Fed Issue #30 - Another broken promise: Tax cuts for the middle class

[JBen]

Twist words much Mosquito because it doesn't fit your narrative?

You said, "More people in the low income groups are able to max TFSAs than those who earn 150k-200k" as though its some kind of revolution without really exploring, why that might be .

I said, and Ive said this more than once, is that I agree with "some" changes. One of which, is small changes to tax code that do in fact, do little for low income earners, and or the middle class. Seriously, how you can continue to argue this is beyond me. Do you think the "middle class" is someone that earns 75,000 or 80,000? Or someone that earns the same and has a Pension? You know, the kind of people who could potentially max out a TFSA?

Re 17% of a group versus 32% of a group.
/whoosh.

and by the way Mosquito, its far more than just the cbc....

Im not sure where the "disconnect" is, because on one hand you seem to be agreeing that the middle class is getting kneecapped, yet on the other are moaning about changes that really do nothing for them. Do you really think someone that earns 50k has
5,000 so little Johnny can play hockey
4,000 so little Susie can be a gymnast
2,000 for the RESPs
17,000 for an RSP ( not that it does them any good, saves them any money anyways, the tax is deferred only, do you know what that means?)
10,000 for a TFSA
10,000 for paying down debt (over and above mortgage payments).

Hmmm, 43,000 so far. Thats far more than they are left after income taxes, let alone, you know
bills.

income splitting?
please explain how two people that are middle class benefit from that. If 2 people earn 60k theres zero benefit. If one partner earns say 120,000...........
*****

But someone that earns say 100,000k or a couple that combined earn say 125,000 and more?

So if your going to give someone a cup of coffee these days. Would you give it to people already have it "relatively" good, or those who statistics say are getting kneecapped

And for the record.
There is utterly no difference with respect to "investment return" between a TFSA or RSP. None. Its six of one, half dozen of another.
RSP is pre tax dollars
TFSA is after tax dollars.

If I pay you $100. If you direct it to an RSP, theres $100 tax to be paid later. If is taxed first (say 30%) theres $70 in the TFSA.
Doesn't matter what you invest in. If in 10 years it doubles.

RSP:$200
TFSA: $140
Lets say you withdraw the money and its now in your pocket.
TFSA:$140
RSP: $200 x .70 ( or whats 30% tax of 200?)

oh yeah
$140

The advantages to contributing money to one or the other depends entirely on other things.
primarily what tax bracket are you in. If your in a high tax bracket you defer 30% tax to a later date, in theory when you retired and subject to 20% income tax. Thats a significant difference.

But if your the middle class there is no "advantage", and so a TFSA makes more sense. Also because for people who aren't so fortunate to be well off....Life happens, and we can get hit by unexpected things and need 20, 30, 40 grand. If its in a RSP its taxed (often higher than the rate your originally deferred) if its in an TFSA theres no "penalty" for withdrawing, and because most real people don't have 10,20,30 grand laying around...

No need to use a credit line either.
Anyone thats taken rudimentary financial planning courses can tell you that.
/hint


In the future, you might want to be careful when your accuse people are drinking the Kool aid.
The point being after decades of this that and the other of trying to help people with high taxation, is that really, it benefits the well off more than it does those who are truly struggling...aka the middle class that can't save...are going into debt at record levels as well......Gee I wonder why..

And isn't this timely. In the news today.

Its not about Left vs Right, its a class war brewing....And its the middle class getting bent sick of the privileged......
http://www.newswire.ca/news-releases...613678663.html

And I might add, the SUN (not the CBC)....is running it.

[mosquito]

OK, let's try some investment realities, it is very surprising how high the percentage of low income max it out .....but not so much for those with incomes over $125K+ will be looking at investment in a company, debt elimination, lifestyle or higher yield investments. Property for example, I was talking to a real estate agent I know today and in the GTA area many houses are going for 20 or more % above asking and many are being used for investment rental properties... where if you invested in a good property the rental income will cover the majority of the costs and there is the continued increase in property values.
(ex https://www.inbrampton.com/brampton-...le-bidding-war
Chinguacousy and Bovaird Drive West area attracted a stunning 532 viewings and generated 82 offers. The home sold on Feb. 2 for $756,000—$206,000 over asking.

