Toronto, December 3, 2015 – A recent public opinion poll shows majority support among Canadians for leaving the TFSA (Tax Free Savings Account) limit at $10,000, not reducing it to $5,500 as the Liberal government is considering. This support is consistent across income levels, age, region and whether the respondent worked in the public or private sector.
Catherine Swift, spokesperson for Working Canadians said, “53% of Canadians are in favour of leaving the TFSA limit at $10,000, while only 19% favoured reducing the limit.” A total of 27% of respondents said either “it depends” or “I don’t know.” These results are consistent with other polls conducted on this issue.
Both public and private sector employees demonstrated similar support for a higher TFSA limit at 56% and 62% respectively. “Since very few private sector Canadians enjoy the generous, inflation indexed pensions that are commonplace in the public sector, private sector support for maintaining the higher limit is not surprising,” said Swift.
“Given that government employees are already very well provided for in retirement, the high level of support among this group for leaving the TFSA limit “as is” suggests public sector employees value the higher TFSA limit more than might have been expected.”
Support among all income groups
Keeping the TFSA limit the same enjoys considerable support among all income groups; support reaches majority level among respondents with incomes over $50,000. Respondents with income less than $25,000 exhibited the least support for leaving the TFSA limit “as is”, yet 37% of this group still wanted the limit to remain at $10,000. Support for retaining the $10,000 limit was also consistently strong across age groups, ranging from 51% among those 18-34 to 55% for those over 65.
The poll also showed support for the current TFSA limit among voters for different political parties. Of those who voted Liberal in the recent election, fully 52% want the limit to be left alone, as compared to 61% who voted Conservative, 51% of NDP voters, 63% of Green voters and 56% of Bloc Quebecois voters.
TFSAs have only been in place since 2009, and according to Canada Revenue Agency (CRA) data, over 11 million Canadians have a TFSA, which is roughly half of the working population. “This is an amazing level of participation in a very short time,” Swift noted. She added “These poll results are another indicator of how much Canadians love their TFSAs, and want the current limit to remain.”
“Some people have claimed that the higher TFSA limit is only for the “rich” and costs the government too much in foregone tax revenue. The results of this poll and other data indicate that the higher limit TFSA is by no means something only the “rich” aspire to.
As well, the federal government spends tens of billions of taxpayer dollars every year on very generous public sector pensions. Surely the couple of billion in tax dollars foregone annually in running the current TFSA program is the least the government can do to permit the 80% of Canadians who do not work for government to save for a decent retirement for themselves and their families,” stated Swift.
Formal petition coming to House of Commons
Since launching the campaign to promote leaving the TFSA limit at $10,000, Working Canadians has been overwhelmed by positive feedback. As a result, Working Canadians established a formal petition to the House of Commons, which will be introduced by Member of Parliament Peter Kent in the near future. The petition can be found at www.workingcanadians.ca/saveourtfsa
This online poll was conducted between November 26 and 29, 2015 by Research House, amongst a nationally representative sample size of 1,012 Canadians who were 18 years of age or older.
Catherine Swift is Spokesperson for Working Canadians, a not-for-profit organization dedicated to opposing the negative impact excessive union influence has on the Canadian economy and society.
To arrange an interview with Catherine Swift, contact Gisele Lumsden at 647 466-5509 or by email: firstname.lastname@example.org
Special to the Financial Independence Hub
The campaign of Working Canadians to save the $10,000 limit on Tax-free Savings Accounts is really gaining momentum.
We have always known Canadians love their TFSAs for their simplicity, flexibility and as a valuable tool to permit tax-efficient retirement savings.
Just this week our campaign was bolstered by an Angus-Reid public opinion poll, which reveals that the promise by the new federal government to reduce the TFSA limit is opposed by a majority of Canadians. So of the 11 million who have money in a TFSA, more than 5.5 million of them like the higher limit of $10,000 implemented by the Conservative administration earlier this year.
As well they should. The facts have convincingly shown that the justifications the Liberals claim to support the limit reduction – that “TFSAs are mostly a tool for the rich and cost the treasury too much in foregone revenue” – are just plain wrong.
All we want is pension parity for the middle class
When the federal government continues to pour tens of billions of our tax dollars into generous, indexed public-sector pensions every year, it’s hard to swallow the fact that a billion or so “lost” to TFSAs is somehow unacceptable. These public-sector pensions are also grossly underfunded. Read more
The Financial Post provides my take on last night’s Liberal landslide, as it pertains to Financial Independence in this blog that just was published online: So long $10,000 TFSA, and other personal finance fallout from the federal election.
