What the Liberal government means to my wallet

With the Liberal majority government in place I thought our personal finances were going to change.  Not so fast.  Let’s take a look at what some of the Liberal election promises mean to my wallet.

  1. OAS at 65? Not anytime soon for us. The Liberals said they would NOT go ahead with legislative plans to raise the age of eligibility for Old Age Security (OAS) by 2023.  Whatever they plan to do a) we won’t reach this age until almost 25 years from now and b) I’m not counting on OAS payments for retirement anyhow.  If I get paid by this program I consider this a bonus.
  2. Cut the Family Tax Cut? Not applicable for us, we don’t have kids. This means we could not transfer up to $50,000 of income to the lower-earning spouse anyhow.
  3. A new Canada Child Benefit? Not applicable for us.
  4. Tax increases for high income earners? Not applicable for us.
  5. Expanded CPP? I’ll believe it when I see it.  The Liberals said they would work with the provinces to expand our Canada Pension Plan (CPP).  I think that’s a good idea but whatever they plan to do a) we won’t reach age 60 for almost 20 years from now and b) I’m not counting on CPP payments for retirement income.  If we get paid by this program it’s another bonus.
  6. Changes to the Tax Free Savings Account (TFSA)?  This sucks.  The Liberals have pledged to roll back the annual TFSA contribution limit to $5,500 (from the current $10,000 limit) although I hope this program will be indexed at very least.  Each year, one of our investing goals is to max out our TFSAs.
  7. Tax breaks for property moguls and the ability to raid your RRSP, more?  Not for us thanks.  The Liberal campaign promised tax breaks to developers who build new rental properties in Canada.  The election platform also promised to let Canadians raid their RRSPs, more often, with less strings attached, associated with the Home Buyers’ Plan.  The withdrawal limit/raid associated with the Home Buyers’ Plan would remain $25,000 though.
  8. Student loans? I read that new graduates wouldn’t be forced to repay student loans until they earned at least $25,000 per year, with interest on the loan paid for by the government.  Pretty good deal that didn’t apply to me when I was younger with my student loan back then nor will it apply now.  I think helping students is a great thing though.
  9. The Liberals also promised to lower Employment Insurance premiums. That will impact me (along with other fortunate Canadians that have a job) but only in a slight way.
  10. GIS increase?  This program will get a bump but I’m saving what I can now to avoid Guaranteed Income Supplement cheques. Hopefully this program is never applicable for us although I think the increase is a good idea given our demographic shift.
  11. The small business tax rate is intended to be lowered to 9%. That seems like a great thing, I’m all for lower taxes especially for small business owners, but it won’t help me out.

Am I happy the Liberals got elected?  Absolutely but it doesn’t mean very much to my wallet.  At least Harper is out.  We’ll see how things shake down as Mr. Trudeau takes office.

What was your reaction to the massive Liberal win?  Is Mr. Trudeau going to help your wallet?

85 Responses to "What the Liberal government means to my wallet"

  1. My reaction is *sigh*, but the mass has chosen.

    Only 6 and 9 affect me. And no, this ****** of Trudeau will not help my wallet; not by the TFSA hammering, not by putting the budget in deficit again for the next 3 years…

    Reply
    1. I worry about the deficit as well. I mean, we need to spend money on infrastructure but I also worry about digging a massive debt hole to go with it. I wouldn’t do that in my personal life but maybe I am missing something?

      Every time I hear someone complain about the TFSA limit I think about the RRSP limit and how that’s unchanged. On top of that, most Canadians are better off using the TFSA vs. RRSP as a retirement vehicle. *sigh*

      Reply
      1. most Canadian are better off using a TFSA over an RRSP for a retirement vehicle? I’d like to see the math on that Mark because it’s simply not the case. For retirement the RRSP is almost always better and at worst equivalent to a TFSA. Now if you want to raid it every now and again that’s another story but if we are talking retirement savings I don’t agree at all.

        Reply
        1. None, I’m just suggesting now the TFSA is in place, the TFSA is an account that can benefit all Canadians whereby the RRSP tends to favour middle- to higher-income earners.

          You don’t agree? That’s fine if you don’t.

          Reply
      2. Isn’t the TFSA only beneficial if you’re in a higher tax bracket at retirement then when the money was invested?
        Doesn’t really only provide a benefit in these scenarios::
        1. You have maximized your RRSP
        2. You want a tax free vehicle for investment earnings where you can withdrawal money before retirement without penalty
        3. You will be in a higher tax bracket at retirement

        On this note, it’s ridiculous to think that TFSA maximums above say $5,000 provide any benefit to low income earners. Call it what it is. It’s a tax free investment vehicle for those who have disposable income. If you plan to be in a lower tax bracket in retire and don’t plan to need the money before retirement, what’s the benefit of a TFSA? Now, if you have a pension, you don’t need all of you’re money tied up in RRSPs. However, I’d argue that a vast majority of Canadians don’t have pensions.
        Regarding the low income argument, Who are the low income earners? Minimum wage is $12/hr (approx). The average HOUSEHOLD in Canada supposedly makes about $65,000, which is $32,500 per income earner in a two income household. Say for argument sake $40,000 is considered the high-end of low income (it’s probably lower). A $5,000 TFSA maximum would be 12.5% of my gross income, which I think is around the recommend percentage of income one should contribute to retirement savings. For someone making $30,000, it’s 16% of their income. So when people say a TFSA is for low income earners, it makes me wonder if they’ve ever done the math. Given the other financial pressures of low income earners (under say $40,000), I image it’s very difficult for those earning under $35,000 to contribute $5,000 per year. According to my math, $5,000 is a reasonable maximum for low income. Anything above is a tax free investment vehicle for middle-class or above. Let’s be honest here.

        Dave

        Reply
        1. And so the middle class can die? Because you aren’t able to save $5K / year.
          My rules your rules, I see.

