I don't write about politics as much as I used to, but you all know that I have no love for conservatives, expecially our current Prime Minister and his ilk. The latest federal budget does nothing to change that. I know I'm a bit late on the analysis of this, since the budget came down in late January, but that's because the "how does it affect me" part didn't really sink in until I started working on my taxes.
I have no particular issue with paying taxes. Taxes pay for things I value like universal health care, education, roads, social services and a whole bunch of other things that make Canada a good place for most people to live. In fact, if paying more taxes would turn "most people" into "everyone" I would happily pay more--but only to a point. I would prefer that current taxation schemes become more progressive (which could mean I would pay more) and do a better job of redistributing wealth through the provision of services and less taxation for the very poor, rather than the current trend towards encouraging those who already do okay to keep more of their earnings out of the system.
The Tax-Free Savings Account is one of those new programs that gets it completely wrong in my books. This new scheme allows anyone over 18 to annually save $5000 of money, and shelter all the investment interest it accumulates from taxation, forever. Any of the $5000 that is not used in a tax year can be rolled over into the next year similar to RRSPs. However unlike registered retirement savings which are taxed when they are withdrawn (ie the taxation is deferred), the captial gains from the TFSA are never taxed. The tax savings are greatest for those who can put away the most money. No sign of progressive taxation there...
The smart people at the Canadian Centre for Policy Alternatives sum up my issues with this program nicely:
This is essentially a program to shield capital gains. Consequently over two-thirds of the benefits from this program go to 6% of Canadian, those with taxable incomes of more than $100,000 (They were the source of 69% of all taxable capital gains in 2005.) This is a male dominated group, but also a very elite group: 5.7% of men who filed taxes, and 1.6% of women.
Looking ahead, TFSAS raise another troubling issue: a future generation of retirees could be paying little or no income tax (for those who could afford to save) but expect to receive large amounts of high-cost public services, such as public health care.
This new program also raises personal issues for me. I live very comfortably. My family income is much higher than the median national family income and while I live in a big expensive city and have a comparatively large mortgage, our family is able to do pretty much anything we want. As Jo suggests in a very thoughtful post, we have chosen how we wish to live, and do what we need to achieve that.
I have some money that I could use in one of these accounts. It seems foolish not to take advantage of this and increase my personal wealth. Does that mean I should strive to donate a portion of this to causes I deem worthy and exchange taxation-based income distribution with philantropy?
While I know that both government and charitable organizations play important roles in Canadian society, I also feel like my government is going in a direction I don't support. I suspect that most Canadians are not having this conversation with themselves. They seem to not consider how their taxes contribute to services they demand for themselves and for others (everything from funding for amateur sports to Aboriginal housing), but instead think only of keeping more of their money; like the "tax man" is some nefarious entity that keeps them from their holiday or big screen tv.
I also suspect there's a whole bunch of people out there who wish they had an extra $5000 they could save and earn some extra income.