According to the CBC, the house was on the market for eight days.)



A couple of articles on using TFSA's
http://www.moneysense.ca/save/invest...st-not-wisely/
http://business.financialpost.com/pe...vs-tfsa-battle


Now as for the kool-aid.... when a person is loosing 10 or 20 or more % of their income to the government than someone else it is ridiculous to say they are benefiting more! theRebel does a fairly good job of covering the "fair share"
http://www.therebel.media/do_canada_...share_in_taxes


Now as for the Class war .... it is just what the left seems to be pushing to create, from your article..


Emerging Canadian Concerns & Fears

• 1 in 2 people agree that an influx of people from other countries is damaging Canada's economy and national culture.
  ** Libs wanting to increase it more....
• 40% of Canadians agree they are denied access to education and opportunities to get ahead.
  ** Are they willing to work for it though... ask any employer about lazy, job jumpers etc.
• 80% of people think the elites who run institutions are out of touch with regular people. ** evidences suggest they are right
• 61% of people do not have confidence that Canada's leaders will be able to successfully address Canada's challenges. ** Trudeau, Wynne, Notley .... evidence suggests they are right
• 2 in 5 say Canada shouldn't enter into free trade agreements because they hurt Canadian workers. ** majority see opportunity in free trade, not sure the demographic on this
• 69% say we need to prioritize Canadian interests over the rest of the world. ** If you can't take care of your own, how much help can you really be
• 69% agree government should protect jobs and local industries even if it means the economy grows more slowly. ** YES! Libs seem oblivious like Wynne building a ferry in Chile while a company 25 miles away builds comparable boats and wasn't allowed to bid.
• Issue: Corruption (52% concerned, 23% fearful) ** Libs (pay for access, .....)
• Issue: Globalization (67% concerned, 30% fearful) ** Libs/Soros ...... enough said there
• Issue: Eroding Social Values (54% concerned, 25% fearful) ** takes FROM charities, pot smoker, admirer of dictators as PM ... enough said there
• Issue: Immigration (52% concerned, 28% fearful) ** Too many, not willing to check properly...
• Issue: Pace of Innovation (53% concerned, 23% fearful) ** It is getting too integrated and increasing in vulnerability, at some point a solar flare, hacker, coding error etc. is going to really f*** us up!

[fishermccann]

You present those % as facts, from where?

[skypilot]

Globe and Mail, CNW, Calgary Sun, yahoo.com news, newswire.ca at a quick glance.

[JBen]

So much I could say, will just say.
TFSAs. Read the 2nd link. For the most part everything I've said.

However at the end of the day. If someone doesn't know what an ETF is ( do you) or why they are good investment vehicles over say MFs ( do you know what a MER is?). That will hold true no matter where they have their money in a TFSA or RSP... The same person that doesn't know the difference between an ETF and MF is the same person who will miss "better investment decisions".....regardless of where the money is parked.
For all intents and purposes there is no difference. The writer in the first article didn't discuss options either, or shorting,. or Puts and Calls, and many other vehicles that can be held in both. Most people, don't even realize that the tax treatment for dividends is different than the tax treatment of Interest. Whats the difference Mosquito?

Or frankly whats the difference between an ETF and a MF ( you can invest in both in both TFSAs and RSPs). In fact if your sophisticated enough you can even utilize options and strategies like covered calls in RSPs. That entails a certain level of risk tolerance though not commonly found. Do you know how risk tolerance is defined? And did you know that one finding in various studies shows that for Canadians, the "better" off they are, the more tolerant of risk they are. At the end of the day if a millionaire loses 25% its no different really than someone with 50,000 total who loses 25%. So if your wondering why so many play it safe with their meagre savings..........

Point being, the vast majority of people are not aware, period of the differences, nor why one or the other might be a better choice. At the end of the day as I tried to illustrate there is really no benefit, no inherent "investment return" advantage to either. There is certainly a big advantage to deferring the tax when your in a high bracket to the day when your in a low bracket....But those in the middle.