          I’m right in your case #2 and I don’t use a RRSP for some reasons, and not interested to use one.
          How much cost the RRSP each year to the gov? Certainly more than a petty additional $5,500 / year…

          “If you plan to be in a lower tax bracket in retire and don’t plan to need the money before retirement, what’s the benefit of a TFSA?”
          To not have to justify anything to the gov, and pay them taxes when you sell part of your capital and take them out the TFSA…

          But yes, let’s bring down the society, let’s get all poor and happy I suppose… The Canadian way.
          Sorry to be a bit harsh but I post my point…

          Reply
          1. No worries. We may just have a philosophical difference. I think that in some cases, some of our money (through taxes) is better off in the hands of the government so they can provide health care, education social services, etc. Some people don’t agree with that philosophy. That fine.

          2. I would also add what is the point of low income earners using RRSP’s? Maybe at some point to loan yourself money to buy a home down the road. If you are taxed at a minimum level already the benefit of an RRSP is basically negated to a point. You theoretically could be taxed at a higher rate down the road then at which you deposited the money… So yes the TFSA does have it’s advantages and it’s if you want to use a little self discipline and try to save some money for your future.

            And None… your comments are infantile about wealthy people… They already pay over 50% of their earnings in tax. I’ll ask you the same thing as everyone else. What do you think is fair, 75%?, maybe then they will all start leaving like they did in France and they had to roll the tax back. All those evil 1%’s. You know the ones that actually create jobs for everyone else…

          3. I’ve mentioned so many times on this site, RRSPs are somewhat useless to low income earners, that I’ve lost count 🙂

            We agree. Some people don’t agree with me and that is fine. Not everyone has to agree on everything all the time!

            As for None’s comments, he is very passionate about topics of the wealthy I’ve found. I’ve met a number of hard working, very successful people in my life to date. Some are quite wealthy, as in multi-millionaires many times over wealthy. They earned it and I have nothing against them using a TFSA, or maxing out their RRSPs, or putting stocks under their corporation or holding company. They work within the laws, it’s all good.
            Kudos to them for being a success.

          4. I would hardly say that the RRSP is useless for low income earners. Where do you get that idea?

            If your tax bracket is the same for when you put money and take money out the RRSP and TFSA is mathematically equivalent. A TFSA is actually worse for anyone using these funds for retirement and their income is going down. What is your reasoning that RRSP are useless for low income earners? I don’t get it. I agree if we are talking about sub 13K per year income but in that case TFSAs are useless too. I don’t understand your thinking here.

            The issue I have with the TFSA expansion is that it’s simply stealing from Peter to pay Paul. The tax base is already tight (hence the deficits) and simply throwing out lame platitudes like cutting government waste doesn’t count for much. Our infrastructure is crumbling and outdated, veterans benefits are reprehensible (so I’m told), and OAS is (was) being cut. The government is short on cash and expanding the TFSA program ultimately will make ALL investment income tax protected. Is that fair? I don’t think so – and save the ‘the money is already taxed’ rhetoric – it’s meaningless as well.

            Anyway, it is what it is. I’m glad Canadian’s kicked the crooked cons out of government.

          5. I don’t think the deficit came from “stealing from Peter to pay Paul.” Our workforce has been shrinking over time, that means the tax base has been shrinking over time, the GST was cut, etc.

            With the TFSA in place, regardless of the contribution limit, folks can check out this calculator for TFSA vs. RRSP.
            https://www.retirementadvisor.ca/retadv/apps/tfsaRrsp/tfsaRrsp_inputs.jsp?toolsSubMenu=preRet

            At the end of the day my hope is folks stop bickering about what is better, etc. and simply pick one to invest in or pick both. Adults have such a strong desire to “be right”. Who cares? 🙂 As long as you are saving that’s very good since ultimately your savings rate will be key to your financial success anyhow. Folks will likely disagree with on that as well – that’s fine!

          6. @None

            There is little benefit for low income earners. You are sheltering money, just deferring tax to a later date. As a low income earner you could shelter money that would be taxed at a lower rate only to have the money you remove down the road taxed at a much higher rate. It’s as simple as that. The sweet spot for either picking your TFSA or your RRSP as your savings vehicle IMO and many financial pundits is about $44,000.00 in annual income. Just research it online, this is common knowledge .

            Yes we are just in time to kick the “crooked cons” out of the government so we can install the “deceptive Fiberals”. I must say, I added my other comment below just yesterday about them giving us back $670.00 only for them to steal it within the next year. I didn’t even have to wait 24 hours from when I wrote that. They want to double the land transfer tax on houses $250,000 or more. This is a direct attack on the middle class, any savings just evaporated 5X over. This is what you can expect, deceptive taxes that have pretty names like “revenue tools” and such. None, your passion is very misdirected….

            http://m.torontosun.com/2015/10/27/wynne-plans-to-expand-tax-grab-despite-promise

        2. Dave – you are exactly right. The idea or rhetoric that TFSA are superior to RRSP for retirement savings is for everyone save perhaps 1 in a 100,000. It’s just those flush with cash trying to sell the ridiculous 10K per year amount to fatten their pocketbooks.

          The 10K really helps the wealthy people with a stay at home partner and adult children. Those people stuffing their and their kids TFSAs are borderline tax cheats.

          Reply
        3. I’m just suggesting (and have always) that with the TFSA in place, the TFSA is an account that can benefit all Canadians whereby the RRSP tends to favour middle- to higher-income earners. Those folks have a choice of investment account to use. That’s it.

          I know some folks don’t agree with me and that’s OK.

          Here is an older article debating the two accounts although these debates are all over the internet:
          http://www.thestar.com/business/personal_finance/2013/02/17/tfsa_or_rrsp_try_these_five_tests.html

          The TFSA maximums are a stretch for any low income earner. So are the RRSP maximums. So are savings at all. You have to have money, to save money, to invest money, no denying that and never have!

          The vast majority of Canadians will not have a pension and that is going to make savings even more important and challenging for people since the responsibility to save has shifted from employers to employees. More of that is coming and I wouldn’t be surprised to see some defined benefit pension reform. I expect that actually for our generation!

