A recent study (link is external) by Jonathan Rhys Kesselman, who holds the Canada Research Chair in Public Finance with the School of Public Policy at Simon Fraser University and who is a fellow at the Broadbent Institute, shows doubling the amount people can contribute to a tax free savings account is Robin Hood in reverse. Poor and middle-income Canadians will pay so the wealthy can get more.
You need $200,000 a year to benefit
According to the study, Double Trouble: The Case Against Expanding Tax-Free Savings Accounts to get a significant benefit from the increase in tax free savings account limits people will need an income of at least $200,000 per year.
It’s not hard to figure out why. Most of us don’t have a lot left over once we’ve paid for things like housing, groceries and a car or bus pass. For what we are able to save, the existing tax deductions for tax free savings accounts and RRSPs are more than enough.
$24.5 billion less for services like health care and education
But while most of us won’t benefit, we will pay for any increase in the tax free savings account limit. It’s estimated that the cost of this tax break will grow to the point where it’s costing $24.5 billion a year — $15.5 billion from the federal government and $9 billion from provincial governments.
One of the biggest myths politicians peddle is that tax cuts for the wealthy don’t cost anything,” said James Clancy, National President of the National Union of Public and General Employees (NUPGE). “We pay a huge price for those tax cuts through things like user fees, longer wait times in hospitals and higher college or university tuition for our children.”
We get more from public services than from tax breaks
While it was beyond the scope of the report, the reality for most families is that we all benefit more from a dollar put into improving public services than a dollar spent on tax breaks. For a household with a median income, the value of the public services they use will be 63 per cent of their income. So when there is a surplus, why not put it into services that make life more affordable for everyone?