Fairness and Our Savings
Your tax free savings, and how much you can save for retirement, are up for debate in the 2015 federal election.
The Tax Free Savings Account, a piece of legislation introduced by Finance Minister Jim Flaherty in 2009 has given Canadians the ability to save tax free outside of an RRSP. To the delight of savers, the January 2015 budget saw the Conservative government raise the annual TFSA limit to $10,000 from a previous limit of $5,500. This increase to your TFSA is in jeopardy if Stephen Harper’s Conservative government were to fall.
“We know that other parties are going to claw back the TFSA. There’s actually talk that they’ll take part of it back in favour of massive mandatory increases in payroll taxes,” says Richard Landau, the campaign manager for Conservative MP candidate Andy Brooke in Kingston and the Islands.
The proposed reduction of the TFSA by the NDP, Liberal, and Green Party, to its previous limit of $5,500 in 2014 is being tabled as a way to create fairness. The Liberals, NDP, and Green Party don’t believe everyone has the earnings power to take advantage of the increase in the TFSA.
“The NDP is not for doubling it. We’re going to keep it at the same level. The thinking behind that is, certainly in the articles I’ve read, is that if you if keep on increasing that amount, you’re really only benefitting the people who have that disposable income already,” says Daniel Beals NDP candidate for MP in Kingston and the Islands.
“The Green Party considers TFSAs an effective way for Canadians to save money. They do have the potential to benefit everybody in some way. However, we feel they sometimes harbour the possibility to disadvantage lower income Canadians who basically don’t have the money to contribute to them. So that’s why the Greens are in favour of keeping the current limit as it stands,” says Nathan Townend Green Party candidate for MP in Kingston and the Islands.
The Conservative government has a different take on who’s actually utilizing and benefitting from the Tax Free Savings Accounts. They believe the lower and middle income earners are best positioned to take full advantage of the tax free savings potential of these accounts.
“I don’t think $5,000 has a huge impact on somebody who’s rich. To be very frank,” says Landau.
“Say they’re making a household income of $300,000 a year or more. Putting aside $10,000 isn’t going to make a huge difference to them. The evidence we have shows that it’s a tool mostly used by middle class, and often the working poor that are using a TFSA,” says Landau.
While there’s no doubt saving tax free is good for individual savers. The savings accrued by the individual, may come at cost to other Canadians at whole. Typically a reduction in tax revenue is balanced by spending cuts, or additional taxes being levied.
Beals says, “When you create a structural deficit, the only thing that can happen is you have to raise it in other ways.”
“You might end up paying in a way where the municipalities are concerned. Then you have things like this infrastructure deficit we have right now where we can’t maintain infrastructure in our municipalities.”
When it comes to government spending, some believe the government is in the best position to decide how to spend your tax dollars. While others believe, keeping money in the hands of the individual tax-payer is the ideal situation.
“If your attitude when you start off the blocks is that the money really belongs to the government, not to the individual, then you may find that a problem. But if your philosophy is that people decide best how to spend their money wherever possible then you understand the power of the TFSA,” says Landau.
Both the NDP and the Green Party say they’re not looking unfairly punish those who’ve been able to take advantage of the increase in the TFSA. For those who’ve managed to put aside $10,000 in 2015, the initial thoughts are favourable.
“I would have to admit I’m not sure what the plan would be for that. But my feeling would be, and what I would support is that you can’t ding people for that, who took part in it in good faith. When you’re changing something that a previous government has done like that. It’s very difficult to go back and say well were going to sting you for it now,” says Beals.
“The possibilities would be to create a two-tiered system with it, grandfather those who have already paid in up to the limit of 10000,” says Townend.
The Liberal candidate for Kingston and the Islands did not respond to requests for an interview.
