In case you hadn’t noticed, this is a nation designed for rich people.
If I earn $180,000, am single and live in BC, I’ll pay $39,848 in federal tax and $19,419 to the province. The tax bill totals $59,267. The leaves me with $120,733, and on every extra dollar earned, I’ll be taxed at the rate of 45.8%. Ouch.
But if I have an investment portfolio of $2,600,000 and earn 7% in capital gains in a year, then of the $182,000 received I’ll pay only $21,436, and end up with more than $160,000. So, I keep an extra forty grand. Because I’m wealthy.
Huh?
This happens since capital gains are taxed at only half the rate of earned income. Ditto for dividends, because by claiming the dividend tax credit rich people reduce their government bill by approximately 50%. Or sometimes, 100%. Somebody with a portfolio of $1.2 million in bank stock kicking out about $48,000 in annual dividends (an average of 4%) would end up paying zero tax. That’s right. Nothing. But if you earned $48,000 in Ontario working as the personal masseuse to a Re/Max broker, you’d pay just over $8,000 in tax.
See? Totally unfair. That’s why rich people invest money instead of earning it doing tawdry things like working. Employees are sitting ducks for government Hoovering, and the top marginal tax rate now exceeds 50% in Ontario. But for business owners taking their income as dividends or capital gains, it’s party time.
Now, employees do get a few breaks. Money put into an RRSP allows you to defer the tax on it until a year in which you make less and your marginal rate drops, for example. Plus the growth compounds without annual taxation. But RRSPs only defer tax. They do not eat it. And this brings us to the TFSA, which is suddenly in the news – for good reason.
As this pathetic blog has shown you in the past, a simple TFSA can be a money machine, so long as you use it to hold cool stuff like ETFs, and not brain-dead flotsam such as GICs. If a 30-year-old put in a hundred bucks a week until age 65, getting an average annual 7% in taxless growth, she’d end up with $848,776. Unlike an RRSP, this is completely non-taxable.
Now imagine if the annual contribution limit was $11,000. Then this same person, at retirement, would have $1,783,919. That’s enough to generate an annual cash flow of $125,000 (without diminishing the principle), which you can take as non-reportable income. That means you still get to collect your government pogie, no clawback.
This is what drives the 99% crazy. It’s inherently unfair.
If you buy a condo and lease it out, the rent is fully taxed as income – on top of any other money earned, at your full marginal rate. Interest earned on a GIC, bond or savings account gets equal treatment. Investors in ETFs, stocks or preferred shares, on the other hand, pay half. And guess where most TFSA money sits? You bet – in interest-earning cash or investment certificates.
In other words, the system taxes financial illiteracy. Employees and savers are squished. Owners and investors are favoured. Concurrent with this, the 99% carry most of the debt in Canada, largely because they’ve drunk the real estate Kool-Aid. All that borrowing eats disposable income, leaving little left to invest.
Well, you can see now how emotionally-charged the debate about doubling the TFSA contribution limit can become. The federal Conservatives promised this back in the election of 2011, and Joe Owe was all primed to deliver it until oil swept away his winter budget. It’s still the big middle class carrot the government would like to toss out before the October election campaign gears up.
Opposition is growing. The Parliamentary Budget Officer weighed in this week, saying the action would end up costing the feds almost $15 billion in lost tax revenue by 2060 – when this blog will finally hits its prime. Moreover, it would favour the rich. “By 2060, gains for high wealth households project to be twice the median and ten times that of low-wealth households,” he said. This was reinforced by SFU professor Rhys Kesselman, who claims: “Like a little baby who looks cuddly and cute, this proposed initiative would grow up to be the hulking teenager who eats everyone out of house and home.”
This is all correct. Smart, wealthy people milking the TFSA can save a fortune in tax over their lifetimes. But the same has been true of RRSPs for years, since contribution room is based on income – the more you make, the more you can contribute and the greater the savings because of the higher tax rate you pay.
So what’ll happen?
Beats me. But if the feds can eke out a balanced budget this year, the TFSA bloats. As it should. The more we allow people to create and shelter wealth, the more that precious public resources can be targeted to those who need them. (Which is why the OAS should not be universal.)
Besides, people are victims of their own fear or ignorance. The nation gives them RRSPs, and they use them for house down payments. They get TFSAs, and they turn them into growthless savings accounts. They’re offered half-tax on investments, but they buy GICs. They get a huge gift on dividends, and they want a rental condo. The country drops rates, and they cannot borrow enough.