          Regardless of income, especially lower income Canadians, I think anymore saving 12.5% of gross income is doing well and good on them.

          Reply
          1. I’m not going to argue with Mark (or most of you) on the merits of the TFSA vs RRSP for low income earners. Mark has done a great job explaining why it’s the preferred retirement investment vehicle for lower income earner, or for that matter, it’s probably preferred for anyone who expects to be in a higher tax bracket at retirement. What I was trying to suggest is that once you get past around the $5,000 TFSA maximum, it no longer benefits the low income. It benefits those with much greater means. I’d love to see the stats on what level of income most uses the TFSA. I’d also like to see a comparison between the income levels and their ROI within the TFSA to see who is really benefiting from the TFSA. From a use case standpoint, I’m guessing that it’s used primarily as an investment income tax shelter for people with means and it also happens to be an alternative and preferable retirement savings vehicle for those who expect to be in a higher tax bracket when they withdraw the money. But who is really benefiting from the TFSA? I’d argue the middle and more likely the higher income earners.
            You can argue that the TFSA is for everyone, but I think it’s benefiting those with means the most. That’s just an opinion. I could be wrong.
            If we can accept that for what it is and get past that topic, an interesting question comes to my mind: “Why should we not pay some tax on investment income?” We probably need a new thread for that one 
            And on Mark’s point, I’m not arguing to be right or prove a point. That’s not my intention anyway. I’m presenting my opinion and hopefully I can learn from those with a different opinion. I may not adopt that different opinion, but I’ll have an opportunity to learn from it.
            Dave

          2. “I’m not arguing to be right or prove a point. That’s not my intention anyway. I’m presenting my opinion and hopefully I can learn from those with a different opinion.”

            I like that 🙂

            The TFSA is for everyone, but the amount folks can contribute is certainly not for everyone. I see that as a savings point and issue for sure for most Canadians. I totally agree the folks that benefit from the TFSA, RRSP or any account are the ones that can save.

          3. I would like to know what everyone’s idea of a high income earner is? Does it start at $50K or $75K? I don’t think I’m what you would call a high earner, but I do maximize my TFSA every year including the $10K last year. So I disagree that it is only a tool for the rich.

            Also, and I am repeating myself, when do we say “enough” is enough tax on any one individual? It seems to me for some people that limit is endless as long as someone has any advantage over them at all. So if some person who makes $300,000 a year pays $175,000 in various combined taxes, but you make $40,000 and pay $10,000 in taxes, why are you so worried about that little amount of money? You make it sound like the rich guy is stealing from you when clearly he is already subsidizing your life. That high earner pays 17.5 X what the low earner did. Your worried he/she could shelter an extra few thousand? Who really is the greedy one here?

          4. “I would like to know what everyone’s idea of a high income earner is? Does it start at $50K or $75K? I don’t think I’m what you would call a high earner, but I do maximize my TFSA every year including the $10K last year. So I disagree that it is only a tool for the rich.”

            I don’t know Paul, to answer your first question 🙂

            Everyone has their own definition I think….

            I think “enough tax” is definitely the psychological point whereby you pay more in tax that retained net income, so let’s say that’s 50%. That’s just me. That seems like “enough is enough” regardless of how much you make.

            I don’t care (personally) the $300k earner makes that much, they might very well earn it!

            I think a flat tax would solve the issue nicely, or at least a flatter tax system, and simply we raise taxes on consumption. This means the more you spend, the more taxes you pay.

            I’m not rich by any means, financially speaking. Far from it. My wife and I are getting more financially comfortable I would say though, but that’s because we are fortunate to have good jobs, work hard at them, and we save our money. We could likely save much more money than we do but we’ve made other choices in life. So be it!

            The TFSA by itself is not a tool for the rich. It is a container to be maximized by a) those who save very well or b) those that make enough money simply to save and use it to the maximum. Anyone can use the TFSA, even if it’s a general savings account for them or a $500 emergency fund.

            I often wonder if the anger/frustration/annoyances about taxes and investing accounts related to taxes and such is more about income disparity than anything.

            Thanks for your comments Paul, (and others) I like a healthy dialogue on the site.

  2. None of those items listed help us. Well, not true- we would qualify for OAS ~ six months earlier, but I really wonder is this something the country can afford with longer life expectancy. I’d rather live with it later. It will take more of current revenue beginning in 2023 when it was supposed to change and cause higher taxes, so it is easy for a new govt to promise more candy it likely doesn’t need to answer for. Most countries are raising this number. #6 is a negative for us.

    I am not a supporter of deficit budgets unless they are truly necessary such as after 08/09, and after years we’re now into balance. It doesn’t seem to me the country is anywhere near a crisis point where we need unusual monetary stimulation. This is promising things with money the government does not have, and burdens all generations since govt. debt is unlikely to be paid back, and has an ongoing interest cost. Why lower taxes on most people when you’re also going into deficit? If the infrastructure spending was paid for by increasing taxes to pay for it over 4 years or less (govt mandate) for example like it should, more people would object. Unfortunately this is just politics.

    What actually concerns me is that fewer people care about debt anymore (personal and govt) which is why this stuff is so easily passable now. I am even reading blog posts now where people suggest deficit budgets should be legislated since they’re necessary and good for the economy. Really?

    With the slew of promises made by the Liberals it will be interesting to see what really happens for people and where the country stands financially several years from now. I am hopeful but not very confident especially if Trudeau pere is any example of economic stewardship.

    Reply
    1. I also do not support budget deficits, unless absolutely necessary. I think coming out of 2008-2009, that was absolutely necessary. Our unemployment rate is near historical norms, we have a decent economy (better now with our CDN $$ low), and we have rock bottom borrowing rates. What’s the rush for the government to borrow piles of money? If they are going to balance books in another 3 years, fine. But, that’s a big IF.

