $65K, plans to retire at age 65, die broke at 95, full cpp&oas entitlement, living in BC.
> 
> In one case he decides to invest going forward in his TFSA, in the other case he opts for his RRSP. The punchline.... the RRSP strategy delivers him a constant (pre&post retirement) ATI/lifestyle of $41,213 and opting for the TFSA will deliver a constant die-broke ATI of $41,166. Just slightly less than the RRSP option.
> RRSP strategy
> TFSA strategy


holee molee, i picked the wrong guy to explain something.
I dont even know what ATI stands for.

I cant comprehend any of that, but agree we all die broke.


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## the-royal-mail (Dec 11, 2009)

andrew, why must you twist this around to further your "let's prioritize the poor" agenda? Did you even read my earlier post? There is no disproportionate assistance in the TFSA. Everyone has equal access to save in it. $5K is a maximum (not sure if you knew that), nobody has to contribute that amount. The beauty of the account is that no matter how much you save, whatever you save is treated the same way as what others have saved in their TFSAs. I think you need to drop your agenda and see the forest for the trees here. The TFSA is a great thing that is available and benefits everyone equally. But as someone said about, you have to help yourself.


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## DavidJD (Sep 27, 2009)

You see, the problem with poor people is they don't have any money.


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## steve41 (Apr 18, 2009)

> holee molee, i picked the wrong guy to explain something.
> I dont even know what ATI stands for.
> 
> I cant comprehend any of that, but agree we all die broke.


 ATI is after tax income.... what you get to spend on beer&groceries. In one instance, our guy can make it out to age 95 living on $41,213 annually before his capital runs out, and in the other instance he makes it out to 95 on a $41,166 lifestyle. Generally, it is desirable to have 41,213 to spend rather than 41,166.


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## gibor365 (Apr 1, 2011)

andrewf said:


> My TFSA is maxed out. I'm just not a selfish ingrate. I think it's okay to pay some taxes now in exchange for the many great public services I've received that got me to where I am today. Your "I've got mine, Jack" attitude has bitten many countries in the backside when they ignore their poor.


"to pay some taxes now in exchange for the many great public services I've received that got me to where I am today." - nice wording, I have to pay taxes that you will received great public services that got you where u r today!

"has bitten many countries in the backside when they ignore their poor" - yeah, I've heard it in Soviet Union, take from rich (for them and you: rich is everyone who is not poor) and give to poor! Where is USSR now?!


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## andrewf (Mar 1, 2010)

the-royal-mail said:


> andrew, why must you twist this around to further your "let's prioritize the poor" agenda? Did you even read my earlier post? There is no disproportionate assistance in the TFSA. Everyone has equal access to save in it. $5K is a maximum (not sure if you knew that), nobody has to contribute that amount. The beauty of the account is that no matter how much you save, whatever you save is treated the same way as what others have saved in their TFSAs. I think you need to drop your agenda and see the forest for the trees here. The TFSA is a great thing that is available and benefits everyone equally. But as someone said about, you have to help yourself.


I understood what you were saying. What I am saying is that it benefits everyone who can afford to contribute more than $5k per year. That would be an impressive feat for someone who earns minimum wage.

So indeed, the problem with poor people is that they don't have money. Dangling this in front of them won't help them in the least.

I think it's very revealing that some (not you, TRM) think that people only advocate for policies they would personally benefit from. I'm more likely to be offended by an unfair or ridiculous policy that I would benefit from more than average.


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## Homerhomer (Oct 18, 2010)

slacker said:


> You're wrong. It's $3830. I personally would welcome an increase, but I doubt the average Canadian has much more discretionary income left to contribute.


I agree, with any budget it's either the low earners or high earners that get the breaks, there is rarely anything for middle class.

Though I am for tax breaks and would welcome the increase.


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## Sampson (Apr 3, 2009)

andrewf said:


> I think it's very revealing that some (not you, TRM) think that people only advocate for policies they would personally benefit from. I'm more likely to be offended by an unfair or ridiculous policy that I would benefit from more than average.


Hear, hear!

I personally would benefit, but I don't believe in 'to each their own'. Nothing wrong with me losing some tax dollars (which I would have spent frivolously anyway) to benefit others less fortunate.


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## daddybigbucks (Jan 30, 2011)

steve41 said:


> ATI is after tax income.... what you get to spend on beer&groceries. In one instance, our guy can make it out to age 95 living on $41,213 annually before his capital runs out, and in the other instance he makes it out to 95 on a $41,166 lifestyle. Generally, it is desirable to have 41,213 to spend rather than 41,166.



yup that extra 47 bucks is a case a beer for that 95 yr old.

good luck with your retirement plans. i just hope you dont go senile. 
ill stick with mine and not drink.


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## steve41 (Apr 18, 2009)

> i just hope you dont go senile.


 Too late.


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## riamo (Jun 18, 2009)

this is a joke..this does not help most canadians...as someone in high income tax bracket i would prefer the government spend more money on an innovative health care system before it goes broke..(oh yeah it already has)


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## daddybigbucks (Jan 30, 2011)

steve41 said:


> too late.


lol


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## Larry6417 (Jan 27, 2010)

andrewf said:


> You didn't have to immigrate to Canada. I understand there are plenty of places that offer attractive tax rates. As I understand it, Somalia is completely tax-free.


Yes, but the road tolls one has to pay not to get shot are murder.


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## Larry6417 (Jan 27, 2010)

I'm going to be the devil's advocate here. I fully support a doubling of the TFSA limit because it would benefit me personally, and it's the fair thing to do.

People on this thread have argued that the TFSA increase would help wealthy Canadians more than poor Canadians. That's true, but how is that an argument against allowing (some) Canadians to save more? By the same argument, RRSPs also disproportionately benefit the wealthy. Should we reduce RRSP limits too?

Statistics Canada has gathered some interesting data about services used and taxes paid per quintile of income. See http://www40.statcan.gc.ca/l01/cst01/famil88b-eng.htm

You can toggle "income" or "transfers" on the left column. Some intersting facts come out. The top income quintile (top 20%) pays ~ 60% of tax. The bottom quintile of income pays ~ 1% of tax. The bottom 2 quintiles of income (bottom 40%) receive more in gov't transfers than they pay in tax. The middle quintile of income receives roughly what it pays in tax. The top 2 quintiles pay more in tax than they receive in transfers. The difference becomes even more extreme when you dissect the top quintile. The top 5% of earners pay ~39% of tax while the top 10% pay just over 50% of all tax. See www.canada.com/national/nationalpost/news/story.html?id=6982cd17-a6b2-4c11-8234-42693ee70259

High earners in Canada deserve a tax break. "Soak the rich" is great populist policy, but it's not terribly fair. 

*Reality check*: lowering income taxes will do almost nothing for the poor. The bottom quintile of income pays only ~ 2-3% of taxes. Also, lowering income tax even 1% is exceptionally expensive. I forget the exact number, but it's in the billions.


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## Sampson (Apr 3, 2009)

Larry6417 said:


> *Reality check*: lowering income taxes will do almost nothing for the poor. The bottom quintile of income pays only ~ 2-3% of taxes. Also, lowering income tax even 1% is exceptionally expensive. I forget the exact number, but it's in the billions.


Lower income taxes for the poor do nothing for CANADA, for those low income earners, that 15% is meaningful.

In fact, if we cut income taxes altogether for the poor, the country would not be impacted significantly at all, as you point out.


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## newfoundlander61 (Feb 6, 2011)

The plan for the TFSA amount to increase once they "balance" the budget is a non issue as they may not be in power when this happens.


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## CanadianCapitalist (Mar 31, 2009)

Like most members here, we would be taking full advantage of any boost in TFSA limits. It's great for me personally but I fail to see how any tax proposal that disproportionately benefits the well-off could be called fair.

Yes, cutting income taxes across the board is very expensive. I recall reading that cutting 1% in the lowest tax bracket will cost the Treasury $6B. Guess what? Recently the Post estimated that all the tax cuts implemented by this conservative government add up to approx. $18B. That's good for a 3% cut in the lowest bracket. Why not simply cut income taxes instead of handing out $1,200 per child under 6 years of age or a tax credit for kids fitness?

The TFSA is a great program but I contend that $5K is plenty of contribution room. Plenty enough for everyone to benefit. Poorer Canadians can save in a TFSA and avoid clawback of transfer payments. For better-off Canadians it offers a tax shelter for some of their investments that they will otherwise hold in taxable accounts. Doubling it will only benefit the latter.


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## clovis8 (Dec 7, 2010)

slacker said:


> I believe it's called "starve the beast" strategy by the Bush administration.


Wow we are at the point where we can openly cite a Bush policy as a good thing?

Bush was a genius at starving the beast;

2000 they had a 236 billion surplus and by 2006 Bush had a 3 trillion deficit. 

Conservatives are funny. 

Anyway, back on topic, lets not pretend this is anything other than "fiscal" conservatives throwing government money (which they supposedly hate to do) at voters trying to buy votes.

What Canadiancapitalist said is 100% right imo.


