Tax Free Savings Account: Whopping tax cut for the rich

In 2009, Harper introduced the TFSA — or what the wealthy call the “totally fantastic savings account!” It allows a person to put away $5000/yr in savings or investments and never have to pay taxes on any money the account generates. If one is familiar with concept of compound interest, that can really add up over the years.

The TFSA might sound like a nifty idea, at first. But like income-splitting, it's a scheme that only the rich really benefit from.

RRSP better

The best savings plan available for the average person is the RRSP. It allows you to deduct your contribution from your taxable income. When you withdraw money, after you're retired, you have to pay taxes on it. But since your income is less, you end up paying less income tax.

Of course, Canadians are holding record levels of personal debt. It's highly unlikely any middle-income earner is putting away $24,000/yr in max RRSP contributions. So filling up your RRSP and having room left over for a TSFA is something only the very wealthy can accomplish.

Economy Lab pans TFSA

Back in 2011, the Globe and Mail Economy Lab examined the issue: Who really benefits from TFSA? The wealthy, for sure. They concluded the tax cut scheme reduced revenues by $3-billion/yr and was a terrible waste of resources:

A small minority of Canadians have stuffed $19-billion in assets into these accounts in less than two years. …

You could relieve an awful lot of day-to-day stress for $3-billion. You could improve services, repair infrastructure or tackle poverty in a meaningful way. …

It’s not the government’s money, it’s our money. And how we use our money to create a prosperous and civilized society is critical.

Let’s be clear. This measure will make the rich and powerful more rich and powerful. The rest of us will be left begging for funding for basic services.

TFSA: the sequel

If that was not bad enough, Harper plans on doubling the TFSA to $10,000/yr if he wins in 2015.

In today's G&M, the economist who designed the TFSA from Simon Fraser University concluded: a) doubling the TFSA is a terrible idea that will blow a whopping $10-billion/yr hole in the budget; and b) all the benefits will go to the rich. Rhys Kesselman: The forgotten tax break for the rich that will cost Ottawa billions.

Reverse, Restructure, Reinvest

When Harper is finally brought down, we're going to have to look into the mess he has made of the tax system and put the money to better use: reverse reckless tax cuts; restructure the tax system; reinvest poorly allocated resources.

According the Con 2009 budget, Harper has cut taxes by $44-billion/yr. That's an gargantuan amount of money going to waste.

Although Trudeau has ruled out reversing any of Harper's “starve the beast” tax cuts, Mulcair could really capitalize on the situation. He could promise to reverse these tax cuts and with most of the savings cut personal income taxes for middle- and low-income earners. That would be attractive to voters and still leave over $20B/yr to spend on infrastructure and social programs.

Harper has put the federal government in a fiscal straight jacket. We need to elect a leader that has the balls to undo the damage Harper has done.

Trudeau ruling out working with NDP shows he just doesn’t get it

In the rest of the developed world, coalition governments are the norm. But instead of standing up for Canadian democracy, Justin Trudeau has decided to back Harper’s anti-democratic position that coalitions are undemocratic.

Iggy folly redux

Clearly Trudeau hasn’t been paying attention to recent history. When Ignatieff rejected the 2008 Liberal-NDP coalition — which would’ve ousted Harper — that meant he was forced to prop up the Harper Government. Harper took full advantage and ruled like he had a majority. Iggy looked pathetic attempting to criticize legislation he was forced to vote for. In the end, he went down in a stunning defeat.

Having learned nothing, Trudeau is also taking the position he would rather work with the Harper Conservatives than the NDP.

History of Liberal-NDP cooperation

But the fact is the Liberal party has worked with the NDP many times in our country’s history. The greatest government of all time was an informal coalition between Lester B. Pearson and Tommy Douglas. It brought to Canadians: universal health care, the Canada Pension Plan, and Canada Student Loans, the 40-hour work week, two weeks vacation time, a new minimum wage and the Canadian flag.

After 30 years of tough Tory times, you can bet most Canadians would rather have this kind of “interventionist” government than more neo-con “starve the beast” bullshit with big free-money tax cuts for the rich.