      I’d like to see governments get in the habit of doing a few things very well (healthcare, education) and avoid making too many promises you can’t keep. You can and never will please everyone but I suspect if you have an effective and efficient healthcare system, dare I say the same for education system, I bet that party would never lose power.

      On the subject of debt, I hate it. I’m looking forward to being debt free so on this site I can eventually write “I don’t care” what interest rates are, could be, will be or won’t be. It must be a great, liberating feeling to be debt free like some of my ‘established’ readers 😉

      Thanks for the comment. Hope you got my email?
      Mark

      Reply
      1. @ MARK
        Contrary to you, I am hoping to stay in debt for several more years.
        This is because I run a HELOC for investment purposes. So all the interest is written off against the dividends it is generating.
        YTD is >$15K divs VS >$3K in HELOC interest charges. The reason I am pulling in thst amount of divs is because I have been running this for several years. As the divs pay down the HELOC I get to invest in more div paying stocks.
        As long as those interest charges get paid off every month from dividends I see no reason to lower my debt level at present. If the interest rate changes then I will re-evaluate.

        RICARDO

        Reply
        1. I get the borrowing for investment purposes. I just don’t do it myself because I’m overly conservative sometimes as my close friends Dave and Scott would attest! I’m rather risk adverse when it comes to investing.

          I might get into leveraged investing when my mortgage is close to death, we’ll see. Then again, it might be nice to be debt-free and any income my wife and I don’t spend on travel can be invested. We hope to pull the plug on the workforce within 10-12 years. 7-10 years if we are lucky!

          YTD dividends are $15K? That’s very good in a non-registered account.

          Reply
          1. @MARK
            Yes, $15K year to date but that is tempered with just over $3K (YTD) of interest charges which are totally paid off every month by the incoming dividends plus being tax deductible. My short months pull over $700 and my big months (quarterly) pull over $2,500K
            I don’t have all winners in there either. I can make some unprofitable purchases as well as anyone else but the goodies outweigh the not so good.
            Getting some room in the HELOC now to buy some more stocks. Hope those interest rates stay low for a few more years

            RICARDO

          2. Geez, that’s great…$15K although I understand there are interest costs involved…

            I think you’ll get your wish with rates, maybe a bump of 25 to 50 basis points over next few years but that’s it. Just my prediction of course.

  3. I’m happy with the Liberal win. As a CF veteran I found it shameful the way Harper and Fantino treated Veterans. This is why I voted Liberal this time around. The Cons ran enough of a fear campaign to turn me off for a lifetime. We did pretty well financially when the Liberals were last here. I don’t see the harm now.

    Reply
    1. I found Harper’s programs related to Veterans appalling. I was never a huge Harper fan. He always struck me as our equivalent to Bush. We’ll see how things go I guess. Certainly lower taxes for small business owners and the loan payments for students are huge.

      Reply
      1. The Economist has mentioned a few times that Canada’s tax breaks for small businesses mean owners sometimes don’t want to grow their business which would be good for the economy. I’ve heard of a few people around here who purposely limit the size of their business (one of them is nice enough to give large bonuses to employees to lower the profit but that still means the business can’t create more jobs). It’s hard to tell how big of an effect it has.

        The assistance for student loans sounds nice, it does mean that universities have an excuse to charge more though. How do we know whether we’re actually getting better education out of higher prices? This time around not many of the promises were linked to clear goals.

        I would have liked to see the OAS age increase though. Just about everything else has gone up with inflation since that was established – retiring at 65 doesn’t mean the same as it once did and keeping it at the same age is like a bonus that grows faster than inflation.

        I do think we’ll see a lot of good in the next few years. Hopefully we can make adjustments later!

        Reply
        1. I’m all for small business owners getting a tax break/reduction. This is where the growth comes from to drive our economy.
          https://www.ic.gc.ca/eic/site/061.nsf/eng/02804.html

          I suspect it will have an effect but I agree it’s difficult to accurately quantify.

          I agree that retiring at 65 doesn’t mean the same as it once did but I’m fine with the change. Two years isn’t a big deal in the grand scheme of things. I suspect that was more political posturing than any meaningful change (with OAS).

          I’m optimistic as well but as they say, time will tell!

          Reply
  4. I am in the same boat. As a 29 year old childless guy none of this is overly applicable to me other than the TFSA scale back which will hurt for many years to come. Oh well though, maybe the tax break for the middle class will help soften blow. Only time will tell however.

    Reply
    1. Thanks for the comment Stephen. The TFSA is a great thing for all Canadians and the more tax-free room, young, old, wealthy or whatever the better. We are taxed enough. We’ll see how Trudeau helps the middle class in the years to come. He has a big agenda…

      Reply
  5. My pleasure.

    I think we’re on the same page debt wise.

    I agree with you on health although that’s really a responsibility of the provinces. Although it should be called something other than health care since there is almost nothing done on prevention of bad health.

    From what I read health care costs are rising at unsustainable levels, way outstripping inflation and changes must be made to ensure our system survives. These rapidly escalating costs (most of the problem) can’t be solved by government alone. It seems to me we’re asking way too much of the system and it has to be redesigned to get people to change and become healthier. I would like to see screening of all citizens to determine the state of their health. Goals should be set and health education (diet & exercise etc) offered for those who are medically determined to have obvious preventable health conditions or diseases. If people cannot demonstrate progress on this diagnosis and their plan for better health over a reasonable time frame they should pay for all or some of their own “health care” relating to these specific issues and choices. More people pay attention when it costs money.

    I have also read an enormous and disproportionate amount of money goes into health costs for the final year of some peoples life. I wonder if this is something that most people support and do our current practices allow choices for patients and families. It’s not something I know much about but maybe this is an area where there can be a win/win in some situations.

    I can confirm publicly being debt free was very liberating for us.

    Yes, I got your note and you’re going to hear back soon.