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## Eder (Feb 16, 2011)

DavidJD said:


> You see, the problem with poor people is they don't have any money.



Lets give them ours!!


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## Sherlock (Apr 18, 2010)

I agree that an increase in TFSA contribution room will mainly benefit the rich. But will it hurt the poor? If so, how? Just because something benefits the rich doesn't mean it hurts the poor as far as I can see. And let's put these numbers into context: 70% of Canadians own the home they live in, and the average house price in Canada is $355,000. So I think for the majority of people who can't max out their TFSA, it is because of poor planning and/or their high-consumption lifestyle, not because they're genuinely poor.

I make less than 60k and I save about 63% of my after tax income. Of course I could buy a house with 5% down and the biggest mortgage the bank would give me and then whine about how I don't have any money left over to contribute to my TFSA, but homie don't play that.


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## slacker (Mar 8, 2010)

@clovis8: I didn't mean to imply the Bush policy to be good or bad, just that such conscious policy exists. I also implied a degree of hypocrisy with so called Republicans and their spending ways.

tax-and-spend > spend-and-spend


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## andrewf (Mar 1, 2010)

I call it borrow and spend, which is just a different kind of tax and spend, where you're taxing the future.


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## ghostryder (Apr 5, 2009)

Sherlock said:


> And let's put these numbers into context: 70% of Canadians own the home they live in, and the average house price in Canada is $355,000.


Yes, let's put that in context. Those 70% of Canadians that own their home didn't all buy a $355k house yesterday. 




Sherlock said:


> I make less than 60k and I save about 63% of my after tax income.




You live on $17K a year? Impressive. My 10 yr old probably eats that much in groceries alone. 


http://www.taxtips.ca/calculators/taxcalculator.htm

$60k gross = ~$45k take home - 63% = $17k


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## gibor365 (Apr 1, 2011)

ghostryder said:


> You live on $17K a year? Impressive. My 10 yr old probably eats that much in groceries alone.
> 
> 
> http://www.taxtips.ca/calculators/taxcalculator.htm
> ...


But his/her spouse probably also bring home some money

Whatever you say, TFSA is a great thing! Even if currently you have to pay for daycare (I'm talking about middle class, " poor" families don't pay, we pay for them) , morgage etc and you don'r max you TFSA, you always can do it in future....


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## Ben (Apr 3, 2009)

Sherlock said:


> I agree that an increase in TFSA contribution room will mainly benefit the rich. But will it hurt the poor? If so, how? Just because something benefits the rich doesn't mean it hurts the poor as far as I can see.


Yes, it does hurt the poor. Like this...

TFSA contribution room is increased.
Rich people shuffle money from taxable accounts to TFSA.
Government receives less income from rich people.
Government has no money available to cut lowest marginal tax rates.
Poor people fail to benefit from income tax cuts they could otherwise have received.
Poor people get hurt.


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## Toronto.gal (Jan 8, 2010)

LOL Xander, I think you have created the most active thread in CMF's history; 9 pages in 24 hours! 

Who says Canadians are apathetic!


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## Homerhomer (Oct 18, 2010)

Sherlock said:


> I make less than 60k and I save about 63% of my after tax income. .


Do you live in your parents basement?

Just asking because even a single person paying rent, or mortgage, or even property tax and maintanance can not save this much and live a regular live in Canada.

If you have a spouse paying for your living expenses then your 63% is overstated.


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## Xander (Apr 3, 2009)

Wow! Great discussion!
Personally I would like to see the increase as it would allow me to save another $10,000 per year tax free between my wife and I. I agree it does benefit higher income earners but I see nothing wrong with that. 
Whichever way you look at it, it is the lower tax payers and earners who benenfit the most from the tax system, gov't program etc... in this country.

Lower earners get the same health care, access to gov't services and is some cases get additional tax credits or social assistance. Fine. It is the small businesses and higher earners that fund this. I would appreciate a little apprecitation. The additional $5000 for the TFSA is good thing for me & my family. I don't begrudge the extra resp contribution that lower earners get or the gst refund that lowers earners got, or any other credits or assistance that people receive. I may not agree with all of the social programs/assistance in this country all of the time but it is what it is. Time to reward the people who help fund Canada's social safety net.

Just my opinion but I'm entitled to it.


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## andrewf (Mar 1, 2010)

"Time to reward the people who help fund Canada's social safety net."

I guess statements like this just puzzle me. How do you know this? How do we know that this change is enough and not too much? Why don't we just cut the marginal rate for high income earners, which is a better idea?


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## DavidJD (Sep 27, 2009)

I just wish there was a way we could make everybody low income and then we would all be satisfied = equally. It really burns me when I see people getting ahead and I can barely afford my smokes, tattoos and face piercings. The government should give me a break! Body art is expensive and should not be taxed!


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## Xander (Apr 3, 2009)

Hi Andrew all I mean by my statement is that all gov't programs are funded by tax revenues. Those who pay more tax do not get anymore for their tax dollar do they? All basic gov't services and programs are available to all Canadians equally (health care, education etc...). It stands to reason that the people who pay most taxes fund the programs. I do not have hard figures handy but I don't think those figures would show any different.


I agree it would also be nice, maybe even better, to lower the tax rates on higher incomes but no one seems to be willing to do that. At least I haven't heard any of the provincal of federal leaders seriously discuss that issue lately.


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## Toronto.gal (Jan 8, 2010)

Xander said:


> Whichever way you look at it, it is the lower tax payers and earners who benenfit the most from the tax system, gov't program etc... in this country.
> Just my opinion but I'm entitled to it.


Well written post Xander and yes, you most definitely are entitled to your opinion!

Re: gov. programs, very true as I remember a time when we used to pay $900/month for daycare while others paid $1/day.


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## Toronto.gal (Jan 8, 2010)

DavidJD said:


> I just wish there was a way we could make everybody low income and then we would all be satisfied = equally. It really burns me when I see people getting ahead and I can barely afford my smokes, tattoos and face piercings. The government should give me a break! Body art is expensive and should not be taxed!


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## HaroldCrump (Jun 10, 2009)

CanadianCapitalist said:


> Yes, cutting income taxes across the board is very expensive. I recall reading that cutting 1% in the lowest tax bracket will cost the Treasury $6B. Guess what? Recently the Post estimated that all the tax cuts implemented by this conservative government add up to approx. $18B.


CC, no issue with your post, however, the National Post newspaper's position is disagreeable.
It is wrong to say that a given tax cut "costs" the public coffers $X.

The reason it appears to "cost" something is because a given tax level is considered sacrosanct.
It is assumed that anything lower is a "cut" and anything higher is a "raise".
That level of taxation is then used as a base for political rhetoric, public policy, etc.

However, at some point in the past, the tax level must have been lower (or higher).
In other words, it is assumed that the current level of taxes is somehow an inviolable right and entitlement of the govt.
Therefore, any proposed cut is somehow a loss for the govt.

Tax (revenue) and spending are part of a balance sheet - we all know that.
Instead of cutting taxes (and perceiving it as a loss), expenses can also be cut.
It is unfortunate that tax cuts/raises receive so much rhetoric and attention rather than cutting spending.
None of the political parties in this election (including the Harper group) is even talking about the expense side of things.
The Liberals, Greens and the Democrats have plans to increase spending substantially and are understandably reticent on how they plan to pay for it.
The PCs are placing a huge bet on GDP growth to wipe out the deficit and fund all these programs that they are promising (TFSA increase, spousal income splitting, child credits, etc.)

Anyhow, just wanted to make the point that how the current level of tax in a society is considered an inviolate right and any reduction is seen as a "cost".


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## andrewf (Mar 1, 2010)

DavidJD said:


> I just wish there was a way we could make everybody low income and then we would all be satisfied = equally. It really burns me when I see people getting ahead and I can barely afford my smokes, tattoos and face piercings. The government should give me a break! Body art is expensive and should not be taxed!


Yeah, being poor is a larf. You should try volunteering sometime. It might change your perspective.


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## DavidJD (Sep 27, 2009)

andrewf said:


> Yeah, being poor is a larf. You should try volunteering sometime. It might change your perspective.


How presumptuous. I actually am a front-line worker with low income families on poverty, housing and other community development. Not to mention my volunteering.

The reality is that many low-income families are simply unwilling to do without what they perceive as essentials – not luxuries. I cannot afford $800 in tattoos, $100 in piercings, $300-600/month in cigarettes and up to $30/day in KFC. 

Last summer: I have some friends/neighbours who take their kids to a neighbourhood pool and our kids play together. They even have pizza’s delivered there, have more body art etc. than I have ever seen, conceal beers at the municipal water park and go through packs of smokes. She yaks on her cell phone ($) to her social service worker that she needs to be placed at the on the top of the daycare waiting list ($1/day with free diapers and meals) because she has now found a doctor who is willing to write a note that she needs it for stress. She has not had a job since she became pregnant with her 4 year old. Her well decorated boyfriend whispers to me that he lost his job two weeks ago and has been hanging out a friend’s house all day not to raise awareness with his girlfriend…

Of course, these two will never max out their TFSA, ever.