It’s not about fairness any longer. It’s about taxing stupid.
See why I’m no longer elected?
246 comments ↓
First!!
second!
I’m #2
Love it
Stupid tax
You no longer elected because you have a blog :)
No, seriously. make every darn politician write a blogpost everyday and answer most voted comments.
Garth said “That’s why rich people invest money instead of earning it doing tawdry things like working” (or looking for a condo tenant!)
I mashed up 2 charts just now on the Toronto Condo glut and a snapshot of rentals available:
http://www.chpc.biz/history-readings/condo-glut
Looks like a good time to get a rent reduction.
I’m in favour of a raised TFSA limit but society operates at the lowest common denominator. Personal responsibility is not a legitimate argument when there are so many existing precedents contravening it.
Sad, but true.
TFSA writing is on the wall, at some point it will be taxed or a “cap” on contributions is brewing.
No, never taxed. — Garth
2nd…..
Sometimes it’s easier being part of the problem than the solution, so I for one hope the TFSA increase happens.
Dr mike s.
This ones for you. Free advice. Now you can think of how to give back.
And enjoy the lottery you are unaware that you won.
No more whining.
That’s the ticket! Tax STUPID! For once, a tax that is truly universal, since everyone has at least a little bit of stupid in them!
“But RRSPs only defer tax. They do not eat it.”
Not quite, as your own example illustrates.
The person earning $180,000 has 45.8% marginal tax rate – this is the tax he/she saves while contributing to RRSP.
If one withdraws $180,000 from RRSP the tax being paid according to you is $59,267/$180,000 ~ 30%.
So only 30% (2/3 of the tax) is deferred but 15.8% is saved.
Imagine…for a minute…bank stocks DRIP-ing within a TFSA…for a decade or two…
now slowly open your eyes.
Slow clamp fine sir, slow clap.
Well done once again.
As a youngish 28yr old striving to make sense of your views, perspectives, and trying put your advice in action i can’t thank you enough for your great work you provide to us few who read it and make sense of it, thanks a lot!
Mr. Turner i promise if you manage my TSFA ill stop steeling my neighbor cable TV.
No tax on Corporations. 0.
Tax dividends and capital gains as income.
Hi garth , you will be in your prime at 2060 what about that drink I am WAITING FOR
VETOED.
KEYSTONE IS KRUSHED.
What does this mean, in a nutshell?
Alberta’s current woes just lost any sun on the horizon.
It’s a good bet that Alberta’s RE meltdown will now be generational, lasting a decade or two.
Welcome back to 1984.
I heard a fellow Albertan talking on CBC today about his alternate energy business as an antidote to oil dependency. (Listen at 17:00 on today’s podcast)
http://www.cbc.ca/w6/
“We’re fast becoming kind of the new white South Africans of the apartheid era. If we’re not looked at as responsible citizens of the world, no one’s gonna buy our oil.”
OUCH!!!
Bravo jimmy. I would be so proud.
Send that guy a copy of Fargo (the film) .
He’ll never go near a wood chipper again!
http://news.nationalpost.com/2015/02/24/pmo-oas-ei-changes-angry-response-0/
Or you could leverage up 10 X 1 to buy a house, let it double in value and sell it. The gain is Tax Free!!! Even Better no?
Not sure if someone else already mentioned this before, but the Fort McMurray Real Estate Board has a dead link to their “Current Real Estate Stats” (right in the middle of their home page)
http://www.fmreb.com/market_update
Raising the TFSA limit seems to reduce government income, and why would the Conservatives do that? I think it’s a cynical policy for votes in the next election.
Doubling the limit will accelerate long-term shielding of tax-free income resulting in reduction of collected income tax. Eventually we will all have to pay a higher proportion of taxes on taxable income. Increased income tax will have less effect on those with more non-taxable income.
It probably doesn’t make sense to the Cons to promote public policy that could benefit Canadians that don’t bother to vote.
2060- when this blog finally hits it’s prime – Garth
—————————————————-
I was thinking more like 2075 is a more realistic target!
Obama did it again, this is NOT going to help the Alberta economy one bit:
“Obama Vetoes Keystone XL Pipeline Bill, FEB. 24, 2015”
http://tinyurl.com/myntq7a
Quote: “President Obama retains the authority to approve the pipeline on his own timeline.”
“because this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest — including our security, safety, and environment — it has earned my veto.”
http://business.financialpost.com/2015/02/24/william-watson-austerity-or-a-quebexit/
Ed Zachary !
You won’t drink the Kool-Aid.