    Reply
    1. True, healthcare is a ministerial responsibility of provinces, as is education, but the federal government plays a key role in ensuring transfer payments are sufficient and setting the standards for public health. On the point about care standards the government could enact legislation regarding performance standards to focus on prevention vs. service delivery. There should also be both “carrots and consequences” when it comes to meeting these performance measures. It happens in industry and it should happen in our medical model….

      On the subject of debt free, well, I’m sure it is and was 🙂

      Reply
        1. The number of people able to take advantage of the 10K contribution is relatively small. The tax cut will not require anyone to do anything and will be applicable for every single Canadian with income in that tax bracket.

          Reply
  6. The TFSA rollback will affect me right off the bat – if it comes to pass.
    I am retiring as of Jan 1st 2016 and the TFSA was one way I could convert my non-registered (taxable dividends) in to a non taxable form. Yes, I will be drawing down on the non-registered portfolio right away but this would have helped me to save some dinaro and extend the potential lifespan of my savings.
    As usual election political promises, from all parties, are just spouted off without due consideration to how they will affect the majority of Canadians versus the cost and effect of their implementation.
    A case in point to this outside of our finances is the promise to reverse the door to door mail delivery. As of today I will be utilizing the “communal” mailbox. How much has Canada Post spent on these? And therefore how much money would/will be wasted to scrap them all and revert to D2D mail delivery. Another mindless political promise where the costs have not been considered – cost of all those boxes and installations, cost to rehire “new” mail people, cost to remove all those mailboxes and restore the land they are on, cost to store the brand new mailboxes that are no longer needed.. OK wait! It is just government money. Wonder where they get that? Maybe borrow from the banks.
    Cancel the F35 fighter jets! How much has Canada spent to date on this? It has already been re-reviewed once. At what cost? What are the implications/cost to cancel the project? Remember how much it cost us (Chretien) to cancell the helicopters from BM? How much would Canada lose in future development/manufacturing potential? Another political promise without due consideration.
    The Liberals will invest in the countries infrastructure! Just where is this money coming from? The big Banks? Who will pay the interest on the loan?

    Did I like Harper? NO! But I also do not like political election promises that are just window dressing or that will cost us, the Canadian citizen, more than we can afford. Debt is not necessarily evil but mindless electioneering promises can cost us dearly.
    Lets hope that the commercial of Trudeau as being “nto ready” does nto bear fruit as we, all Canadians, ar eth eones who will pay for it – as usual.

    RICARDO

    Reply
    1. No doubt this will impact you if retiring soon…the TFSA is an excellent way to move non-registered assets to registered (inside TFSA).

      As Dave pointed out, the promises buy votes. We’ll see if things are changed…

      I suspect the communal mailboxes will be cheaper in the long run but I don’t know for sure. Otherwise, why do it? 🙂 Good rant all the same.

      Those F35s are pricy but they look cool right?

      I have no idea where our money is coming from. I worry about the Liberals taking on more debt and raising the deficit. NDP would have likely spent more but we’ll never know…

      Harper became more like Bush with every passing year. I’m glad that reign is over. I just hope we can improve healthcare, education and infrastructure in the coming years. That will be good for Canada I think.

      Reply
      1. Hi Mark;

        I just wish someone could sit all those university supposed well educated politicians down and tell them they are there to administer the taxparyer’s monies and not just to spend it on high falooting ideas & promises. There is a cost to everything.
        Having projects implemented by one administration and cancelled by the next is not exactly what I would call good administration unless they can show it was a real bad idea.
        As to the F35’s, yes, they do look cool but that is not the point. How much money have we Canadians already paid to be in the loop and just how much would it cost for us (Justin) to rip up the paper including lost R&D and manufacturing plus loss of confidence in Canada carrying through on commitments.
        Wish they could run the government by the people & for the people instead of just getting themselves elected.

        RICARDO

        Reply
        1. There is absolutely a cost to everything, including an opportunity cost.

          I was kidding about the F35s…

          Yes, to have work done, only to have it cancelled or reverted is waste. I see this enough in my day job. Management (including government) is allowed to make bad decisions but re-work is one of the worst kinds of waste. It will be interesting to see if there is any culture shift. Justin is rather young to be PM.

          Reply
  7. Well, if your top priority is to have more money in your wallet, then why would you ever vote for a non-conservative party? You can’t want a liberal party and then complain that they won’t be as friendly to your wallet as a conservative party, or specially the conservative party under Harper. Of course they won’t be as friendly to your wallet. Surprise!
    I have a child and will be affected by some of the changes. However, I also recognize that some of what will be changing, Child Tax Benefit for example ($160/month), was only there to buy votes anyway. That’a a taxable benefit by the way. So I might only see $120. That was apparently introduced to help with child care costs. That might cover the cost of diapers. One of the biggest child care costs is daycare. At an average of about $65/day, that benefit might cover two days. At $65/day for 20 days equaling $1,300/month, that’s like a 10% reduction in my daycare costs. Tack on diapers, food, etc, and that “carrot” is well under 10%. Yes, I may miss the $160/month, but it wasn’t a good idea to start with. It was to buy votes.
    Would I rather have the $160 ($120) in my wallet than have a policy that would vastly reduce child care costs for those who need it most? No. But that’s a philosophical argument.
    Am I concerned that the Liberals aren’t as wallet friendly? No.
    Am I hopeful that in exchange for a few dollars that we may have a more fair, responsible and equatable Canada – one that we can be proud of? Yes

    Dave

    Reply
    1. I’m not complaining about the Liberals, they haven’t done anything yet to complain about yet 🙂

      Yes, those politicians do that, buy votes for sure; they all do.

      If we had kids or a kid, I would happily give up extra money in my pocket to reduce child care costs across the board. Even without kids, I think an equatable state is a better state. We need more of that. If the Liberals can help do that, or any party for that matter, that works for me.

      This post was just some fun to highlight some promises. We’ll see if they can be kept.