But these two work really hard. They work really hard at being unemployed and keeping up their lifestyle. It takes resourcefulness and a very good understanding of the system to do what they do so well. As they explain the great lengths they go to play the system I am amazed. Equally amazing is how quick they are to leave a job. “the boss was a jerk” “I missed two shifts – my kid was sick!” “the customer was rude so I told him off”… never their responsibility, the blame is always the other ____.

This is what angers others who pay their way…myself included.

It is, however, fantastic to help families have an opportunity and to gain independence from social service reliance. Immigrant and refugee families are models of this. Their success is measured in months whereas many Canadian families take generations to get out of a cycle of poverty – if at all.


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## clovis8 (Dec 7, 2010)

DavidJD said:


> I just wish there was a way we could make everybody low income and then we would all be satisfied = equally. It really burns me when I see people getting ahead and I can barely afford my smokes, tattoos and face piercings. The government should give me a break! Body art is expensive and should not be taxed!


This is such a gross caricature. You realize lots of people who have MBAs, PHDs and other advanced training use the social net. Not to mention the tens if thousands of people in industries like manufacturing.


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## DavidJD (Sep 27, 2009)

clovis8 said:


> This is such a gross caricature. You realize lots of people who have MBAs, PHDs and other advanced training use the social net. Not to mention the tens if thousands of people in industries like manufacturing.


I think you mean generalization? Pretty much yeah.

'use' the social net is fine, that is why it is there. Agree 100%

abuse is another matter.

Not too many PHDs with five rings in their lips, 2 in their eyebrows and one each on their nostril, tongue, and cheek. 

Just sayin'


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## Toronto.gal (Jan 8, 2010)

True, it isn't just the 'poor' who know the system as I remember a University of Toronto School teacher [whose child attended same day-care as ours] receiving child-care subsidy & openly talking about it. 

She was married, but ok., her husband was a new immigrant and maybe her teaching salary at a prestigious private school was not enough, though she did manage to have enough to always drive the latest Volvo. But like I mentioned in another thread, welfare reform is not popular because then, many social workers would be out of a job too, so we are in essence supporting 2 welfare systems, ie: we need people on welfare in order to keep gov. employees employed; just a vicious cycle and David is spot-on about the system abuse as I have witnessed it over and over. 

Just for the record, I volunteer also [at a nursing home] & also used to deliver Meals on Wheels some years ago during my lunch hour until I got disgusted looking at some very dirty apartments full of smoke smell.


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## daddybigbucks (Jan 30, 2011)

DavidJD said:


> How presumptuous. I actually am a front-line worker with low income families on poverty, housing and other community development. Not to mention my volunteering.
> 
> The reality is that many low-income families are simply unwilling to do without what they perceive as essentials – not luxuries. I cannot afford $800 in tattoos, $100 in piercings, $300-600/month in cigarettes and up to $30/day in KFC.
> 
> ...


I cant wait to see andrewf reply to that.

There will always be the poor. 
Wouldnt you rather have the government cancel the social net and instead give you back 10% of your taxes and then you can decide what program you want to support?
I feel if you give someone a crutch, they will lean on that crutch. You take that crutch away, they have to learn how to walk. Yeah its tough to watch but suprisingly, everyone ends up walking.
Our spirit is alot stronger than people give it credit for.


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## Viscount (Apr 8, 2011)

Homerhomer said:


> Do you live in your parents basement?
> 
> Just asking because even a single person paying rent, or mortgage, or even property tax and maintanance can not save this much and live a regular live in Canada.


I can vouch for the poster who was living on $17k after tax. I live alone and managed that for all of the prior four years. (This year was an exception, but I had moving expenses that my new employer did not reimburse.)

It is *perfectly* possible to live frugally in Canada. In most cases this means going without a car and cooking for oneself on a fairly consistent basis. I'm not an immigrant myself, but you'd be surprised how well some immigrant families do at saving on surprisingly low incomes.

In any case, I think the discussion about TFSAs benefiting the rich is completely misguided. Increased TFSA limits benefit the poor and lower middle class. Before TFSAs, the poor who did manage to diligently save were at risk of being slammed, often unknowingly, because they were funding RRSPs, which put them at risk for the GIS and other benefit clawbacks. (Also, the poor are more likely to have to contend with unexpected emergency expenses, which TFSAs are much better at accommodating.) In general, TFSAs are a much safer savings vehicle for low income Canadians, and any meaningful increase benefits them.


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## realist (Apr 8, 2011)

daddybigbucks said:


> There will always be the poor. Wouldn't you rather have the government cancel the social net and instead give you back 10% of your taxes and then you can decide what program you want to support?


Lets do that. I want you to decide at birth if you want to pay taxes and have a social safety net or pay no taxes and you are on your on. If you ever get sick, you pay. If you ever don't have a job, you deal with it. If you have kids, you pay for everything yourself. If you drive on a road, you pay the toll. If you use electricity you pay the *real* cost without government subsidy. You have to make this decision BEFORE you know whether or not you will have a good job and the ability to support yourself. BEFORE you know if you will get a debilitating disease in your prime money earning years. 

Yes there are stories about idiots and screw ups who abuse the system. There are also stories about people who become successful productive people because they got a helping hand at a rough point in their life. 

My taxes pay for a lot of stuff I don't use. I'm okay with that. It's part of living in a community and making the country a better place. If you don't like that, there is a country right below us that approaches things differently. So many people want to cut spending... but not on the stuff they personally use of course.



> I feel if you give someone a crutch, they will lean on that crutch. You take that crutch away, they have to learn how to walk. Yeah its tough to watch but suprisingly, everyone ends up walking.


LMFAO. Really? Theres no one that dies cause they starve, or can't afford health care etc?


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## andrewf (Mar 1, 2010)

I don't support welfare, either. It's a poverty trap. I'd rather a modest guaranteed annual income. Things like subsidized daycare are unwise. If you can't earn enough to cover the cost of daycare, stay home and care for your kids. But that requires some social assistance, particularly for single mothers. Although I'm sure you will also mock those single mothers who selfishly elect to not allow the father to abuse them or their child.

What your argument boils down to is that the poor are morally deficient and the wealthy are virtuous. It must be nice to be able to maintain such a stark world view. It must make it easier not having the think about any shades of grey.


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## andrewf (Mar 1, 2010)

"I feel if you give someone a crutch, they will lean on that crutch. You take that crutch away, they have to learn how to walk."

Those damn quadriplegics not doing any useful work. Take away their chairs and I'm sure they'll learn how to take care of themselves. Or something. 

Yikes. Do you kick out your granny's walker, too?


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## balk (Dec 6, 2010)

I can't believe the attitude of so many people in this thread. It seems to me that most people only vote for policies that only benefit them. What is wrong with voting based on beliefs. 

I will preface the next part of the rant with the fact that my household income was over 180k and we did max-out our family TFSAs. 

The tax-free savings account is a vehicle for wealthy people to accumulate more wealth without paying tax on it. There is nothing fundamentally wrong with paying more tax or a higher percentage of tax if you make more money. And most poor people do not want to be poor, nor are they lazy. 

Anyway, I think either the contribution room should be dimished or the total amount of a TFSA should be capped because after a certain point it is not for savings any longer. 

There was an interesting article in the globe.


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## Toronto.gal (Jan 8, 2010)

andrewf said:


> Those damn quadriplegics not doing any useful work. Take away their chairs and I'm sure they'll learn how to take care of themselves. Or something.
> 
> Yikes. Do you kick out your granny's walker, too?


Who is doing the mockery here??

You're making unfair comments. Nobody is mocking anyone as it's understood that *we're not talking about legitimate cases.* Abuse does exist, it's a fact. 

TRM was right when he said: "must you twist this around to further your let's prioritize the poor".


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## Larry6417 (Jan 27, 2010)

Sampson said:


> Lower income taxes for the poor do nothing for CANADA, for those low income earners, that 15% is meaningful.
> 
> In fact, if we cut income taxes altogether for the poor, the country would not be impacted significantly at all, as you point out.


Actually, the converse is true. Lowering income tax would be great for Canada as a whole but lousy for poor Canadians. As CC pointed out, a 1% rate reduction in income tax would yield 6 billion in tax savings for Canadians - the majority of which would go to middle- and upper middle-class taxpayers. If you look at the Stats Can chart I provided in a prior post (see http://www40.statcan.gc.ca/l01/cst01/famil88b-eng.htm ), an individual in the lowest quintile of income pays ~ $200 in tax. Eliminating tax completely for that individual would give back ~ $4 per week. Does it make sense to you to spend 6 billion dollars to save that person $4 per week?

I'm not a fan of big government, but in this case, a direct subsidy to the poorest makes more sense than a blanket income tax reduction.


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## Larry6417 (Jan 27, 2010)

DavidJD said:


> Not too many PHDs with five rings in their lips, 2 in their eyebrows and one each on their nostril, tongue, and cheek.
> 
> Just sayin'


Uh,...I think you haven't met some of the PhDs I know.