The gist is that we’ll likely lose the $10,000 annual contribution TFSA limits that were only hiked earlier this year but as aging boomers move into semi-retirement or full retirement, it’s likely they’ll fall into the middle tax bracket where the Liberals’ 1.5 percentage point cut should provide several hundreds of dollars of annual tax savings. There are also significant implications for an expanded Canada Pension Plan, Old Age Security and I expect that Ontario will now no longer see a need for the Ontario Retirement Pension Plan or ORPP.
Plenty of other links via my Twitter feed (@JonChevreau), which can also be viewed under the new “Social” tab over at the Hub.
UPDATE Oct 21. See the updated version of this blog at sister site Financial Independence Hub, with links to various Financial Post stories by me, by Jamie Golombek on tax bracket changes, Garry Marr on lost TFSA limits, and Fred Vettese on an expanded CPP and probable elimination of the ORPP.
Here’s my latest column from the print edition of MoneySense magazine, written right after the federal budget: Get the new TFSA limit to work for you.
Click on the link for details, but in a nutshell — and has been extensively reported in the media, such as this piece by Gordon Pape (subscribers only) — there’s no reason why you can’t add another $4,500 to your Tax Free Savings Account right now, in addition to $5,500 you may have contributed anytime on or after Jan. 1, 2015. (Note to American readers: the TFSA is the equivalent of Roth IRAs, providing no upfront tax deductions but which let you eventually withdraw money tax-free in Retirement or for other purposes).
That means a whopping $20,000 per couple. Now while Liberal Leader Justin Trudeau seems to think only “rich” people have that kind of money available, the fact is that many hard-working middle class people have been saving and investing for the better part of two or three decades, and built up substantial non-registered or “taxable” portfolios. Even though they may have paid income tax to acquire the capital in the first place, over those decades they have been paying annual taxes on interest, dividends and (often) capital gains generated by that capital.
As the column points out, those who have built such “open” portfolios don’t have to use new cash to put $10,000 per annum into their TFSAs. They merely have to start transferring their non-registered securities into their TFSAs. This is called a “transfer-in-kind” but as I have pointed out here and elsewhere (see for example last Friday’s piece in the Financial Post: The Million-Dollar Tax Problem), the tax rules are complex. In a blog I wrote this week for Motley Fool Canada, we also look at How to make an extra TFSA contribution if you don’t have $4,500 lying around. Read more
By Jonathan Chevreau,
Financial Independence Hub
At least one of Canada’s big banks is giving clients the go-ahead to top up their Tax-Free Savings Accounts by the extra $4,500 amount specified in Tuesday’s federal budget.
CIBC Wealth’s Jamie Golombek says the Budget included draft legislation that allows for an increased TFSA dollar amount for 2015 to $10,000, up from $5,500, the current 2015 TFSA dollar amount. But critically, he added:
“We have received confirmation from the Canada Revenue Agency that, while the legislation is subject to Parliamentary approval, consistent with its general approach for proposed income tax changes, it is administering the measure on the basis that $10,000 is the new TFSA annual contribution limit. Clients may therefore proceed to contribute to their TFSA based on this proposed law.”
On Wednesday, sister site Financial Independence Hub ran an (since updated) blog that suggested investors contemplating such a purchase hold off a few days, pending comment from the Canada Revenue Agency and Department of Finance. When I made inquiries at my friendly local financial institution (RBC), I was initially dissuaded from this course. I was told I could do the transaction at the discount brokerage but it would be at my own risk until the proposal is formally enshrined in legislation later this summer.
In the original blog, Golombek said that “In the event the legislation is not ultimately finalized, in my view, it is unlikely that the CRA would penalize taxpayers for acting on draft legislation.”
This morning, I pressed Golombek further with these questions:
So CIBC is saying we can proceed with the extra contribution now? Even if it got reversed, what would the worst-case consequences be? 1% per month on $4500?
Jamie’s reply (via email):
Yes. If the draft rules aren’t finalized, in CIBC’s view, it is unlikely that the Canada Revenue Agency (CRA) would penalize taxpayers for making these additional contributions.
Sheryl Smolkin: Make the transfer now
After the first version of yesterday’s blog was published, I had an email and Facebook exchange with pensions expert @SherylSmolkin of the RetirementRedux website.
Even before the CRA’s clarification via Golombek, Sheryl said she and her husband planned to make a $4,500 additional TFSA contribution now. Here’s what she said on Facebook:
“Majority government. it will pass for sure. I say make the transfer now.”
Based on Golombek’s statements above, it appears that while possibly risky to those wary of CRA recriminations, the likelihood is minimal that Canadians will be severely punished by the agency in the event of the measure being revoked after an election that removed the Conservatives from power.