      Reply
    2. Some provinces also have assistance programs to help with daycare costs – they can run to much larger amounts than the current federal program. Putting it all together, some low-income families can actually be paid more than the cost of daycare, right now. That’s even better than a $15/day program 🙂

      Reply
  8. I think you are missing a crucial aspect to CPP expansion. Your premiums will certainly increase with any expansion. So looking at what happens at 60 with CPP expansion is missing the boat IMO. You’ll pay more NOW and that’s the bottom line.

    Reply
    1. I actually don’t mind paying more now Phil as long as CPP “is there” when I need it or want it. I get I will have higher premiums and if that makes Canada a better place for seniors, so be it.

      Reply
  9. My comments
    Agree with much of Ricardo’s comments so don’t want to repeat.Secondly I don’t believe this election was won on who the better government would be. I believe that the liberals simply have a far superior marketing strategy. I think if they had Kim Kardashian as the leader she would have won too. PC’s just can’t sell themselves anymore, they shoot themselves in the foot every time somehow. With all the social changes in our society and school system, I really don’t see them winning anytime soon… Where was CARP in this election? Not a word from them in advertising?

    I wholeheartedly disagree with running a deficit unless there is an emergency situation. I also would like to hear in the same sentence : “we will run a 10 B deficit for the next three years, and in order to pay this back in year 4 were are going to..”X”..”
    What the exit plan? I don’t think there is one.

    With the liberals it’s the same thing over and over. For you making over $40 K to 90 K here is… $670.00. I will guarantee you right now, there will be a combination of taxes aimed at the middle class (provincial and federal) the will steal that money right back from the middle class within a year, and then some. (I doubt it takes that long) Some kind of Carbon tax, road tolls for when we go to work, etc – they will get that money back.

    As for CPP expansion. CPP is a win win for governments. CPP works like an annuity. Right now they take 4.95% off of your paycheck, and your work contributes the same. WE are contributing 10% already but getting a 6% return if that. If your lucky and you live to 90 you win. If you are unlucky and you die at 68 you lose and so do your survivors. I would rather see forced savings to your own “life income fund”. As long as you work you are forced to contribute to it. (Singapore has this approach) Then when you retire 45 years later you are much better off and your money can be directed to survivors (taxed fairly of course). I think expanding CPP will give false hope for those who really don’t understand just how much they will get at retirement. Really what will the 2% extra give you after it’s skimmed? Another $100 monthly… Wow great… Some people think that CPP is supposed to be this golden pension, and not a supplement to your own plan to help with inflation… I think it will make people save even less and have the opposite effect.

    Good post today, someplace to vent… much appreciated.

    Reply
    1. I think it was very much a strategic vote to get Harper out of office. Do I think the Liberals will do better than the Conservatives did? I hope so but I really don’t know.

      The Kardashian comment was funny…

      I worry about the deficit. I hope the books can be balanced. I simply don’t see how more debt is good for our country long-term, especially with demographic shifts now underway. Less workers + more retirees = tax mess. I just hope I’m out of debt when $hit hits the fan.

      Time will tell if you are right, re: combinations of taxes aimed at the middle class (provincial and federal). I could see some more toll roads in our future on that note.

      Interesting concept about the life income fund. How does that work for folks that leave or are forced to leave the workforce early?

      I would there are no perverse incentives when it comes the CPP expansion. I mean, folks do realize how little CPP pays right? Then again, maybe they don’t. Far from a golden plan of any kind.

      Reply
      1. @ PAUL N
        I, for better or for worst, live in La Belle Province.
        So your statement that the governments will find some way to make sure they get your share of any extra money bears great truth here. When Harper lowered the GST (Gouge & Screw Tax) by one % guess what happened to the QC sales tax. YEP! Somehow it got raised at the same time. Ditto for the next cut to the GST. So we here in La Belle Province never got anything from that generosity by Steve.
        And, for all my 65 yrs of wisdom, I still can not understand why the governments can not issue treasuries or CSB’s at the same rate or slightly lower than what they borrow from the banks or other lenders. If the banks charge say 5% on a loan to the government then why can the government not offer the same rate on a CSB or bond? After all, we would ony be paying ourselves back without having to pay profits and administration fees to the lenders. It might drop the value of my bank shares but I can live with that.
        OOPS! Now I see why. If that happened then the “government” would actually be responsable to the citizens to give them back their money from taxes the governemnt is collecting from the citizens. Don’t want that now do we. We might actually take more interest in how the government is administering our money because if they ran deficits every year we just might get worried about getting paid back. Now no governing party would want the citizens to be concerned about that now would they.

        RICARDO

        Reply
          1. @MARK
            They are losers are the rate they are offered
            Which is my point. WHy can the government not offer CSB’s or bonds at the going rate that the government (US – you and me) pays to borrow money from who ever.
            At least then. I am fairly sure, a lot more Canadians would buy them. That way the government can borrow our money and then tax us to pay us back. Simple logic! No middle men, no administration charge, no banks fees. So less expensive to the government who are….US – you and me

            RICARDO

        1. If people are still buying CSB’s at the rates they are offered, then it is really no wonder why they don’t raise the rate of return… 🙂 Is there a stat somewhere disclosing if sales of them have nosedived? I just think it’s humorous when i see a bank with a big advertisement that you can get a whole 1.5% interest back on you cash (and lock it in for 5 years) or for the next 45 days or so you get 2% then it drops down to below 1% after that. Do people really get excited about that?

          Reply
  10. Hi Mark,

    Disclaimer: I’m a full-on conservative and believe in lesser the government the better overall it is for its citizens. Going back to Harper has the Conservatives, i’m just amazed at how much hate there is for Harper. Yes, it is true that he has made some questionable moves and he is *hated* by the media (just go back and read the bias in the media). However, let’s not lose sight of the fact that he had done some amazing things. I may be in the minority but I maintain that he was a very good PM for Canada.

    As for the Liberals, I love Trudeau. He’s someone i’d love to go out for a beer with and hang out a strip club. He did well in the debates (Harper was much better; Mulcair sucked) and he actually improved as the campaign went on.