Using the changes.
People earning 45-90k can defer 20.5% to the day they retire, when guess what they are going to pay 20.5%.....On every dollar above 45k...No bloody wonder people have finally sized up....Its really only benefit to the well off......And on the off chance your able to sock away money young when your in a 20% bracket, but if life happens and you need to withdraw funds.....maybe your 40 something and who the heck knows....Well now your paying more tax, than you originally deferred.......

Re the last paragraph, theres something your missing.
Many of the things your bolding, many accused Harper of to...Food for thought. There are reasons so many people didn't trust him, and instead voted for a popular (abeit naive no substance dreamer)...Did you miss the parts that said the masses are sick of the "elitist", translation the privileged. Be they Harpers back room buddies that he pandered to, be they the CEOs of companies be they the well off getting so many tax breaks, despite all being heavily taxed.

Trying to stay somewhat on point, which was (is) the way our tax system and all those credits your moaning about...Somebodies paying for all that and by now I hope you can guess who it is. If you truly think or thought Harper was in touch with the working class and just who they are, not sure what to say to that...

Perhaps you should read this.
http://www.theglobeandmail.com/news/...ticle26431270/

And pause long enough to wonder why so many were sick and tired of Harper to, so much so they voted for a buffoon kind of like so many just did the same south of us. Tired of things like income splitting helping the well off, the middle class.....Not so much...Boosting TFSAs ( while nice ) if you live in the real world........

As Skypilot rightly pointed out. Everyone fighting for scraps, meanwhile forgetting the middle class exist.

An excerpt from that link. AKA WHEN HARPER WAS IN POWER.

[b]A 2013 internal government document, entitled “What We Know about the Middle Class in Canada,”[COLOR=#111111] draws the lines more precisely, deeming the middle class as those whose after-tax income falls between 75 per cent and 150 per cent of the national median – which, using 2012 figures, would include any family taking home $54,150 to $108,300 a year.

“Family,” however, is a catch-all demographic that includes couples of all ages, with or without children, single or double-earners, and single parents. Single people are excluded entirely – one of the fastest growing groups in Canada and a big chunk of the middle class – whose income, using the same government calculation above, would fall between $21,150 and $42,300.


Who did Harper try to woo?
Would love to know how someone earning 40,000 gets any benefit what so ever from "income" splitting....lmao even if its two people earring in the means of say 80k combined......

Or having 10,000 to max TFSAs when its a known fact, that the vast majority are going deeper and deeper into debt (in many cases trying to make ends meet), and don't have near enough saved.

Also from the link the average net worth is 200,000k
If you need to live 25 years after retirement and CPP/OAS might get you 10-15k a year.
How far do you think 200,000k will go ( and do note also in that link for the peons, the vast ,majority most of that is from their home equity)...need somewhere to live........

[bardern]

Probably an over simplification but if government at any level were better administrators and money managers this argument would be a moot point

[JBen]

Haha. Brevity has its place nor are you wrong. Harper was good, I voted for him. That doesn't change things, doesn't change that he like any of them pandered to the privileged. Had his companies and CEOs and backroom deals, no differently than Ms Wynne.....

Recently, in the Kevin O'Leary thread I think, I linked a very good article that spoke about Trumps popularity, why he is in the White House, The Americans working class and the growing ( can't think of right word) anger towards the "privileged". Largely white collar professionals in cities.

Trumps not Right Wing, he's anti establishment, going to drain the swamp, "make America great again". What? People think it's only Obama the American middle class, those people in the rust belt, the mid west have seriously had enough of????? Its the left wing wing that millions of working class Britons have seriously had enough of?
Yeah they are a good chunk of it..........

Read this one to. Even though its specific to the US, pay attention to how similar things are here. The middle class today, still earns less than they did in the 70s...Thats not big government....thats corporate greed as the left likes to moan about, and CEOs and. And thats not the only mirrored trend.
http://origin-www.bloombergview.com/...s-middle-class

Read the study by Edelman released yesterday....
Note the "resentment" towards....the upper quintile. Not the left, not the right, the upper 20%

Now read this one again.
http://www.theglobeandmail.com/news/...ticle26431270/

Earlier Mosquito you made some comment ( aside from say I drink Kool aid )about it being ridiculous that people who pay 20% more in tax ( they don't) benefit more..But they can certainly take advantage of a slew of loopholes and advantages in tax code that the peons ( sorry that was the term in Marie Antoinettes day) the working class can't. RSPs, TFSAs, RESPs, more are also just the tip of the iceberg..........