It occurs to me that maybe we should all follow Sheryl’s lead and contribute the $4,500 NOW. Can you imagine the furor if the 10 million or so Canadians already with TFSAs were confronted with punitive retroactive penalties and interest?
In that spirit, and subsequent to the initial draft of this blog, I made this transfer myself this morning (in-kind, see bottom of blog for details), as well as my spouse.
TFSA lifetime caps and other threatened reversals shaping up as Election issue
It seems clear from the second-day newspaper coverage of this, that super sized TFSAs are shaping up to be an election issue. The Opposition parties appear bent on reversing the TFSA expansion. In particular, Liberal leader Justin Trudeau has vowed to reverse it if he wins power. Read Garr Marr’s (@dustywallet on Twitter) piece on possible TFSA lifetime caps in the Financial Post.
Some of the “Double Trouble” reports in February talked about a lifetime $800,000 cap as a possible future measure but Garry’s piece mentions a much lower $100,000 cap, which would be ridiculous, given that many TFSAs are already past that amount based just on the $5,000 and $5,500 limits already in place. MoneySense’s annual Great TFSA Race feature was showcasing individuals with $200,000 or $300,000 TFSAs more than a year ago.
Heck, once upon a time we had a $100,000 lifetime capital gains exemption which most Canadian baby boomers were deprived of just as they were starting to build non-registered wealth. And not to mention, the annual hassle of computing capital gains tax liability for preparing tax returns this time of year.
I once wrote an editorial in FP Comment explaining how TFSAs really just eliminate double or even triple taxation (first, income tax to come up with the capital in the first place; then annual taxes on interest, dividends and capital gains associated with what’s left of that capital, and arguably a third round of tax called consumption taxes [HST] once the remaining money is eventually spent on goods or services.)
Remember, TFSAs are Tax PRE-PAID
Remember, the original name for TFSAs was “Tax-PREPAID” Savings Plans. The Liberals and NDP don’t need to get voters riled up over the poor government being deprived of tax revenues for their wealth redistribution schemes. Ottawa gets its tax hit right upfront with TFSAs, and will eventually get a second whack when the money is spent. Seems good enough to me!
Also, remember that if — as outlined at the top of this blog — near-retirees and seniors start to convert non-registered savings in droves in order to fund these super-sized TFSAs, that will be a fantastic source of revenue for Ottawa. Every time you trigger a capital gain in order to move securities from taxable accounts to the TFSA, the cash register will ring in Ottawa.
Ottawa will also reap a tax bonanza as seniors start doing the same with their RRSPs and RRIFs. Justin Trudeau may say that “only the rich” have $10,000 lying around to fund TFSAs but seniors have much more than that in RRSPs, RRIFs and taxable accounts and need to move those funds into TFSAs just as soon as they are permitted to do so.
Why TFSAs upset the Left
But the piece I really think TFSA believers need to push today on social media is by the Post’s @KellyMcParland. My Twitter feed is full of this article, entitled Harper’s winning the wallet war. I highlighted in particular the sentence below. (Kelly is a feisty guy: I used to play hockey with him and he was a tough customer in the corners, let me tell you!)
“TFSAs upset the left because they violate the notion that governments are responsible for people, rather than the people themselves.” — Kelly McParland, National Post
Consider transfers in kind and taking a one-time tax hit
Of course, even if you don’t fear CRA reprisals, coming up with the $4,500 at tax time is another issue, if an ironic one, depending on whether you expect a tax refund or have to pay taxes for the looming tax filing deadline. Keep in mind that you don’t have to fund TFSAs with new cash: if you have significant non-registered investments you can “transfer them in kind” into the TFSA.
This may and probably will entail tax consequences (chiefly capital gains) for securities that have appreciated over time. Ironically, not crystallizing capital gains has been a sort of tax shelter of its own but to transfer them into a TFSA (or indeed an RRSP) it will be deemed a disposition for tax purposes. Ideally, you find securities that are close to their original purchase price, or find pairs of securities where gains in one offset losses in another.
The great thing, however, is that by taking that tax hit once, in the future the transferred securities will generate dividend and interest income that is almost totally tax free for the rest of your life.
Incidentally, I found the whole process relatively painless at my discount brokerage, although the in-kind transfer is not easily accomplished online: you may need to talk to a representative, as I did.
Who’s contributing more now?
I’m curious whether this blog’s readers intend to contribute the extra $4,500 now or plan to wait until the coast is 100% clear.
Feel free to comment on this blog below, or email me at email@example.com for possible inclusion in further blogs or columns.