    To me, it’s the same thing no matter who is in the power. We’ll end up paying more taxes under the Liberal scheme but that’s fine. Note that neither me nor my spouse earn no-where near $200K individually, but together our combined income reaches that threshold. So we’ll lose out on the CCB, though save a tad-bit from the income tax break. Not to mention the fact that we lose out on TFSA, which again gives me less incentive to put money in non-registered accounts.

    What pains me is the potential increase in CPP. That’d really hurt the middle-class more so than our family. It’s funny that the same folks who voted the Liberals in are the ones that should have voted for Conservatives. If you want less taxes, less government, and more money that you control, you should be voting for the Conservatives. Time shall see how bad the deficit situation gets.

    Reply
    1. Hey R, thanks for your comments.

      It was a strategic vote. I agree, Harper did some good things but towards the end he was very Bush-like. Not good.

      Good comment Trudeau, that made me laugh re: beers and strip clubs.

      I suspect we would have paid more taxes over time with Conservatives as well. Losing the TFSA room also provides little incentive for taxable accounts but I need to grow our passive income somewhere….maybe I will pay off debt instead (mortgage) although that’s a lower “guaranteed” rate of return.

      I do want less government over time but I don’t think I’ll get it. I feel we have some waste in the system. Our tax code is unbelievably and overly complex. Maybe only through attrition and/or voluntary job leaves will the government downsize…

      Reply
      1. Do you really buy into the whole “less incentive to save’ malarky about the non-registed accounts? Effectively, rather than making an average of 7.1% per year you’ll be making about 6.1 % on that additional $4500– (assuming you hare investing in Equities – there’s tons of room in the current TFSA for Bonds for crying out loud). Here’s the kicker — if we invest in our infrastructure making Canada more competitive perhaps the economy will perform sufficiently to make up for that 1% ‘loss’. PLUS you only get taxed when you make money over the long term it gets even better due to capital loses.

        So your hypothesis is that a measly 1% drag is going to stop people from saving.

        Seriously? Yeash, hard to believe that most Canadians somehow are still motivated to save in an RRSP and happily pay a 2.4% MER drag on crappy high MER mutual funds. The whole “we need 10K TFSA’ for society reasons is so poorly justified and lame is why I get so heated about it.

        Sorry, I don’t buy it.

        Reply
        1. I do (somewhat) None, because if someone has enough savings to fill up their RRSP, then TFSA, with some leftover, and they want to invest, where does it go? A taxable account. Those people are in the minority and I know how you feel about people who make good money! 🙂

          Personally, whether we have an RRSP, TFSA or neither account, I will save some money for retirement because that’s who I am. We don’t need “a 10k TFSA” as a major incentive for me to save but “tax free income” is some incentive to me – I won’t deny that.

          I can see however if account rules keep changing it will tick people off. Again, I don’t really care in the end, I will do what I can to look after my wife and I as best as I can.

          We (government) simply fail to keep things simple, account-wise, tax-wise, other-wise. Simplicity is the ultimate form of sophistication.

          Reply
          1. Well I think you proved my point in regards of the non-expansion of the TFSA encourages people to save – it doesn’t. The only reason to expand the TFSA is for wealthy people, new retirees (hence how the majority of TFSA maxers make around 60K – those are largely retired people with large nest eggs), and the super savers. It’s not that I’m against rich people per se, I’m against bad policy. You don’t base economic policy on such a small proportion of the population. If I was against rich people I’d be going after the RRSP which is a far – far bigger handout to the rich than the TFSA. As I pointed out above, the TFSA is about pennies in your portfolio. It’s nice, it saves paperwork but the amount it actually saves people isn’t huge – if we are comparing it to equities in a taxable account.

            Anyway, we can agree to disagree. Of course, this we a well vocalized stance of the liberal platform which Canadian voted in with a majority so I guess the majority of Canadian’s agree with me to (maybe that’s a stretch b/c month Canadians saw this TFSA expansion for what it actually was: A lame attempt at vote buying. Fortunately, it didn’t work on you but obviously it did on a few posters on your page.

            All the best.

          2. None, I can only speak for me, not for all Canadians when I say – the higher TFSA is some incentive to save but it by no means is a driver for me. I saved before the TFSA and if it was gone – I would save after 🙂

            I stand my ground the account benefits everyone. What you’re debating is the higher the limit, the more if affects people that have money. Agreed – people that have money can likely save more money.

            “You don’t base economic policy on such a small proportion of the population.” That’s what our progression tax system does. You want a level-playing field? A flat tax. You then tax consumption. The more you spend, the more taxes you pay.

          3. Hey Mark,

            I think in theory a flat consumption tax is the most fair like yourself. However the problem I see is that it could lead to a increase on black market products / sharing / you renovate my basement – I’ll fix your transmission kind of activity. Even if people feel the rate is fair they will find ways to avoid it. This is one argument that many like to use about the issue of illegals in the US. One side claims they don’t pay their taxes but use the most free government services, the other says “sure they pay their fair share” – the sales tax at Walmart… Many will even avoid that small tax and trade with each other. I just think a flat tax will have a bad outcome for the wrong reasons.

            Taxing at source right off of your paycheck makes that activity difficult if not impossible. A necessary evil.

          4. I like the theory behind the flat tax and yes, I could see people trying to skirt of the consumption side of things, but in the end, a more simplified tax system is a better system IMO.

            I might write a post about the pros and cons of a flat tax system at some point. I’d be interested in perspectives. One could say with our high-income earner tax rates of today, close to 50%, you are actually penalizing those people who are financially successful. Is that what we want?

        2. Hi None,

          You’re right in that the actual amount of money “saved” is in the $100s per year. Nothing to cry home about; however, these amount accumulate and cumulative and over the decades, it will penalize the saves to the tunes of thousands of dollars. So if you look at it from my point of view, it’ll mean that I (among many, many others) are losing out on these dollars. I’m not debating about the policy, but how it will actually impact me and my family.