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## Larry6417 (Jan 27, 2010)

Ben said:


> Yes, it does hurt the poor. Like this...
> 
> TFSA contribution room is increased.
> Rich people shuffle money from taxable accounts to TFSA.
> ...


You're forgetting something. To transfer funds from a taxable account to a TFSA, a taxable capital gain is triggered. In the short-term, transfers to TFSAs would give the gov't more revenue, which is offset by the long-term reduction in revenue. Malcolm Hamilton has an interesting suggestion to deal with this future shortfall: raise consumption tax (GST).

Also, reducing marginal rates doesn't help the poor all that much.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> Why don't we just cut the marginal rate for high income earners, which is a better idea?


You oppose doubling TFSA limits because it benefits only the wealthy. However, you advocate reducing the highest marginal rates...which benefits only the wealthy. You're going to have to explain the difference to me.


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## DavidJD (Sep 27, 2009)

Larry6417 said:


> Uh,...I think you haven't met some of the PhDs I know.


Touche - I know some too! However none of them that I know are...unemployed


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## DavidJD (Sep 27, 2009)

Heh Andrew,

The circumstances of poverty are far too complex to discuss in this forum. 

Let's agree that increasing the TFSA will have minimal effect on incidences of poverty/low-incomes for most Canadians.

Other policy measures are required tp address these issue and whoever pays for those (?) should accept that it is money well spent and reaches the intended people.


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## the-royal-mail (Dec 11, 2009)

Right. So can we get back to the topic of TFSA upgrade announcement?


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## slacker (Mar 8, 2010)

As currently stated, it'll be 2 or even possibly 3 more elections before it could possibly happen. So it's no news as far as I'm concerned.


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## dotnet_nerd (Jul 1, 2009)

Larry6417 said:


> You're forgetting something. To transfer funds from a taxable account to a TFSA, a taxable capital gain is triggered.


Really? Can you not transfer funds "in kind" like you can with RRSP accounts?


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## andrewf (Mar 1, 2010)

Larry6417 said:


> You oppose doubling TFSA limits because it benefits only the wealthy. However, you advocate reducing the highest marginal rates...which benefits only the wealthy. You're going to have to explain the difference to me.


I don't advocate. I said it was a better policy. It reduces disincentive to work for the wealthy, which is an issue for high marginal tax rates. Increasing TFSA does not encourage wealthy people to work more. I doubt it would do much to encourage savings, either. It will allow people who would have saved anyway in a non-registered account to instead save in their TFSA, avoiding tax. There will be little economic benefit because it won't do much to modify behaviour.


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## andrewf (Mar 1, 2010)

DavidJD said:


> Let's agree that increasing the TFSA will have minimal effect on incidences of poverty/low-incomes for most Canadians.
> 
> Other policy measures are required tp address these issue and whoever pays for those (?) should accept that it is money well spent and reaches the intended people.


We can only use any given tax dollar once. If we choose to use it for a tax cut for rich people (much like their income splitting proposal), that's how our democratic system works. However, those foregone revenues could have been used to accomplish other goals. We can't have our cake and eat it to.

Otherwise we could extend your statement to say that reducing taxes to zero will have no impact on the incidence of poverty.

You guys might not believe me when I say I'm a fiscal conservative, but I believe in smart taxation that minimizes economic harm. Boutique tax credits, raising TFSA limits, income-splitting, etc. are bad ways to cut taxes. It's really tax-spending, because we retain the harmfulness of higher marginal tax rates, but give transfers of cash to special interests and call it a tax cut. All the cost without most of the economic benefit. In a word: dumb. Real conservatives don't support this kind of nonsense.


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## Toronto.gal (Jan 8, 2010)

dotnet_nerd said:


> Really? Can you not transfer funds "in kind" like you can with RRSP accounts?


Yes, you can, but profit that is made in a non-registered account translates into capital gains upon selling or transferring in-kind. No escaping taxes by transferring from a taxable to a non-taxable account. 

http://www.taxtips.ca/personaltax/investing/transfersharestorrsp.htm


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## Eclectic12 (Oct 20, 2010)

HaroldCrump said:


> steve41's point is true from the technical standpoint.
> However, I believe, most people still consider RRSP a higher priority ...
> 
> There is also the issue of the large section of the working population that do not have any appreciable RRSP limits due to DBP plan contribution adjustments, which is often a mandatory forced contribution rather than the optional RRSP type contribution.
> ...


Actually ... there is a limit to the RRSP - the 18% of income. If one reports an income of zero, one's RRSP contribution room is also zero. I suspect you are meaning the working population that has huge already earned but un-used RRSP contribution room.

As for RRSP contribution room being reduced, a Defined Benefit pension (DBP) and an Defined Contribution (DCP) both will reduce the RRSP room earned.


I'm also suprised that a DBP contribution "often" is mandatory. My experience is that the contributions are mandatory. The only "optional" aspect I've every been offered is to join now or defer joining until at the end of the a set timeframe.

I supposed there's also the option to quit one's job to stop the mandatory contributions. I'm not sure a lot of people use this option. *grin*


Cheers


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## Eclectic12 (Oct 20, 2010)

ghostryder said:


> Yes, let's put that in context. Those 70% of Canadians that own their home didn't all buy a $355k house yesterday.
> 
> [ ... ]
> 
> ...



Good point ... but then again, I did buy a house, owned a car, took trips and ate when I was making $25K a year. 


Where one is and what one's costs are factors but the biggest factor I've witnessed is one's expectations/discipline.


Cheers


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## Sherlock (Apr 18, 2010)

Ben said:


> Yes, it does hurt the poor. Like this...
> 
> TFSA contribution room is increased.
> Rich people shuffle money from taxable accounts to TFSA.
> ...


Even if what you say is true, eventually the owners of those TFSAs will withdraw their money and spend it, at which time they'll pay taxes on whatever they buy.


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## Sherlock (Apr 18, 2010)

Homerhomer said:


> Do you live in your parents basement?
> 
> Just asking because even a single person paying rent, or mortgage, or even property tax and maintanance can not save this much and live a regular live in Canada.
> 
> If you have a spouse paying for your living expenses then your 63% is overstated.


No I live by myself in an apartment in Toronto and pay rent of just slightly over $1000/month. There are many frugal young professionals in similar situations.


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## Sherlock (Apr 18, 2010)

ghostryder said:


> Yes, let's put that in context. Those 70% of Canadians that own their home didn't all buy a $355k house yesterday.


But if 70% of Canadian families own a home and the average home costs 355k then it just doesn't make sense that they can't come up with a measly 10k a year to put in their TFSA. Unless they spend their money lavishly, or unless they bought too much house, in which case they have no one to blame but themselves.

If someone buys a house with the minimum downpayment allowable, and the maximum mortgage the bank will give them, and I live in a 1 bedroom apartment and save my money, they have no right to be upset that I can max out my TFSA and they can't. I simply chose to sacrifice on some things and they didn't.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> I don't advocate. I said it was a better policy. It reduces disincentive to work for the wealthy, which is an issue for high marginal tax rates. Increasing TFSA does not encourage wealthy people to work more. I doubt it would do much to encourage savings, either. It will allow people who would have saved anyway in a non-registered account to instead save in their TFSA, avoiding tax. There will be little economic benefit because it won't do much to modify behaviour.


At present, in AB, the top marginal tax rate is 39%. As CC mentioned, a 1% rate reduction would cost 6 billion dollars. Do you really think people will work that much harder for a top tax rate of 38%? If we were talking about punishingly high tax rates of > 50%, I'd agree. A 6 billion dollar tax cut really is not going to buy that much increased activity.

On the other hand, if gov't cut capital gains tax to zero (the last estimate I saw estimated this would cost about 2 billion), then economic activity would increase dramatically. However, as much sense as this makes economically, it suffers from the politics of perception i.e. it would disproportionately benefit the wealthy. The cost of doubling TFSA limits, at least in the first year (according to the Tories) would cost about 30 million. I don't think you should make sweeping statements that such a move would not modify behaviour. It would definitely modify my behaviour and that of many on this forum.

I agree that tax dollars are finite and should be "spent" (including tax cuts) wisely. I doubt that a tax cut for the highest marginal rate is the best use of tax dollars.


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## Sherlock (Apr 18, 2010)

balk said:


> There was an interesting article in the globe.


What a ridiculous article. The author's assertion that investing your TFSA in a well-balanced portfolio is tantamount to "gambling your money away" is laughable.


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## slacker (Mar 8, 2010)

@Sherlock: No Sherlock. The government (taxpayers) will put on their might behind the housing market, and prop prices up. They don't want a whole country (70%) of people experience a synchronized housing crash. People like you and me who abstain from buying a house will pay for their mistakes in the end.

It's called private profit, public loss.


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## andrewf (Mar 1, 2010)

Sherlock said:


> But if 70% of Canadian families own a home and the average home costs 355k then it just doesn't make sense that they can't come up with a measly 10k a year to put in their TFSA. Unless they spend their money lavishly, or unless they bought too much house, in which case they have no one to blame but themselves.
> 
> If someone buys a house with the minimum downpayment allowable, and the maximum mortgage the bank will give them, and I live in a 1 bedroom apartment and save my money, they have no right to be upset that I can max out my TFSA and they can't. I simply chose to sacrifice on some things and they didn't.


