# TFSA and GIS



## sags (May 15, 2010)

http://ca.finance.yahoo.com/news/Tax-free-savings-accounts-capress-1092035826.html?x=0

Hmmm......wonder how that would affect people's decision to buy annuities.


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## kcowan (Jul 1, 2010)

Before it gets to be an issue, I expect the government will fix the problem.


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## andrewf (Mar 1, 2010)

Not sure that's the case. The government's plans to expand TFSA to $10k per year are compatible with giving GIS to rich people.


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

Tax breaks for the middle class are a good thing. We need more of those.


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## stardancer (Apr 26, 2009)

The current maximum income cut-off for GIS is
SINGLE PERSON = $16319
MARRIED COUPLE = $21551
(not counting OAS)

That's really rich


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## OhGreatGuru (May 24, 2009)

I'm glad to see someone is pointing out this long-term problem with TFSA's. It could become a huge tax shelter for the wealthy in 30-40 years if something isn't done to cap contributions. And trying to change the rules after  a reasonable cap has been passed will be increasingly more difficult to do politically.


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## Sherlock (Apr 18, 2010)

OhGreatGuru said:


> I'm glad to see someone is pointing out this long-term problem with TFSA's. It could become a huge tax shelter for the wealthy in 30-40 years if something isn't done to cap contributions. And trying to change the rules after  a reasonable cap has been passed will be increasingly more difficult to do politically.


Someone who can invest $5000 a year is wealthy?


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## Argonaut (Dec 7, 2010)

I think it's great that there is a vehicle designed to help people save money and build wealth. If you think the gubmint should have more tax dollars, write them a cheque.


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## ghostryder (Apr 5, 2009)

OhGreatGuru said:


> I'm glad to see someone is pointing out this long-term problem with TFSA's. It could become a huge tax shelter for the wealthy in 30-40 years if something isn't done to cap contributions. And trying to change the rules after  a reasonable cap has been passed will be increasingly more difficult to do politically.



This article is a joke. The "wealthy" are not going to limit their saving/investing to TFSA's. The vast majority of people who can afford to max their TFSA also have the means to put money in their RRSP's & probably have non-reg too.

The number of people who are going to have multimillion dollar TFSA's in 40 years that don't have other sources of taxable income will be quite small.

The article assumes that GIS & OAS are going to still be the same in 40 years as they are today. Don't count on it.


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## andrewf (Mar 1, 2010)

Sherlock said:


> Someone who can invest $5000 a year is wealthy?


They have substantially higher than average income. ~$50k per year is in the top 20% of annual income.


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## andrewf (Mar 1, 2010)

Argonaut said:


> I think it's great that there is a vehicle designed to help people save money and build wealth. If you think the gubmint should have more tax dollars, write them a cheque.


We can also cut services. I vote we stop maintaining roads in front of your house.


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## Eclectic12 (Oct 20, 2010)

andrewf said:


> They have substantially higher than average income. ~$50k per year is in the top 20% of annual income.


On average ... yes.

But then again, when I was saving for my first house, I spent as little as possible. The result of my efforts was something like $6K where my salary at the time was about $28K.


It is the exception though ....


Cheers


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## OhGreatGuru (May 24, 2009)

Argonaut said:


> I think it's great that there is a vehicle designed to help people save money and build wealth. If you think the gubmint should have more tax dollars, write them a cheque.


You (and others) missed the point both of the article and of my comment. The TFSA rules allow some people, over time, to amass a $1M investment account, and pay no income taxes on the earnings on that account. @6% return, that's $60K/year tax-free income. Try selling that message to the wage slaves who are earning $60k/yr the hard way.

Up to and including 1987 you could deduct up to $1000/yr. of Interest and Dividend Income. (And this was actually a deduction from income, not a non-refundable tax credt. But that's a rant for another day.) I believe taxable capital gains could also be included in some years - not clear when that was dropped - perhaps when they changed the inclusion rates for capital gains. 

In any case, this deduction allowed people to save a modest nest-egg without it being taxed - which is the supposed social policy objective of TFSA's. But unlike the TFSA program, it had a built-in limit on how much you could earn tax-free each year: and it required NO ADMINISTRATIVE OVERHEAD COSTS AND PAPER BURDEN FOR INDIVIDUALS, FINANCIAL INSTITUITIONS, OR CRA for operating & tracking separate "Registered" accounts.

$1000 in 1987 would be worth ~$1700 in 2010. So just bring back the Interest, Dividend, and Capital Gains Deduction, increase the limit to reflect inflation, and dump the whole cumbersome TFSA program.

If memory serves me rightly, one of the rationales for eliminating the Interest & Dividends Deduction was that the people it most benefited were the people with the most disposable income. (Maybe some archivist can find the budget speech announcing the change.) But exactly the same criticism can be made about TFSAs, and now we have removed the annual earnings cap.


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## DanFo (Apr 9, 2011)

I make an income higher then most but i wouldnt consider myself overly rich. But the more money I have in a bank the more they can lend out to other people (leveraged of course) This supposedly stimulates the economy more...Why then would people be opposed so much to me giving my money into the system.....I may or may not make that much tax free (risks of the free market).. currently the yearly limit is fairly limted (5K) and although the Gov says they might increase it that''s assuming they get re-elected..If I have the ability to save money tax defered I will.. If not I will pay the taxes yearly and ensure when I turn 64 I have a small taxable income to recover these gov't benefits anyway when I turn 65....... whether I put my rrsp off untill 71 or I take it all out before I start collecting OAS/GIS is the decision I''ll have to make based on how my health is before I retire years down the road from now. For now I'll squirrel away the most I can afford..... for some.... well their limited by the choices they have made in life.... I shouldn't have to suffer for that


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## sags (May 15, 2010)

People who feel comfortable with asset rich seniors collecting GIS benefits, shouldn't be too upset about the costs of public service pensions then.

Either way, taxpayers are subsidizing someone else's retirement.


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

Exactly. Many people's situations are arrived at due to the choices they've made. Those who are smart enough to take advantage of the tax shelter the gov't provides (on money that's already been taxed btw) are merely reaping the rewards of their decisions.


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## Eclectic12 (Oct 20, 2010)

sags said:


> People who feel comfortable with asset rich seniors collecting GIS benefits, shouldn't be too upset about the costs of public service pensions then.
> 
> Either way, taxpayers are subsidizing someone else's retirement.


*shrug* 

What about the boatload of taxes the gov't is collecting from the relatively new capital gains tax?

Prior to 1972, all capital gains were tax free.

http://www.cbc.ca/news/business/story/2000/10/18/capgains001018.html
http://www.canadafaq.ca/what+is+capital+gain+tax+in+canada/


Cheers


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## Eclectic12 (Oct 20, 2010)

OhGreatGuru said:


> [ ... ]
> 
> Up to and including 1987 you could deduct up to $1000/yr. of Interest and Dividend Income. (And this was actually a deduction from income, not a non-refundable tax credt. But that's a rant for another day.) I believe taxable capital gains could also be included in some years - not clear when that was dropped - perhaps when they changed the inclusion rates for capital gains.
> 
> ...


Modest nest-egg?

~$1700 a year for an such a deduction is better than nothing but I don't see how it adds up to a nest egg. From what you've described - it's per year without any compounding. 

If this is the option - why not just bump up the personal deduction by this amount? That way the wage slaves don't have to come up with money to invest.



Cheers


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