You had it tested at a lab instead.
You’re no fun.
Garth thank you for this blog. I used to wonder how did they get rich? Now we have Garth giving us step by step instructions to do just that.
There has always been an advantage given to successful entrepreneurs; risk-takers; and optimists.
Since it’s more of a lack of bravery than a lack of knowledge, or initial wealth, there should be bigger carrot available to those who use the TFSA space wisely.
You are absolutely right, Garth, sometimes we forget that this is still Capitalism, for reason.
I wish you could have a magic recipe for 1 million by 30, that you could drop on a less taxed return on capital.
RRSP kind of annoying, though, it was great if you deferred tax only on your indexed contribution amount and the government would not become your business partner when it comes to the profit you make over the decades.
No wonder, TFSA is the sexiest in town.
Two points…
1) every country is set up for rich people.
2) can someone do the math on RRSP contributions, and reinvesting the tax refund and then compound at 7% and compare to a TFSA?
So, $1,000 + $280 refund = $1280 +7%
Does the TFSA still run away with it?
Best post ever sir Gartho…
Yes, the tax system is rigged against those who receive most of their income in exchange for labour. It’s amazing that we quietly tolerate this crooked and unfair way of generating government revenue.
Re:
#12 huibolshoi on 02.24.15 at 7:40 pm
“But RRSPs only defer tax. They do not eat it.”
Not quite, as your own example illustrates.
The person earning $180,000 has 45.8% marginal tax rate – this is the tax he/she saves while contributing to RRSP.
If one withdraws $180,000 from RRSP the tax being paid according to you is $59,267/$180,000 ~ 30%.
So only 30% (2/3 of the tax) is deferred but 15.8% is saved.
You have not accounted for the withholding tax (10-30%) of the withdrawn amounts. So if you pull $180,000 out all at once, that’s 30%, or $54,000, held back immediately. You are taxed on the balance at your marginal rate. So if at 45.8%, thats another $57,000 in taxes.
To those who are tired of hearing about the 1%ers getting all the loot:
My store is having a special on pitchforks. 40% off for readers of this blog.
If you buy 2, I even throw in a torch.
Stupid taxes?
My personal favorite….lottery tickets.
Talk about voluntary taxation.
And in other news…
http://business.financialpost.com/2015/02/24/alberta-to-bleed-31800-jobs-by-end-of-year-in-oil-price-carnage/
“It’s not about fairness any longer. It’s about taxing stupid.”
Please, show us a little bit of respect. Mr. and Mrs. Stupid, please, if you will.
Because of us, there are, rich people, religion, politicians, banks, insurance, investment companies and so on. And let’s not forget sports franchises, financial gold mines, incapable of fielding winning teams. Apparently, is true, “every minute, a new sucker, is born.”
RRSP’s used as Garth has described. TFSA’s invested with 0 GIC’s & 0 in a savings account. Interest I pay is 0. Left home at 17 along with my siblings through unavoidable circumstances. Net worth at 17 was 0. Bought my first house at 34 when the market crashed and my net worth was hicreativitygher than the house cost. Investing is great. Paying 0 interest is even better. Takes learning, discipline, patience, creativity, and the Power of the Universe. I have been Blessed and after looking after me, I always help others. Help, not enable.
should read higheer
higher:)
When I think of my landlord giving half of my rent cheque to the tax man, I feel all warm and fuzzy and generous. Doing my bit for the 99%.
So when do we find out? (about the TFSA?)
#23 Kevin
The January stats on RE in Ft. McM were up on the RE Board website for a few hours. I saw them. They were ugly. I did not take notes to report to the blog dogs. Why would I. I thought I would simply pass along the link. Three hours later the stats were gone. I noted that in a comment I made here that night.
Shameful and potentially harmful to people contemplating buying or selling hence making the biggest single financial decision of their lives.
There oughtta be a law.
Anyone with multimillions of dollars to invest will do it offshore legally and have an even better tax position.
Why would they invest from Canada?
http://www.huffingtonpost.ca/2015/02/24/bank-of-montreals-first-_n_6742376.html?utm_hp_ref=canada-business
Beemo profit falls…..
Here come the FEEEEEEE increases…….banks never lose money.
Excellent post Garth, love your blog. It’s becoming an addiction for me. I’ve followed your awesome advice and have TFSAs and RRSPs, balanced and diversified, invested in several ETFs. If only I’d known this stuff in my 20s!
