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moneysense.ca, 31/01/06
This and That
- Since it is RRSP season, it is a good bet that we will be bombarded by surveys of all kinds. This one by Royal Bank finds that the average foreign content in Canadian RRSPs is 14% and 79% of us have no intention of increasing our foreign investments.
- Here is yet another story on the importance of the “latte factor” on our finances. It suggests that we should brown bag our lunch, buy bottled water in bulk and take public transit and use the savings to fund our retirement.
- Maestro Alan Greenspan ended his reign as Chairman of the Federal Reserve by boosting interest rates by 25 bps.
- Many market commentators had predicted that the TSX Index would return less than 6% in 2006. The index is up 5.6% in January alone. Is a correction looming?
- The Globe and Mail is reporting that the incoming minority government is planning to table the federal budget in March and plans to enact the 1% cut in the GST and also eliminate the income tax cuts in the fiscal update for 2006 and beyond.
moneysense.ca, 31/01/06
The federal budget stuff should be interesting. I don’t want to see those income tax cuts that started in 2006 go away (for me it made less than a $40 difference in my biweekly pay) but I wonder if that would be offset by the GST cut. I guess $40×26=1040 and 1040/1%=$104,000 so I would have to spend $104k on GST-laden goods and services to make up for it. Well, I think I would be stretching it if I said I spend a quarter of that so I would rather have the income tax cuts.
Unless the Conservatives try and eliminate the tax cuts of last year through an order in council (i.e. outside the legislature) I suspect they will have a very difficult time in having this passed. What other party would go on record to have propped up a minority government in effectively increasing taxes?
0xcc: Your $1040 per year less in taxes is not entirely due to the fiscal update tax cut. EI premiums are a bit lower and all brackets and basic personal amounts are higher (indexed to inflation). I think almost everyone earning over $35,000 would get a fiscal update tax cut of $300-$350. So, we need to spend between $30,000-$35,000 in GST-applicable spending to get the same benefit.
I think in rough dollar terms both tax cuts would mean the same to most Canadians. But, I believe that it is better to tax spending and cut taxes on income.
HI: I think it is a fairly sure bet that the income tax cut will be eliminated. The GST cut is in the “5 things I will do” promise and the feds can’t pay for both tax cuts. So one way or other, the 16% bracket is coming back
Actually that $1040 was from the federal tax portion of my paycheque deductions. The EI premiums are outside of that (and the CPP increase took a little of that back). So I guess a part of the reduction in federal tax was due to the inflation adjustments.
Last I checked, the budget is presented as a bill, to Parliament. Parliament returning April 3, it is surprising the Globe can say it will be presented in March.
lecentre: The column was published soon after the election and there was a some talk then that Parliament might start sitting at an early date.