From the Globe article, Stats Canada ( going to try and discredit them now to?) and the Harper govt.
But the sun is not shining on everyone equally. According to a recent analysis for the University of Calgary’s School for Public Policy conducted by former Statistic Canada economists Philip Cross and Munir Sheikh, lumping middle-class factory workers together with middle-class teachers – as politicians are wont to do – “obscures the truth about which members of that group are struggling to keep up.”

By every measure – assets, income and the share of earnings – the wealthiest Canadians have done better, while those in lower income brackets have fared significantly less well. This pattern also holds true within the middle class, where the gap between the top and bottom has widened.
In fact, that 2013 internal government memo (leaked from Employment and Social Development Canada) was downright gloomy. It described a middle class that was shrinking and falling deeper into debt, and “increasingly vulnerable to financial shocks.”

The middle class is not I suspect who you think it is.
Think about the G20...........
And Marie Anoinette

[awndray]

< snip >

Ifs you think couples that gross less than say 100,000 can find 5,000 a year to put into a TFSA..Well I might question what planet we are living on. Again, these aren't "bad" things, and its arguable these days just how "well off" the "well off" are...But no matter what conclusion is arrived at. They are still far, far better off than the

Middle class.
That big chunk of society that is having it's back broken helping to pay for everything, yet gets almost nothing in return...

***********************

The biggest problem "really" is our tiered tax system, maybe one day we will move to a flat tax rate, or at the least just two, maybe three tiers...And leave the rest to consumption taxes. Those that earn a lot more, spend a lot more.........

Should add.
Completely agree with the overarching tone/theme. Aka broken promises, tax and spend and big deficits.
But who votes for this in the first place, currently and historically. Using a broad brush and painting them all the same.

The well off in cities........

I agree with most of what you've said here. I would like to add though, I don't believe the biggest problem is the tax system. Yes it's a serious problem, but I believe consumerism is. Of course that's a conversation for another topic, but it ties in well with your comment about a couple who earns less than $100K. If they can't afford $5K per year for some savings, then it's probably time for them to read a book, get some free counselling and learn budgeting 101. Mind you, you didn't specify the lower end of that scale, but the same principle applies.

[JBen]

That factors in as well Awndray, not disputing that.
Questions.
How much does it cost to go to University these days. How many tens and tens of thousands of young people are spending tens and tens of thousands on post secondary, only to leave with worthless pieces of paper and can't find work......

Will admit, that at times blaming people for some things gets my back up a little. One I came from the "wrong side of the tracks", was lucky where many others weren't. The disadvantages and hurdles many people face are real.

Re Cant find 5k for savings.
Again, look at the statistical mean. For single person, thats $40,000 to $45,000. I can tell you thats roughly what financial advisors earn. People who spend a few years in University, then once they get their foot in the door are required to continue to add their qualifications. Im 52 and Im still taking advanced courses........................Have likely by now spent way more time educating my self, than all Teachers ( who like to say they deserve double the mean and insane benefits because they go to school).......

Now consider, or add, or what ever we want to label it. This emerging trend.
http://www.cbc.ca/news/canada/men-bo...hind-1.3962316

What, people caught in that...ironically working class men who might be 30, 40, 50 should go back to school and spend how money and how many years on a wish and prayer?

Agree, that our tax system is not the "biggest" problem, but it is a big one. Don't forget I spent 20+ years working for a company that was all about helping both people and companies, legally avoid taxes or shelter money. The stuff many hollywood movies are about. Ironic in the end, that all our heads rolled because a few people in Germany bent some tax law and the Germans claimed it was tax evasion and money laundering, then seized the Company.....

[fishermccann]

Legally avoid taxes or shelter money says it all. Maybe if we closed loopholes that only the wealthy can afford to take advantage of, there would be a more level playing field, and 'fair share' may mean something. Why should there be shelters or loopholes to avoid your fair share of taxes at all? Why,because it benefits those who make the rules!