The median after-tax income in Canada is ~25,000 per year. You think they should be able to save 18% of that in their RRSP and 10k per year in TFSA? That's equivalent to saving 58% of your after-tax income. You're absolutely nuts if you think that average Canadians will have any use for this extra contribution room.


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## andrewf (Mar 1, 2010)

Larry6417 said:


> At present, in AB, the top marginal tax rate is 39%. As CC mentioned, a 1% rate reduction would cost 6 billion dollars. Do you really think people will work that much harder for a top tax rate of 38%? If we were talking about punishingly high tax rates of > 50%, I'd agree. A 6 billion dollar tax cut really is not going to buy that much increased activity.
> 
> On the other hand, if gov't cut capital gains tax to zero (the last estimate I saw estimated this would cost about 2 billion), then economic activity would increase dramatically. However, as much sense as this makes economically, it suffers from the politics of perception i.e. it would disproportionately benefit the wealthy. The cost of doubling TFSA limits, at least in the first year (according to the Tories) would cost about 30 million. I don't think you should make sweeping statements that such a move would not modify behaviour. It would definitely modify my behaviour and that of many on this forum.
> 
> I agree that tax dollars are finite and should be "spent" (including tax cuts) wisely. I doubt that a tax cut for the highest marginal rate is the best use of tax dollars.


$6 billion is to cut every tax bracket by 1%. The cut the top marginal rate would cost much less. To see why this is obviously true, think about what 1%=$6 billion means. It means that the income the tax change applies to is at least $600 billion. And I happen to be fairly confident that if you were to add up all the incomes in the highest marginal tax bracket, they don't add up to that figure (our economy is $1.36 trillion GDP). 

Quoting the cost of the increased TFSA room this year is incredibly misleading. The impact will become huge with time. It will effectively mean that 91% of families will not have any taxable capital assets after 10 years of contribution room accumulation. That means either cuts to public services, or higher income or GST rates.

"I don't think you should make sweeping statements that such a move would not modify behaviour. It would definitely modify my behaviour and that of many on this forum."

Will this make you save money you otherwise would have spent on consumption? This is my skeptical face.


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## DanFo (Apr 9, 2011)

*i love it*

As a single high earner I Love this proposed increase. I wish i didn't have to wait for the balanced budget.. if it ever happens...It's not only for the wealthy but ..we are more apt to take advantage of it. Since I'm single and have no kids or a wife to split my income with I get hosed every year just for being successful. I pay higher tax already and since I am lucky enough to have a pension..I have little room for RRSP contributions ( I realize it's a factor from my pension benefits I pay into). I'm not against paying MORE then my fair share for the social benefits but i live well below my means and would love to have more of an incentive to save ...ultimately we are all taxed when we spend the money and in the later years...it is likely that consumer taxes will be higher at that time (they could always increase estate taxes to increase the spending before one dies)......if things stay as they are and only increase I'll just be even more encouraged to retire out of the country and take my money elsewhere....I'm sure i can find a good insurance premium in a another land for far less then 38%of my income.... I have a brother who's been living off the system his whole life (but it's not his fault he will tell you) and it has slanted my view of the system....I realize some people need help to boost them back up in troubled times but when welfare becomes a lifestyle a system needs to be put in place to encourage ppl to at least try..even if it's just forced volunteering a few hours a week at shelters and soup kitchens or picking up garbage off the side of the highways....If your going to benefit from the goodness of the society you live in you shouldn't be mad at contributing to it's wellness....some of us even do these things just to help out


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## Sherlock (Apr 18, 2010)

andrewf said:


> The median after-tax income in Canada is ~25,000 per year. You think they should be able to save 18% of that in their RRSP and 10k per year in TFSA? That's equivalent to saving 58% of your after-tax income. You're absolutely nuts if you think that average Canadians will have any use for this extra contribution room.


Does that 25k figure includes part time workers, eg students, stay-at-home moms, elderly people winding down their careers, and other people not expected to be investing much money?


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## andrewf (Mar 1, 2010)

Yes. I don't see how that changes the argument that many people won't or can't benefit from this measure.


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## Argonaut (Dec 7, 2010)

If you feel guilty about making more money than the poor, then cut a cheque to the government or your local charity. It's that simple. Stop enforcing your views of wealth redistribution on others!

Personally, I'm very happy about this TFSA announcement. Also impressed with Conservative policy over the last few years, despite being a minority government (and likely again). The comparable group down south would be Ron/Rand Paul, the only politicians who make sense in the US.


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## NLOIL (Jan 28, 2011)

*Articles concerning TFSA, and the potential rise in contribution.*

Here are a few articles from the Globe as well as The Financial Post concerning, "Who Benefits from a TFSA", and Harper's TFSA promise...

http://www.theglobeandmail.com/repo...rom-tfsa-the-wealthy-for-sure/article1976138/

http://business.financialpost.com/2011/04/07/harper-to-pledge-tfsa-upgrade/


IMO, we are very unlikely to see an increase in the TFSA contribution room for the foreseeable future.


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## houska (Feb 6, 2010)

Argonaut said:


> If you feel guilty about making more money than the poor, then cut a cheque to the government or your local charity. It's that simple. Stop enforcing your views of wealth redistribution on others!
> 
> Personally, I'm very happy about this TFSA announcement. Also impressed with Conservative policy over the last few years, despite being a minority government (and likely again). The comparable group down south would be Ron/Rand Paul, the only politicians who make sense in the US.


I don't feel guilty, but I rather like to live in a country where fairly robust social programs exist - provided everyone pays their fair share. I have now lived and worked in 4 countries, of which the tax rate on my income is clearly the highest in Canada. But I cheerfully come back to Canada, and feel much more at home with the more social attitude that the majority or plurality of Canadians seem to feel, compared to for instance on average the U.S.


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## kcowan (Jul 1, 2010)

This is a long thread for a measure that will require a minimum of 2 elections before it gets enacted. I am not counting on it.


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## the-royal-mail (Dec 11, 2009)

kcowan said:


> This is a long thread for a measure that will require a minimum of 2 elections before it gets enacted. I am not counting on it.


Most of it was wasted on dealing with someone with an agenda.


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## steve41 (Apr 18, 2009)

I've been running a ton of scenarios .... RRSP-vs-TFSA, RRSP meltdown-vs-NOT, and it is hard to make much of a case for one or the other except for the low end wage earner. What _is_ extreme however, is the huge transfer in taxation weighting over time. If everyone started to melt their RRSP, and/or change their RRSP purchase to a TFSA purchase.... the current administration would see a big near term bump in tax revenue. I don't know the scale, but it seems it would be substantial. Furthermore, the tax-loss chickens wouldn't be coming home to roost until way down the road, when it will be some other politicians' problem.


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## andrewf (Mar 1, 2010)

Oh, I'm wounded. In all likelihood I'd benefit personally from increased TFSA contributions. I don't understand how disagreeing with the policy means I have an <sinister voice>agenda</sv>. It's not particularly smart tax policy. It's meant as a bribe (they best kind of bribe--the one you never have to pay out) to a particular demographic whose votes they need. It's not in the best interest of the country.


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## gibor365 (Apr 1, 2011)

andrewf said:


> Oh, I'm wounded. In all likelihood I'd benefit personally from increased TFSA contributions. I don't understand how disagreeing with the policy means I have an <sinister voice>agenda</sv>. It's not particularly smart tax policy. It's meant as a bribe (they best kind of bribe--the one you never have to pay out) to a particular demographic whose votes they need. It's not in the best interest of the country.


The difference is that even poor can benefit from TFSA, maybe for less degree than a middle class. Rich ppl don't need TFSA at all. imho
On the other hand liberals and NDP concentrate mostly to poor, promising to increase social programs on money of middle class.
You mentioned earlier that better to cut taxes, but poor don't pay taxes anyway, so what the point ?!


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## slacker (Mar 8, 2010)

To resurrect this dead horse for more punishment ...

Increase in TFSA could potentially benefit a lot of people, not just the affluent. Of course, those who has max out all registered accounts AND a decent size non-registered accounts will benefit (that's moi and many posters on this board). But the average Canadian will then have more choices when it comes to saving (for retirement or other items).

With $10k / year, people could use TFSA as a main pillar of their retirement vehicle. They're no longer dependent on RRSP and all its restrictions. Just because they're increasing the contribution room to $10k/year doesn't necessarily mean people have the extra money to put into TFSA, but they could switch from their RRSP contribution to TFSA savings instead. Choice is good.

So overall, I'd say this policy probably will benefit most middle class and all of the upper class. It doesn't really do anything for the poor at all, but I doubt that was the intention of the policy to start with. Are we saying that we can't do anything until (insert your favourite social cause), has been solved?

PS: on the "agenda" comment from another poster... If they can't have an informed discussion without accusing you of having an agenda, then I wouldn't pay any attention to them anyway. Some people have trouble accepting that reasonable people can have differing ideas.