Canadians sick of partisan bickering

Trudeau also doesn’t understand that most Canadians are not partisan. We want center-left politicians to work together to stop Harper. We are sick of watching the Harper Cons destroy the country. Liberal, NDP, Green: we don’t care!

Conclusion

It’s time Trudeau did his homework and found out how our democracy works and what the vast majority of Canadians really want. Given Harper is at 30% in the polls, it is certainly not more Harper Government.

Trudeau chooses vanity over democracy

Justin Trudeau has abandoned his promise to upgrade our primitive voting system, First-Past-the-Post, with ranked ballot voting — which Liberal party members supported by 70% at their 2012 convention.

Instead, he has opted for the same process that produced designed-to-fail PR referendums by provincial Liberal governments. Given Trudeau was “deeply” opposed to proportional representation a few months ago, it’s clear his plan is to kill electoral reform like his provincial counterparts. Here’s what he said:

I do not support proportional representation because I believe deeply that every Member of Parliament should represent actual Canadians and Canadian communities, not just political parties. I support a preferential ballot because I believe it will lead to a more substantive and civil debate during elections and a more representative government afterward.

Vanity of vanities

So why would Trudeau abandon voting reform and attempt to enshrine corrupt FPP, which 91% of developed countries got rid of because it produces distorted election results?

One word: vanity. Trudeau imagines he has the magic to restore the Liberal party to it’s former glory as Canada’s “natural governing party.” And to do so, he will need the fake majority on 39% of the vote.

Bad at math

Unfortunately for Canadians, Trudeau is bad at math. In 2004, Paul Martin kept Harper down to 30% and the NDP down to 16%, but was still seen as a failure. Although, the Cons are presently at their 30% rock bottom, these protest polls are not carved in stone. And with the NDP at 23% in the polls — their lowest since the 2011 election — Trudeau has a long way to go to better Martin.

Then there’s the Green party. Their 4% to 8% of the vote disappears into thin air under FPP. How Trudeau expects to get their vote by supporting the Keystone XL and Kinder Morgan pipeline expansions is beyond me.

Conclusion

Trudeau’s inability to comprehend the vote-splitting issue will make the Conservatives Canada’s natural governing party, not the Liberals. If he gets his way.

Does the National Post’s John Ivison work for Harper’s Ministry of Truth?

When Harper came to power he constructed, with copious amounts of taxpayer dollars, a Ministry of Truth comprised of 4,000 communications staffers.

Their job is to script what Con ministers and MPs say to the press to ensure they “stay on message.” They also stonewall and propagandize access to information requests from the media, as well as muzzle government scientists.

Apparently John Ivison is among their ranks. When Jim Flaherty surprised pundits and Conservatives alike by coming out against a social-con income-splitting scheme — which the Cons promised during their 2011 campaign (after the budget was “balanced”) — Ivison tried stuffing the last 3 years of party history down the memory hole.

Not only did he claim the promise was never made, he also said Flaherty and Harper were against the scheme all along.

I must commend Ivison on his highly disciplined use of “double think.” Big Brother … er … Harper must be pleased. I can just imagine all the party faithful repeating to themselves over and over: the Conservative party is against income splitting; the Conservative party was always against income splitting…

Flahery’s ‘major’ infrastructure plan

Flaherty claims that Tuesday’s budget will contain money for “major” infrastructure projects. But it’s pretty obvious what his real infrastructure plan will be:

1. Commit a piddling amount of money stretched out over a 10-year period that doesn’t begin to tackle the $125B infrastructure deficit racked up over the past 30 years of cheaponomics.

2. Ensure half the money includes spending commitments the government has already made.

3. Spend millions of taxpayer dollars promoting it in ubiquitous “Economic Action Plan” ads.

4. Eliminate all the funding and brag the he saved taxpayers billions in wasted spending.

This is just more proof that the rest of the developed world is crazy: why have government that represents a majority of voters when you can get a dictatorship the people don’t want and didn’t vote for?