Had an interesting discussion with my dad (retired) who is all about GICs, and is quite concerned about me putting cash into equities, bonds, preferreds, etc.. Told him dad, yeah, there’s a small chance I might lose it all (I’d say zero chance I lose everything), but if I don’t invest my TFSAs and RRSPs, the probability that I won’t have enough to retire on is 100%! So I prefer to invest and maybe I’ll make it.
Anybody keeping tabs on CREB.com? Take a look at the table.
Monthly Month to Date Month to Date
City of Calgary Jan-14 Jan-15 % change Feb-14 Feb-15 % change
Total Sales 1,439 879 -38.92% 1,424 938 -34.13%
New Listings 2,396 3,286 37.15% 2,150 2,406 11.91%
Active Listings 2,181 4,420 102.66% N/A 5,522 N/A
Median 417,500 422,000 1.08% 424,700 423,000 -0.40%
Average Price 463,303 460,930 -0.51% 483,271 466,074 -3.56%
Days on Market 40 41 2.50% 30 36 20.00%
Benchmark Price 426,300 459,100 7.69% N/A N/A N/A
Can somebody explain this new “Benchmark price” that CREB is trying to tout? What in the world is this new “metric”, if I can call it that? So even though average price is down 0.5%, median is up only 1%, but this new “benchmark” price is up 7.7%? I hate the R/E cartel. Spreading misinformation with no consequences.
When I used to be a fool, I was looking at buying a $250k condo with $550 monthly in condo fees. When I decided to rent and invest my proceeds instead, I saw the same condo for rent for $1500/month including utilities. Assuming the LL put 50k down, and financed 200k, plus 120/mo for taxes and the condo fees, plus not getting 290/mo for 7% return on 50k, I realized he was actually losing $400/month! I tried to rent the condo, needless to say. Being subsidized is awesome!
When you buy shares in a Canadian company, you do so with money that has already been taxed once.
The company then pays corporate tax and employes people who also pay income tax. You then get a small return on your investment in the form of dividends.
It’s only fair you get a tax break on that income since it benefits the rest of the country and you should be compensated for the risk you take of losing your principal.
#18 ALBERTASTROPHE on 02.24.15 at 7:48 pm
“We’re fast becoming kind of the new white South Africans of the apartheid era. If we’re not looked at as responsible citizens of the world, no one’s gonna buy our oil.”
OUCH!!!
++++++++++++++++++++++++++++++++++
No pablum. Just buy oil from ISIS instead. They’re oil is much more ethical than that dirty Alberta crude; each barrel is charcoal filtered, with the charcoal made from the ashes of ………
Or Saudi, Saudi has great crude, and they only behead a few more people a year than ISIS…
Or Iran, they have a sale on crude right now. Free stonings of the infidel of your choice with each tanker load…
Or maybe Russia; invasions of small neighbor nations are their specialty, and the’ll give you a deal on the oil that they “liberate” from their neighbors…
Breathless,brainless, lapping, Eco-hypocrisy breaks down real fast when you shine a bright light on it. Neil Young and Darryl Hannah… useful idiots. Careful what you wish for.
Sir Garth:
With reward comes risk. Instead of looking at annualized returns, look at annual returns. What do most retail investors do? Sell low and buy high. You may be correct that there will not be another 2008 correction. There will be corrections. Will retail investors stay the course and wait four years for a recovery? Even the balanced funds took until 2012 to recover to their 2007 values. Is that not why investment incomes of dividends and capital gains are taxed at a lower rate? Enticement to put capital at risk.
It is not all sunshine and puppies. Your excellent educational efforts may be well served if tempered with risk warnings.
Except most people with rental income pay 0% tax because they just don’t declare it……..
It’s do or die for oil’s price here. I’m betting on do.
See y’all at the tax farm tmr.
#35 Washed Up Lawyer
Even if there was a law who would enforce it. The Regulators in Canada, especially Ontario, are just filling desk chairs and drinking coffee.
Thanks Garth.
The guy in that photo lived.
http://www.dailymail.co.uk/news/article-2548961/Washington-man-incredibly-survives-sucked-THROUGH-wood-chipper.html
[…] Source: http://www.greaterfool.ca/2015/02/24/tax-this-2/ […]
No, never taxed but there is nothing stopping the guv’ment from basing all kinds of entitlements on assets not income. If I lose my job today and apply for welfare, TFSAs already are included in the calculation and need to be used up before I qualify, so they aren’t “untouchable”. The same thing could easily apply to stuff like OAS clawback, GIS and the cost of funding your own long-term care. In places like the US and UK they apply asset based formulas already for the latter.