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## steve41 (Apr 18, 2009)

Once again.... if I were a 40 yearold-ish, $70K-ish earning working stiff, planning to retire at 65, hoping to fund a sustainable lifestyle out to say 95, it wouldn't matter if I saved in my RRSP, the current ($5K cap) TFSA or the new improved ($10K cap) TFSA, or a combination. It wouldn't matter!!! They should have named the original RRSP the 'taxfree savings account'.... after all, it is essentially tax neutral.


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## the-royal-mail (Dec 11, 2009)

slacker said:


> PS: on the "agenda" comment from another poster... If they can't have an informed discussion without accusing you of having an agenda, then I wouldn't pay any attention to them anyway. Some people have trouble accepting that reasonable people can have differing ideas.


slacker, I realize from past comments you might not appreciate my opinions but I do try and offer a reasoned discussion and I answer lots of questions and take part in many different topics here in CMF. I have never been disrespectful towards you, but I get the sense you take issue with me? Mind explaining that? My comment above was in reference how andrewf is neither balanced nor reasonable in his opinions. Notice the majority of his comments are brief, snippy comments that always end up twisting every blasted discussion we have into a lobby effort to raise taxes or benefit the poor in some way. Look at his message history. He continually twists the discussions, from HST discussions, to energy usage and now to TFSA room to give himself yet another platform on which to spew more rhetoric and brief comments about his pet projects. It has gotten very old and you can see in the thread that I'm not the only one who has noticed the absurdity of his constant harping on this nonsense. If andrewf wishes to start a thread about these pet topics of his he is more welcome to do so, but I think it's well past the time to dispense with distorting every other blasted discussion to suit his agenda. Seriously.


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## balk (Dec 6, 2010)

Argonaut said:


> If you feel guilty about making more money than the poor, then cut a cheque to the government or your local charity. It's that simple. Stop enforcing your views of wealth redistribution on others!
> 
> Personally, I'm very happy about this TFSA announcement. Also impressed with Conservative policy over the last few years, despite being a minority government (and likely again). The comparable group down south would be Ron/Rand Paul, the only politicians who make sense in the US.


How are you any different. You are just trying to force your views about not caring about anybody other than yourself onto other people. 

I don't see how caring about the wellbeing of others who are less fortunate is a bad thing. Canada seems to have become a very selfish place. 


I agree with Adrewf that cutting the bottom tax rate by 1% is a much more sensible policy and would result in an increase in spending whereas letting people hide their assets will just allow those people to invest more and rob the government of revenue.


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## HaroldCrump (Jun 10, 2009)

gibor said:


> On the other hand liberals and NDP concentrate mostly to poor, promising to increase social programs on money of middle class.


*Nobody* concentrates on the real poor.
The NDP's primary vote banks are the labor unions.
Some of the things they are saying are, frankly, quite scary.
They're speaking of raising corporate tax rates, increasing taxes for the companies operating in the oil sands, doubling CPP contributions, preventing companies from outsourcing work, etc.
They've got economic diaster written all over them.
It seems they are merely playing their harmonica for the benefit of their anti-business vote banks.
If truly elected, they won't have the guts to do any of this.
Or (gasp) if they did, they'll lead the country right back into recession.


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## Argonaut (Dec 7, 2010)

balk said:


> How are you any different. You are just trying to force your views about not caring about anybody other than yourself onto other people.


Right, you've got me pegged perfectly.. 

I am just of the belief that I do a better job of applying my money than the bureaucratic mess that is the government. Be that on myself, my friends and family, or my charity of choice.

Seriously. If you want to pay more taxes.. cut a cheque to the government. Who is stopping you?


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## andrewf (Mar 1, 2010)

TRM, if you're interested in a community where no one disagrees with you, you could try setting up your own forum and banning people as you please. Our hosts here generously provide a forum where we can have respectful debates. I might disagree with you some times (and probably less often than you might think), but I don't harbour any animosity toward you at all. 

I'm trying to present a different perspective. I'm a little surprised that you think my position is to raise taxes overall. I might be okay with raising certain taxes, but that's usually part of some move to get rid of worse ones. If I advocate against dumb tax cuts, it's often because every bad tax cut is a missed opportunity for a good one. And the reason why I don't support tax cuts for rich people is that they generally don't need it. Being rich is pretty awesome--you should try it some time. Inequality in Canada has been rising steadily over the past few decades, and I don't think that's a positive trend. It's not in our long-term interests as a society, and we'll pay for it in the future. I think it's important that Canada has a competitive tax regime, too. We've been falling behind in productivity growth and our future wealth depends on reversing that trend. Left and right ought to be able to agree on that, as a strong and productive economy is essential for the well-being of everybody. Dumb tax cuts like tax credits for clarinet lessons, golf clubs and increased TFSA limits don't do much to enhance our tax competitiveness, especially compared to the corporate tax cuts put in by both the feds and province (which I agreed with wholeheartedly). Keeping dumb policies like welfare, and exclusively-publicly provided health care doesn't help either. So, I'm hardly some commie leftie dipper for disagreeing with particular tax cuts and expressing some concern for the poor and lower middle-class.


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## andrewf (Mar 1, 2010)

HaroldCrump said:


> *Nobody* concentrates on the real poor.
> The NDP's primary vote banks are the labor unions.
> Some of the things they are saying are, frankly, quite scary.
> They're speaking of raising corporate tax rates, increasing taxes for the companies operating in the oil sands, doubling CPP contributions, preventing companies from outsourcing work, etc.
> ...


I agree, Harold. The NDP are generally out to lunch or in denial about what effects their policies would have.


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## clovis8 (Dec 7, 2010)

This will blow some of the conservatives minds but I *LIKE* taxes. They buy me frivolous things like healthcare, the arts, roads, science and education. 

I have never taken a single dollar of EI, welfare, or any other government safety net (other than student loans which are a sort of safety net) yet I am happy to keep paying into these things because I know that a just society is the kind I want to live in.


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## fersure (Apr 19, 2009)

clovis8 said:


> This will blow some of the conservatives minds but I *LIKE* taxes. They buy me frivolous things like healthcare, the arts, roads, science and education.
> 
> I have never taken a single dollar of EI, welfare, or any other government safety net (other than student loans which are a sort of safety net) yet I am happy to keep paying into these things because I know that a just society is the kind I want to live in.


And that's the whole problem and why we need TFSAs to reduce the federal government's tax share. A great deal of people - including every single person running for federal office - really need to read the Constitution Acts.

-health care - provincial jurisdiction, notwithstanding the Canada Health Act.
-the "arts" - provincial jurisdiction, but the feds can't stand being left out a theatre or gala opening.
-roads - completely a provincial and municipal jurisdiction.
-science - no clear jurisdiction, and should be conducted and funded by the private sector.
-education - (early, K-12 and university) all provincial jurisdiction.

The federal government takes in far too much money and interfers in areas it has no business being involved.


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## Causalien (Apr 4, 2009)

I am going to pile into TFSA only. The way I see it as a trader is this:

RRSP: I lose money, the government benefits because I can't write it down
I win money the government benefits from increased taxe receipt when I withdraw. 

TFSA: I lose money, same as RRSP, but if I win, there is no future tax to pay, so it is more neutral.

On top of that, contributing to RRSP is a bet that future income tax will not increase. I'd rather pursue a neutral strategy. Of course, I am of the opinion that everyone makes their own fortune.


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## andrewf (Mar 1, 2010)

fersure said:


> And that's the whole problem and why we need TFSAs to reduce the federal government's tax share. A great deal of people - including every single person running for federal office - really need to read the Constitution Acts.
> 
> -health care - provincial jurisdiction, notwithstanding the Canada Health Act.
> -the "arts" - provincial jurisdiction, but the feds can't stand being left out a theatre or gala opening.
> ...


I'm pretty sympathetic to this viewpoint (he did not specify which government, though--you inferred federal), but I doubt overall taxes would fall if all this spending was transferred to provincial governments. There is something to be said for the government doing the spending being the government which taxes.

As far as the constitution goes, it was written 140 years ago before modern medicine, education, electricity, cars, etc. I suspect the existing arrangement we have reflects what voters over the years have asked for from their federal government.


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## sprocket1200 (Aug 21, 2009)

this is one of the most brilliant posts i have read. I agree, but you will never see them pay more because they really don't believe in their cause...


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## clovis8 (Dec 7, 2010)

fersure said:


> And that's the whole problem and why we need TFSAs to reduce the federal government's tax share. A great deal of people - including every single person running for federal office - really need to read the Constitution Acts.
> 
> -health care - provincial jurisdiction, notwithstanding the Canada Health Act.
> -the "arts" - provincial jurisdiction, but the feds can't stand being left out a theatre or gala opening.
> ...



No idea what your point is? We pay provincial taxes too. 

People who blindly hate anything the government does are the silliest and most child-like political thinkers. Somehow the simple act of being provincial makes that government better? 

I also laugh that the same people who go on and on about the evil government are tying with all their might to get into it.