          And it does give me less incentive to save. It may not to others but for me personally, it matters.

          Reply
          1. Especially when you’re probably getting a middle class tax cut that more than offsets that. The TFSA seems like such small potatoes it’s just a silly thing to whine about.

          2. @ None

            I guess you already ignored the broken campaign promise by the liberals I posted already. Give back $670.00 take several thousand with the coming increased land transfer tax. Lets not leave any possible tax grab that we can alone… I’m also convinced deficits are something liberals think are fantasy and if they ignore them they will just go away someday by themselves.

            And you are 100% wrong. Canadians did not vote for the liberals and their policies. They voted for this false marketed message of “hope and change” a borrowed variation from the US strategy that they used to get elected. It was masterful – I will be the first to admit it. I expected it. We don’t elect leaders anymore we vote on “most popular” person like in high school now.

  11. Hi friend (see what I did there?),

    You’re right; the government is so bloated that it’d be very unlikely to be ever trimmed. Harper is gone and we did need a fresh change. I wish we had a 2-term limit, not unlike what they do down in the States. Harper had to go, for sure. But what were the alternatives? Mulcair? Hell, no! Trudeau? Great guy but let’s hope something good comes out of it. At least Trudeau is voted in as the sexiest PM Canada has ever had (after Chretien, Martin, and recently Harper, Trudeau looks like a man’s man). Yeah, i have a bit of a man-crush on Justin. Hahah.

    Reply
  12. In response to your question on what a high earner is-I think a lot people in my demographic-professionals, 40’s, family, University degree etc would say they are middle class. I think many are deluded that they are middle class and they are in fact ‘rich’-definitely in the world wide scale and even on a rich western scale. The median family income in Canada is $76,000 while the median individual income is just $27,600. The richest 10% make more than $80,400 so many in my, very unrepresentative, cohort are in that group of the richest 10%-and I would venture to guess that many reading personal finance blogs are in there as well.

    Reply
    1. Keith, that’s a fair point. However, the median wage of a full-time employee (regardless of race, gender, experience, education) is over $51K per year. Earning $80K may be 10% of all income-earners, but I’d wager that it’s not as high as it appears.

      As you said, lots of my peers earn anywhere from $80K to $120K and they’re smack in the middle-class range. A $150K household income doesn’t really get you very far anymore, when the housing costs are ~$500K in my neighbourhood. Add two cars, two kids and their expenses and the average “upper-middle class” family isn’t so wealthy.

      Reply
      1. And… if you want to get technical about this and want to really feel guilty, anyone making more than $34,000.00/ year is a 1%’er when the entire world is taken into consideration. So you too are a bad 1%’er… So feel free to send some extra taxes to the government voluntarily. (I won’t)

        Reply
    2. I think anyone in the top quartile of earners is a high-income earner. Now, obviously there is a huge difference between the folks Justin wants to tax and what I make but in the end, if you make more than 75% of the population, like scoring 75% on a test, that’s high enough.

      My sense is even most middle-class and high-income earners don’t read PF blogs or articles. Those are called nerds 🙂

      Reply
  13. As a father of three, the Liberals promised a couple things that might impact on my wallet… although I don’t really count on that. I didn’t like Harper that much but I thought he did a good job economically speaking. So, let’s see what happens in the next months. We’re with them for 4 years anyway!

    Cheers,
    Mike

    Reply
  14. The problem with political Promises is that they are intended to attract votes and address a short term issues. Politicians are not the ones who actually run government, create jobs or generate income. If anything they are the ones who create debt and can do little to reduce it.

    After generations of an ever growing government, administration, unions, patronage, etc it will be difficult for any party to address the real problems that are normally just passed on to other generations.

    Of course we, the people, elect the politicians and rarely make them accountable, other than for the short term promises which seem to satisfy the majority.

    Do I have an answer, not really, but if I did have a say, I’d probably try to reduce the size and role of government. I’d try to ensure that social programs are directed to those who need them and ensure that the administrators are not the main beneficiaries of the funding. I’d encourage industry but try to make them pay a reasonable share to support government and the social programs and I’d make us more responsible to raise and be responsible for our family.

    Reply
    1. Governments are rather short-term focused, i.e., what can I do to keep my job for the next 4 or 8 years.

      I would agree that for the most part, growing government, administration, unions are a bad thing. Unions don’t make any sense in the public sector, just my opinion, but they certainly do exist and likely always will.

      Reply
  15. With regards to TFSA most people seem to ignore that point that Un-used contributions can be carried forward. Of course low income will not be able to take advantage of $5k or $10k, but at some point those low income people might very well become middle or high income earners. So that as their income grows so can their contributions and those funds, plus the potential growth of their saving will allow them the opportunity of generating a sizable income during their retirement, tax free. I think dropping the $10k will have a huge affect on current low income chance of pension savings in the future.

    Anyone who believes their future tax will be the same or less than it is now, is deluding themselves. Taxes have never gone down, just up and I doubt any government will do much to change that trend.

    Reply
    1. That’s my fundamental problem with the RRSP, you have to know your tax rate when you retire. I prefer the TFSA because tax-free now is tax-free until they change the rules. I suspect my marginal tax rate in retirement will be lower than now but to be honest, who knows what the future holds. Anyone that firmly knows is dreaming 🙂

      Take advantage of the TFSA now regardless of your tax rate. It is really an everything account although I prefer to use it as a retirement account.

      Reply
  16. Most people assume they will be earning less, but those who are saving for the future, as you are, will likely find that your income will be considerably higher than you expected. You’ll cringe at the rrif withdrawals at the highest tax rate and wish you could have put much more into the tfsa.

    Reply
    1. Well, I’m pretty sure I will be earning less in retirement than now. Hard to say for sure, you never know in life, but if we retire early we won’t have this type of income. That’s OK, we won’t need it because a good portion of today’s income is going towards mortgage debt and RRSP contributions. Those will both disappear in 10 years.

      Reply

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