Apparently I'm not the only one who doesn't like the idea of $10,000 TFSAs...
Mar 4, 2014

Apparently I'm not the only one who doesn't like the idea of $10,000 TFSAs...

...neither does the economist who came up with the idea of TFSAs. And for pretty much the same reasons I spelled out a few years ago when it was first floated.

It is just way too regressive, significantly helping the richest Canadians (those who can afford to put $20,000 as a couple away after RRSPs each year), and helping them proportionally more (as they pay higher tax rates), while the rest of Canada gets no benefit. Apparently it will cost ten billion a year, which is staggering. Combine this with the controversial income splitting pledge that likewise predominantly benefits richer Canadians in a very regressive way, and will cost perhaps as much as five billion annually on top. Together we get a very expensive group of boutique tax cuts that are going to disproportionately help the rich while offering little to zero benefit at all to poorer Canadians.

I support savings plans, and think they are incredibly important for maintaining a stable economy, particularly in recessions, and I support the government spending money to create incentives. These days, I have moved more towards contributed benefit plans (where the government directly contributes a portion of the rate above the market value, such that it is at least neutral on the progressive/regressive spectrum). But it is good to know that even for those sticking with a tax deduction model - even the economist who is really the father of the TFSAs - doesn't like what Harper is doing with it. 

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