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## slacker (Mar 8, 2010)

Causalien said:


> I am going to pile into TFSA only. The way I see it as a trader is this:
> 
> RRSP: I lose money, the government benefits because I can't write it down
> I win money the government benefits from increased taxe receipt when I withdraw.
> ...


Stop. You are overlooking a fundamental difference between TFSA and RRSP.

You contribute after-tax money into a TFSA, the deal is that when you get the money out of TFSA, government promise not to tax you a second time

For RRSP, you contribute before-tax money. That means you get to invest with a bigger principal to begin with (adds up with compounding). The deal is that the government allows you to invest with a "tax-deferred" principal, but that they will eventually tax that amount when you withdraw.

Both types of account will incur taxing at one time. For TFSA, the tax is front-loaded. For RRSP is back-loaded.

I'm not saying one is better than the other, but it's important to understand the difference between RRSP and TFSA.


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## lmcfaden (Apr 4, 2011)

slacker said:


> You contribute after-tax money into a TFSA, the deal is that when you get the money out of TFSA, government promise not to tax you a second time


I agree that “*you contribute after-tax money into a TFSA*”, and that the Canadian Government promises to not tax that initial contribution a second time when withdrawn. 

However there is no intent (as far as I know) to tax the gains made within the TFSA, at least Canadian gains, I am not sure on foreign withholding taxes on securities held within the TFSA. 

So your statement “*not to tax you a second time*”, could be misleading, as you are not taxed on your gains at all, well not until you go and spend it, then you are most likely being hit with PST, GST, HST or some other XST???


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## fersure (Apr 19, 2009)

andrewf said:


> ... I doubt overall taxes would fall if all this spending was transferred to provincial governments. There is something to be said for the government doing the spending being the government which taxes.
> 
> As far as the constitution goes, it was written 140 years ago before modern medicine, education, electricity, cars, etc. I suspect the existing arrangement we have reflects what voters over the years have asked for from their federal government.


1) Totally agree: net taxes wouldn't go down. Indeed, in most have-not provinces, net taxes would increase or services would decline. However, that choice should be made by the citizens and governments of each province, not a paternalistic federal goverment redistrubuting personal wealth to uncompetitive regions.

2) A Constitution is designed to outline good governance practices and the responsibilities of each level of government for future generations. Each of the above sectors is specifically identified as provincial jurisdiction. What we have now is dual taxation and dual spending in the same areas which increases inefficent and expensive governance.

If voters ask for a different arrangements, this *should* be renegotiated into the Constitution. However, because western politician cowers at Quebec's blackmail, we're stuck with a piece of paper neutered by the Supreme Court and p*ssed on by clueless, selfish politicians.


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## clovis8 (Dec 7, 2010)

fersure said:


> 1) Totally agree: net taxes wouldn't go down. Indeed, in most have-not provinces, net taxes would increase or services would decline. However, that choice should be made by the citizens and governments of each province, not a paternalistic federal goverment redistrubuting personal wealth to uncompetitive regions.
> 
> 2) A Constitution is designed to outline good governance practices and the responsibilities of each level of government for future generations. Each of the above sectors is specifically identified as provincial jurisdiction. What we have now is dual taxation and dual spending in the same areas which increases inefficent and expensive governance.
> 
> If voters ask for a different arrangements, this *should* be renegotiated into the Constitution. However, because western politician cowers at Quebec's blackmail, we're stuck with a piece of paper neutered by the Supreme Court and p*ssed on by clueless, selfish politicians.



The federal government is paternalistic but not the provincial? Um ok.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> The median after-tax income in Canada is ~25,000 per year. You think they should be able to save 18% of that in their RRSP and 10k per year in TFSA? That's equivalent to saving 58% of your after-tax income. You're absolutely nuts if you think that average Canadians will have any use for this extra contribution room.


Why would you assume that people save in their RRSP and TFSA? The biggest advantage of the RRSP compared to the TFSA is that the limit is higher. Far more money can be saved in a RRSP. Presently, many Canadians maximize their RRSP and place residual savings within a TFSA. At $10 K per person ($20 K per couple) the TFSA could supplant the RRSP as the primary savings vehicle for retirement.

The figure you quote ($25K median after-tax income) applies to unattached individuals only. As of 2008, the median after-tax income for couples was $63,900. There were large regional variations in after-tax income (ATI). In Alberta, couples had a median ATI of $77,200. Therefore, I disagree with your statement that median Canadians could not benefit from a higher TFSA limit. For a median Canadian couple $20K saved ($10K per person) would be about ~31% of ATI (20/ 63.9). For a median couple in Alberta, $20K would represent ~ 26% of ATI ($20K/$77.2K). See www.statcan.gc.ca/pub/75-202-x/2008000/analysis-analyses-eng.htm


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## Larry6417 (Jan 27, 2010)

andrewf said:


> $6 billion is to cut every tax bracket by 1%. The cut the top marginal rate would cost much less. To see why this is obviously true, think about what 1%=$6 billion means. It means that the income the tax change applies to is at least $600 billion. And I happen to be fairly confident that if you were to add up all the incomes in the highest marginal tax bracket, they don't add up to that figure (our economy is $1.36 trillion GDP).


That's very...creative. All I did was look up the numbers. See http://www40.statcan.gc.ca/l01/cst01/govt01a-eng.htm

The total revenue for all levels of gov't in 2009 was ~ $585 billion. However, this includes things like property tax and consumption taxes. Since we're talking about income tax only, the combined amount of federal/ provincial income tax on individuals was ~ $250 billion in 2009. Therefore, CC's statement that lowering the bottom marginal tax rate by 1% ( i.e. 15% to 14%) would lead to a $6 billion tax drop is quite plausible. However, it was incorrect of me to apply the same number to the top marginal tax rate. The tax loss would be less because the top rate applies to fewer people than the lowest rate. However, the tax loss is still likely to be substantial. The top 10% of earners pay just over ~ 50% of all income tax while the top 5% of earners pay just under 40% of all income tax. See www.canada.com/national/nationalpost/news/story.html?id=6982cd17-a6b2-4c11-8234-42693ee70259

Using back-of-the-envelope calculations, the top 10% of earners pay ~ $125 billion in income tax while the top 5% pay ~ $100 billion in income tax. On a collective basis, even a small cut to top marginal rates is likely to be expensive. However, on an individual basis, the tax savings are likely to be small compared to a high-earner's income. Would a small drop in the top MTR make me work harder? No, but I would happily accept the extra income. How hard I work depends on my desired lifestyle and stage of life. When I graduated, I wanted to “catch up” i.e. Buy a house, max. my RRSP etc. I was perfectly willing to work like a dog. Now that I'm more established and financially secure, lifestyle is more important to me. Most high-earners I know are the same: work-life balance and stage of life are more important than minor tax changes. 

Raising TFSA limits would lead to modest (or greater) results at modest cost while lowering the highest MTR would lead to modest results at high cost. Which do you think is the better policy? Also, lowering the highest MTR benefits spendthrift wealthy as well as frugal wealthy while raising TFSA limits benefits only the frugal wealthy. Again, which do you think is the more sensible policy?


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## Larry6417 (Jan 27, 2010)

andrewf said:


> Quoting the cost of the increased TFSA room this year is incredibly misleading. The impact will become huge with time. It will effectively mean that 91% of families will not have any taxable capital assets after 10 years of contribution room accumulation. That means either cuts to public services, or higher income or GST rates.


That's...interesting. Here you argue that the increased TFSA limit will be used to such an extent that 91% of families could avoid all capital gains tax. However, you also argue that average Canadians have no use for the extra contribution room: 



andrewf said:


> You're absolutely nuts if you think that average Canadians will have any use for this extra contribution room.


Make up your mind already! You can't possibly argue both positions, at least not logically. Besides, what's wrong with lowering capital gains tax and raising GST? Economists agree on few things, but here are a few things economists do agree on: taxing consumption is less harmful than taxing saving and investment. Lowering capital gains tax and increasing consumption taxes to compensate is desirable.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> "I don't think you should make sweeping statements that such a move would not modify behaviour. It would definitely modify my behaviour and that of many on this forum."
> 
> Will this make you save money you otherwise would have spent on consumption? This is my skeptical face.


Well turn that skeptical frown upside down! Would I forgo present consumption to “purchase” higher, future consumption? Of course I would! As would many others on this forum. You may have noticed (or not) that people on this forum aren't the same as everyone else. Not a value judgement, just an observation. Some of the people here make their own laundry detergent to save money. People in their 20s ask questions about retirement.


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## Larry6417 (Jan 27, 2010)

balk said:


> I agree with Adrewf that cutting the bottom tax rate by 1% is a much more sensible policy and would result in an increase in spending whereas letting people hide their assets will just allow those people to invest more and rob the government of revenue.


As CC points out, decreasing the lowest MTR would lead to a tax loss of ~ $6 billion. The poorest of the poor, those earning less than the basic personal amount, would derive no benefit. As I pointed out in a prior post, I'm not a fan of big government, but targetted aid directly to the poor makes much more sense than a blanket tax reduction.


