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moneysense.ca, 19/03/07
Federal Budget: Who Wins?
Despite the spin you are likely to hear from the Tories as well the opposition (assuming the budget is passed in Parliament), there are only three significant tax benefits for most Canadians in the budget:
- For each child under 18 in your household, you will get a tax break of $310 (15.5% of $2,000 child tax credit) for 2007.
- If are a one-income household, the increase in the spousal amount will net you $209 in tax savings in 2007 and more in future years.
- If you purchase one of the eligible fuel-efficient vehicles on or after March 20, 2007, you could get a rebate of $1,000 to $2,000 depending on the vehicle.
That’s it! There is no general tax relief or reduction in the capital gains tax as rumoured in the media leading up to the budget. On the bright side, it isn’t as complicated to figure out how much you will gain, as was the last federal budget.
moneysense.ca, 19/03/07
This budget was terribly disappointing.
No capital gains tax reduction.
Meaningless increase to RESP’s.
$2000 Tax credit to every family in Canada. The money used to create this tax credit should instead be funneled into improving the Canada Child Tax benefit, a benefit program worth its weight in gold. Families who need the money get money because payouts are based on your income. Not these programs the conservatives love that pay out money to everyone regardless of their need, a great political tool but not much in the way of improving the lives of lower and middle class Canadians.
No direct tax reduction. ie reduction in marginal rates or increase to personal exemption.
Very very disappointing
I’ve hoped for “some” reduction for singles for a long time, yet another day I missed out.
I agree. What a waste. May as well have used the surplus to pay down the debt some more and give the next generation a break.
I’ve said before that I voted for the conservatives last time (though I am not a partisan supporter). I have to agree that the budget is disappointing from a personal finance standpoint. I was hoping for a reduction in the lowest tax bracket to 15%. That way everyone benefits and tax payers in the lowest bracket benefit proportionately the most.
On the bright side, at least there is no increase in taxes!
James: Just to clarify, the total RESP benefit remains the same at the lifetime maximum of $7,200. They CESG grant also stays at 20% of RESP contributions. Only the contribution level to get the maximum CESG grant has increased from $2,000 to $2,500.
I’m not too disappointed since I get $519 more per year from the child tax break and spousal amount. Like CC said, it’s better than a tax increase!
The resp increase is dumb – $2k / yr is more than enough for most students (and way too much for a lot of them). Same thing with the lifetime limit increase – 1. nobody uses the lifetime limit and 2. if you did, your kid would have to complete 2 degrees to use up all the $$ unless you had it in GICs the whole time.
With all the surplus we supposedly have, we should be paying down the debt and lowering the tax rates for everybody (even a little bit helps)
Despite the spin ….
If you have no kids under 18, and your spouse works like the rest of us dogs, you will find your 2001 Honda Civic that burns 34 MPG will get you nothing but a swift kick in the ass.
I would argue that the changes to the RESP rules are great. Right now, my wife is at home with my 2 children. Since we are only bringing in one income, we can’t afford RESP contributions. In a few years, when my wife returns to work, we should be able to catch-up on these lost contributions a lot quicker with the $2500 cap.
Correction.. that should be 39 MPG.
And… just in case… I guess the tax breaks are given to those who can afford new cars versus those who already drive efficient cars.
The reason I think the increase to RESP’s is meaningless is it once again does nothing to support lower income families…the ones who can’t even max out the current RESP limits. How is this helping lower income Canadians afford post secondary education. My wife and I are lucky enough that we can almost max out the current RESP limit, we won’t be able to take advantage of the new limit though. This is the same as the $100/month baby bonus payment and the new $2000 tax credit that the conservatives have given us. It gives money to everyone…including the people that don’t need it. If you are currently able to max out your current RESP contributions and actually have more money available afterwards to meet the new limit does the governemtn really need to help you save?? Shouldn’t we be looking at ways to improve things for lower and middle income Canadians.
Philip: Yes, the tinkering of the RESP rules will benefit you. Though, you would want to put just enough money into the RESP to get the CESG and nothing more. That would mean $5,000 per child per year until you have caught up on the grant room.
Mike, I am not disappointed because we didn’t get any goodies: with two kids, we get $610 out of the budget. I am concerned because this government is just like the last: spend, spend and spend trying to win votes. But then I guess that’s what politicians of all stripes do.
Andrew Coyne writes in today’s Post that if the current and previous government reined in their spending, the budget this year alone would have run a $43B surplus! That’s a $1,500 average tax cut for every Canadian!
Despite have 1 child, I wasn’t that impressed with these ‘targeted” tax measures. The best help you can give to low and modest income earners is either lower the first bracket tax rate to 15% as the Liberals first proposed, or increase the basic exemption up. There’s no use taxing people on minimum wage as they need ever dollar to survive. Plus most of the items for basic needs are GST free, rent, hydro, food, etc.. so a GST cut is useless.
Median total income in 2004 was around $25000, which means half of employed Canadians earn that or less. Doesn’t take a statistician to realize who would gain from this type of tax cut.
RE: Mike at Comment 6:
Not sure why you think nobody can use up the RESP$$. In my opinion, they can be used up very easily.
1) With annual contribution of $2500 plus grant and 10% investment return, the RESP will grow to $148K after 18 years. This is equivalent to $37K per year over a 4-year period, or $25K per year over a 6-year period. This is not a lot considering the tuition, books, renting, etc.
2)More people will be enrolled into Master Program in the future. Two degrees are possible.
3)Plus, the tax is paid on kid’s head which is at a low tax bracket, even if Educational Assistance Payments (EAPs) are more than necessary.
Hey I am in 2 of the 3 categories on your list AND I am thinking of buying a nice thrifty car too! Whoo hoo, the TRIFECTA!!!!
What if my kids play Lacrosse or Canadian Football? You forgot to mention grants to those sports too.
A very blasse budget really for the common folk like us.
Jennie
I did a quick research on costs of university and according to the Ontario Ministry of Training, Colleges & Universities, it will cost at least $5k/yr for a student living at home at and least $11k including accomodation. I did an estimate using $12k/yr and concluded that contributing $2k/year for 18 years would at 7% return would provide enough money for one 4 year degree. This doesn’t include any $$ that the student would earn during the degree. Now I’m not too confident about the $12k/yr figure but I haven’t seen anything better except for the ridiculous estimates from various financial institutions. The future value of this cost is about $75k-$80 which is well short of the $148k you mention.
Current tuition is approximately $5-6K per year. In eighteen years if tuition rises at about 5% per year one years tuition will be $14-15K per year. Thats $60000 for a four year degree. You will likely need an equivalent amount for expenses if your son/daughter wants to live away from home, less if they can live at home. My wife and I both paid 70-80% of our university expenses on our own, and we expect our kids to pay for some. Having said that I expect our savings will pay for tuition on a four year degree and at least a portion of expenses if they live away from home but they will be expected to contribute. I found receiving and paying back student loans was a good life experience for me, as well my summer jobs were very rewarding and I will encourage my kids to seek out the same.