You wait and see,the government will tax all capital gains at marginal tax rate including etfs,stocks,dividends and preferred.They will throw capital control also into the game.Remember its there money not yours,they basically own sheeple Canadians.
In a global economy competing for investment capital, impossible. — Garth
Services are going to have to be paid for somehow. Perhaps that huge TFSA after 40 years will just pay for the medical care?
Harper’s GST cut only affected Federal tax revenues, but the TFSA eats into provincial revenues as well. All those Boomer’ hip and knee replacements are going to cost real money. I hope there’s some left over by the time I need an elbow replacement!
It should be interesting (and not in a good way) to see how the provinces attempt to pay for the Boomers’ dotage as Ottawa constrains their revenue. Do Canadian provinces become more and more different? (Suggestion: BC License plates adopt the slogan “Canada’s Upscale Retirement Home,” Alberta can have “$80 or Bust,” Ontario gets “Will Subdivide or Build to Suit” and Quebec can have “Passerelle Vers C.B. 门户不列颠哥伦比亚省”).
Maybe when our PM said “You won’t recognize Canada when I’m through with it,” it was a shot at people on waiting lists for Alzheimer’s care.
“See why I’m no longer elected?”
Because you’ve chosen to no longer run for office. Same problem as those not voting and complaining that they’re not happy with the government they’re getting.
“The more we allow people to create and shelter wealth, the more that precious public resources can be targeted to those who need them.”
Two things jump out at me here.
1, you’re becoming a big softie in your old age, Garth. You never seemed like the type to care a great deal about the unfortunate, but if these feelings are genuine, it’s nice to see you’re growing a heart. You’re almost becoming cuddly now.
2, this is the refrain of right wing trickle down Reaganomics, the self-serving ideology that has fucked the global economy for the last 3 decades and has brought back the gilded age of rollecoaster boom-bust capitalism after a half century of stability and growth. No Garth, lessening the taxation burden of those that have plenty of money and options already won’t inherently benefit those with no money. I know that “conservative” ideology has been trying to topple the very concept of progressive taxation (see Alberta), but how (willfully?) blind can you be? I thought you were wiser than that.
Keep the hot stuff in the TFSA. Load up on CPD in sane proportion (a bargain) in the taxables.
Keep the good stuff coming Garth!
Posted rumor saying Canjet is laying off 21 pilots, with cancelled flight schedules. They fly charters to sun destinations for Kanadians.
Well Garth, you were sounding reasonable until this:
“The more we allow people to create and shelter wealth, the more that precious public resources can be targeted to those who need them.”
Seriously? Show me anywhere that has actually happened since the neocon bullshit era began fifty years ago. It hasn’t, of course.
What complete tripe, utterly unsupported by facts, a total logical fallacy.
Are you drinking tonight?
Your false dichotomy between public and private resources is a sad economic canard. Ultimately, all resources are public resources, Garth. We just lease them for a while, then they are returned to the commons when we are returned to the dirt.
What you propose will only accentuate wealth disparity which will almost certainly lead to a breakdown of social cohesion and likely much worse.
The stupid neocon agenda continues: the wealthy get wealthier, the growing poor get the blame, private profits and public debt controls the game for the fewer and fewer.
So sad to hear you support this, along with the blaming of the losers you point to, as if their ‘errors’ in dealing with a rigged system makes it just.
Ask yourself when you review this, one of your dumbest blogs ever, how it is that you sounded like you were making such a reasonable case, then simply veered hard right….for what?
Nice cherry-picking, The comment was that programs like OAS should not be giving money to those who don’t need it, so those who do, get it. — Garth
“….If you buy a condo and lease it out, the rent is fully taxed as income – on top of any other money earned, at your full marginal rate…….”
_______________________
I guarantee you very few condo owners are declaring rental income on their returns, now that the renter’s tax credit has been removed and the government has no way of tracking rental income.
The Cons took all your money and laughed at your cowboy faces and now you will lose your jobs. I say good when you vote conservative you vote for the 1% to screw you hard. The Cons are going to give it to you clueless cowboys so hard. It’s well deserved for Alberta which is a province that is so clueless that they make clueless people look smart.
Please oh wise Garth or ANY other brainiac explain why the TFSA even exists?? The government NEVER does anything to help the people. They confiscate by force from one group to give to another. That is ALL they do. The TFSA will be the first to ‘bail-in’ the banks when the derivatives bomb explodes. These will be the first to go as they are the easiest to restrict.