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## Larry6417 (Jan 27, 2010)

clovis8 said:


> This will blow some of the conservatives minds but I *LIKE* taxes. They buy me frivolous things like healthcare, the arts, roads, science and education.
> 
> I have never taken a single dollar of EI, welfare, or any other government safety net (other than student loans which are a sort of safety net) yet I am happy to keep paying into these things because I know that a just society is the kind I want to live in.


I partially agree with you, which also means I partially disagree with you. I like many of the things that gov't provides: health care, education, law enforcement, clean water, etc. However, my endorsement of the things gov't provides is not a blank cheque. I want my taxes to be spent wisely. 

Also, some taxes harm the economy more than others. Consumption taxes like GST are less harmful to the economy than taxation of investment and income. From an economic perspective, it makes sense to lower taxation on investment and raise GST to make up the difference.

I find your blanket endorsement of taxes to be a wee bit overarching.


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## clovis8 (Dec 7, 2010)

Larry6417 said:


> I partially agree with you, which also means I partially disagree with you. I like many of the things that gov't provides: health care, education, law enforcement, clean water, etc. However, my endorsement of the things gov't provides is not a blank cheque. I want my taxes to be spent wisely.
> 
> Also, some taxes harm the economy more than others. Consumption taxes like GST are less harmeful to the economy than taxation of investment and income. From an economic perspective, it makes sense to lower taxation on investment and raise GST to make up the difference.
> 
> I find your blanket endorsement of taxes to be a wee bit overarching.


I 100% agree with you and my overstatement was intended to show how stupid the counter overstatement really is. There is this idiotic idea among so many conservatives that all tax is bad and especially any tax going to the federal government.


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## Larry6417 (Jan 27, 2010)

We agree.


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## andrewf (Mar 1, 2010)

Larry6417 said:


> Well turn that skeptical frown upside down! Would I forgo present consumption to “purchase” higher, future consumption? Of course I would! As would many others on this forum. You may have noticed (or not) that people on this forum aren't the same as everyone else. Not a value judgement, just an observation. Some of the people here make their own laundry detergent to save money. People in their 20s ask questions about retirement.


That's not the question I asked. Would you not have otherwise saved the amount you'd save in the TFSA with additional contribution room? It only modifies behaviour if it makes people save money they otherwise would not have saved (ie spent) without the policy. And I think the amount of difference it makes will be vanishingly small. It will allow people to move non-reg investments to a tax sheltered account, but not change overall savings much at all.


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## andrewf (Mar 1, 2010)

Larry6417 said:


> That's...interesting. Here you argue that the increased TFSA limit will be used to such an extent that 91% of families could avoid all capital gains tax. However, you also argue that average Canadians have no use for the extra contribution room:


Not quite. It means that 91% will have less in financial assets than they have tax shelter room. But a high percentage of that already have less than they have contribution room (let's guess 70 or 80%). The only people who benefit are those between the 70-80% and 91%. Everyone under that threshold will gain no benefit from this change. Just some logic.




> Make up your mind already! You can't possibly argue both positions, at least not logically. Besides, what's wrong with lowering capital gains tax and raising GST? Economists agree on few things, but here are a few things economists do agree on: taxing consumption is less harmful than taxing saving and investment. Lowering capital gains tax and increasing consumption taxes to compensate is desirable.


I think you just misunderstood what I wrote. I'll agree with you about the GST/HST, as long as increases go along with increased rebates to the poor. I will point out that advocating for higher consumption taxes used to offset decreased corporate and personal income taxes got me called a dirty commie in another thread, so...


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## andrewf (Mar 1, 2010)

Larry6417 said:


> Why would you assume that people save in their RRSP and TFSA? The biggest advantage of the RRSP compared to the TFSA is that the limit is higher. Far more money can be saved in a RRSP. Presently, many Canadians maximize their RRSP and place residual savings within a TFSA. At $10 K per person ($20 K per couple) the TFSA could supplant the RRSP as the primary savings vehicle for retirement.
> 
> The figure you quote ($25K median after-tax income) applies to unattached individuals only. As of 2008, the median after-tax income for couples was $63,900. There were large regional variations in after-tax income (ATI). In Alberta, couples had a median ATI of $77,200. Therefore, I disagree with your statement that median Canadians could not benefit from a higher TFSA limit. For a median Canadian couple $20K saved ($10K per person) would be about ~31% of ATI (20/ 63.9). For a median couple in Alberta, $20K would represent ~ 26% of ATI ($20K/$77.2K). See www.statcan.gc.ca/pub/75-202-x/2008000/analysis-analyses-eng.htm


So, if you ran out of TFSA room, you wouldn't use your RRSP room? I would use all the tax sheltered saving room I had available to me.

If we take your 63,900 average couple, with increased TFSA room they go from being able to save 18%+10k per year (33%) of their income in tax-sheltered accounts up to 18% plus $20k per year, or 49% of their income. I don't think too many of those average couples save an average of half of their after-tax income. So, only people with higher than median incomes are likely running short on tax-sheltered saving room.


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## steve41 (Apr 18, 2009)

If a high-end earner ($350K gross salary), 40 year old was presented with a $10K TFSA limit instead of the current $5K limit, his annual lifestyle would be $138.8K rather than $137.6K.... an increase of $1200 annually. That's $100 a month. Is this worth even discussing?


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## andrewf (Mar 1, 2010)

You're right, steve. Of the two big promises, I found the income splitting proposal worse. It might help some middle class families some, but it helps very high income earners quite a lot.

For instance, a couple with one spouse earning $150k and the other $0 (stay at home) pays about 33% average tax in Ontario. Add in income splitting, and the blended average tax rate of 24.4% for a savings of $13.5k per year. I don't see why it's fair for this couple to get a huge tax break, and not the single parent (say the spouse died) with the same income. The spouse at home is generating value in terms of child care, etc. For a family with three kids, the spouse that stays at home is probably creating value in the range of $40k-$50k pre-tax per year in forgone expenses.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> So, if you ran out of TFSA room, you wouldn't use your RRSP room? I would use all the tax sheltered saving room I had available to me.


Now who's misunderstanding whom? What I said was that the TFSA could supplant the RRSP as the primary savings vehicle of choice for Canadians if limits were raised i.e. max the TFSA and place residual savings in a RRSP. In a setting in which a couple was expecting OAS, it may be even preferable.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> That's not the question I asked. Would you not have otherwise saved the amount you'd save in the TFSA with additional contribution room?


Actually, I answered exactly the question you asked. I am willing to sacrifice present consumption to purchase future consumption. Higher TFSA limits would spur that on. Legally depriving the gov't of tax revenue permanently makes me all warm and fuzzy inside.


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## Larry6417 (Jan 27, 2010)

andrewf said:


> Not quite. It means that 91% will have less in financial assets than they have tax shelter room. But a high percentage of that already have less than they have contribution room (let's guess 70 or 80%). The only people who benefit are those between the 70-80% and 91%. Everyone under that threshold will gain no benefit from this change. Just some logic.


Not really. Again, some average Canadians may opt to save primarily in a TFSA rather than a RRSP (esp. ones close to retirement), so average Canadians could benefit from an increase.

(At the risk of being called a "nutter"...) the C.D. Howe institute looked at marginal effective tax rates (tax rates including claw back of social benefits) and found that METRs were exceptionally high, which greatly reduces the value of RRSPs compared to TFSAs. See http://www.cdhowe.org/pdf/ebrief_91.pdf


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## andrewf (Mar 1, 2010)

Larry6417 said:


> Actually, I answered exactly the question you asked. I am willing to sacrifice present consumption to purchase future consumption. Higher TFSA limits would spur that on. Legally depriving the gov't of tax revenue permanently makes me all warm and fuzzy inside.


The question you answered is whether you are willing to save. Duh. Everyone (almost) is willing to save to varying degrees. The question is whether an increased TFSA would make you save more than you would otherwise (in RRSPs and non-reg). Maybe the answer for you is yes, but in general, I can't see it making much difference at all.


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## andrewf (Mar 1, 2010)

Larry6417 said:


> Now who's misunderstanding whom? What I said was that the TFSA could supplant the RRSP as the primary savings vehicle of choice for Canadians if limits were raised i.e. max the TFSA and place residual savings in a RRSP. In a setting in which a couple was expecting OAS, it may be even preferable.


In that case, one wonders whether we should retain welfare for old fogeys who have a million bucks in the bank ($20k/year times thirty or forty years plus growth). Something is a bit messed up if they not only avoid tax, but get nice juicy welfare cheques each month as if they were poor. If this scenario becomes common, you better believe there will be changes to OAS.


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## realist (Apr 8, 2011)

fersure said:


> -science - no clear jurisdiction, and should be conducted and funded by the private sector.


Not sure I would agree with that. Since private sector funding has this mysterious habit of supporting the company that funded it. Conversely, do you really want the cure for cancer to be a for profit endeavour? In fact one of the criticisms of modern science is that it is too focused and misses out on the more broad based general discoveries. But that is ranging a bit too far off topic.


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