Disgusting Ford flag rant actually electioneering

Rob Ford was outraged over the Canadian flag at Toronto’s city hall being replaced with the rainbow flag to support gay athletes at the Sochi Winter Olympic games. Of course, Ford knew that wasn’t what actually happened. The Pride flag was put up on the “courtesy poll” which the City of Toronto flag usually flies on.

Ford puts up a Canadian flag in his office window to fake protest the Pride flag temporarily replacing the City of Toronto flag.

So why the fake mix up? It actually has to do with our corrupt and antiquated voting system, First-Past-the-Post.

Ford is beating the war drum to get right-leaning “Ford Nation” supporters fired up for the fall election. He may only need 35 to 40% to win, so the objective is to unite the voting block and ensure they show up to vote.

Andrew Coyne explains the strategy:

When a candidate needs only a small slice of the electorate to win he has little incentive to make himself less obnoxious to the rest; indeed, he has every incentive to amp up the us-and-them rhetoric, the better to lock down his support.

If we had ranked ballot voting — which would require that Ford earn support from a majority of voters — he would be sunk. All his disgusting rhetoric would unite the vast majority against him, removing all chances of him getting reelected.

Conclusion

It’s absurd to put politicians and governments in power the vast majority doesn’t want and didn’t vote for. That is the very opposite of democracy.

Frankly, I hope Ford wins in 2014. As he thumbs his nose at voters and makes a bigger ass of himself on the world stage, maybe we will come to our senses and realize how important a democratic voting system is to a democracy.

(BTW, keep an eye out for Harper using the very same tactics as the 2015 election draws nearer.)

Falling loonie is actually a benefit for most Canadians

From 2003 to 2008 the loonie skyrocketed, rising 60% in value. If you were rich it was definitely time to break out the champagne. All your wealth magically increased by 60% and you didn’t have to lift a finger or take the slightest amount of risk.

But what happened to average Canadians who spent all their time and money in Canada? Nothing.

Prices remained the same

According to Mike Moffat, the price difference remained the same. In 2003, Canadians paid $1.20 CAD for an item that sold for $1 US in America. After 2008, when the dollar reached parity, Canadians still paid $1.20 for an item that sold for $1 in the US.

With a 60% increase in value, prices should’ve come down dramatically. That would’ve caused deflation. But they didn’t.

Moffat tries to claim the Bank of Canada is the culprit: that its 2% inflation target kept Canadians from benefiting from a rising loonie. But the fact is he didn’t do his homework. From 2003 to 2008 the BoC didn’t increase the money supply or lower interest rates to offset deflation. Their policy actions were in line with the US Fed, which was to actually raise interest rates to counter inflation.

Falling loonie: same thing — nothing

The same thing happened when the loonie plummeted from 74 cents to 65 cents US, from 1997 to 1999: that is, nothing.

We should’ve seen an increase in prices that caused inflation. But what really happened? Inflation was 1% — lower than the 2% inflation target. We actually experienced disinflation.

So what’s really going on?

For the most part, it’s simply a case of supply and demand. When the dollar rises, purchasing power goes up, but so does demand. That means businesses can get away with charging more in US dollars. (Business charge the highest price the market will bear.)

When the dollar falls, purchasing power drops, but so does demand. That means businesses have to move more inventory to make the same profit — at a lower price in US dollars.

So that’s why average Canadians never see any difference.

Conclusion

Right-leaning Canadians are bitterly complaining that the falling loonie means “everyone will take a pay cut.” But in reality, only the well-off will suffer a loss. But they are not really suffering anything, because it was all free money to begin with.

According to the OECD, the value of the loonie should be 80 cents US (based on purchasing power parity.) A dollar at parity means exports are 25% more expensive and labor costs are 25% higher. That means businesses close up shop and move south of the border. That’s why the economy shed 500,000 good-paying manufacturing jobs and Canada went from a 2% GDP trade surplus to a 3% trade deficit.

An overvalued loonie is actually bad for the economy and bad for Canadians. It has a long way to fall before it can be considered “weak.”