Before you yell the great phrase that the cia invented- \hint\ starts with consp and ends with eory.
WHY WOULD THEY PUT IT IN LEGISLATION??? Explain THAT one!
Canada’s Deposit Confiscation Proposal
The most candid statement of confiscation of bank deposits as a means to “saving the banks” is formulated in a recently released document of the Canadian government entitled “Jobs, Growth and Long Term Prosperity: Economic Action Plan 2013″.
The latter was submitted to the House of Commons by Canada’s Minister of Finance Jim Flaherty on March 21 as part of a so-called “pre-budget” proposal.
A short section of the 400 report entitled “Risk Management Framework for Domestic Systemically Important Banks” identifies bail-in procedure for Canada’s chartered banks. The word confiscation is not mentioned. Financial jargon serves to obfuscate the real intent which essentially consists in stealing people’s savings.
Under the Canadian “Risk Management” project:
The Government proposes to implement a ‘bail-in’ regime for systemically important banks.
This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.”
This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.
What this signifies is that if one or more banks (or credit unions) were obliged to “systemically deplete their capital” to meet the demands of their creditors, the banks would be recapitalized through “the conversion of certain bank liabilities into regulatory capital.”
The “certain bank liabilities” pertains (in technical jargon) to the money they owe their customers, namely to their depositors, whose bank accounts would be confiscated in exchange for shares (equity) in a “failing” banking institution.
“This will reduce risks for taxpayers” is a nonsensical statement. What this really means is that the government will not provide funding to compensate depositors who are victims of a failed banking institution, nor will it come to rescue of the failed institution.
Instead the depositors will be obliged to give up their savings. The money confiscated will then be used by the bank to meet their liabilities contracted with major financial creditor institutions. In other words, this entire scheme is “a safety net” for too big to fail banks, a mechanism which enables them as creditors to overshadow lesser banking institutions including credit unions, while precipitating either their collapse or their takeover.
In case you hadn’t noticed, this is a nation designed for rich people.
If I earn $180,000, am single and live in BC, I’ll pay $39,848 in federal tax and $19,419 to the province. The tax bill totals $59,267. The leaves me with $120,733, and on every extra dollar earned, I’ll be taxed at the rate of 45.8%. Ouch.
——
Add in PST, GST, 5 different gas taxes, MSP, hydro and property tax increases, bridge tolls and a myriad of other fees, taxes and levies on goods and services with “ZERO ACCOUNTABILITY” as to where the money goes by govt….and the tax rate here is closer to 60%.
#35 LazyJason
The withholding tax is not an additional tax on an RRSP withdrawal. It is what it’s name says: a withholding of income tax which is credited on your next tax return.
“….In case you hadn’t noticed, this is a nation designed for rich people………”
_________________________
Absolutely.
And, Free Trade Agreements, out-sourcing, off-shoring, insourcing TFW’s, and a Government/Bank of Canada/CMHC propped up housing bubble will continue to keep it that way.
The socialists were all over BNN today about how TFSA’s will become a huge advantage for the well off. Maybe, maybe not.
If I pay tax on earned income today and invest in a TFSA, the government gets the tax on the income earned to go into that TFSA today(2015). Citizens get to drive over that new bridge or whatever for the next 30-40 years because the government had the money to build the bridge today and the government didn’t have to wait until RRSP’s got cashed out in 2060.
If I take the same money and buy a RRSP, I get a tax deduction and pay no tax on that earned income today and for the next 10, 20, or even 30 years. No new bridge until 2060 or float a government 30yr. bond to pay for it today and have taxpayers pay interest on the bond for the next 30 years. (Bond holding rich people really like that!)
There is a difference in the timing of when the government gets their tax revenues but will the difference be financial armageddon by 2060?
Do we really want to put roadblocks in the way of people saving for their own retirement or do we want everyone to be totally dependent on a government social welfare program in their golden years?
Somehow, it was also missed that low income people, if they can squirrel away ewen a few dollars along the way, will not have their government pensions such as GAINS impacted by withdrawing funds from a TFSA or by the interest in those accounts.
@Paully #11
As with all things big fella, the devil is in the details.
Some would say that anyone who votes CPC is stupid and they should pay the stupid tax.
Some would say that anyone who votes Liberal is should and THEY should pay the stupid tax.
And how the f*&k does one define anyone who votes NPD?
Dammit another jest ruined by not being able to edit!
“Besides, people are victims of their own fear or ignorance. The nation gives them RRSPs, and they use them for house down payments. They get TFSAs, and they turn them into growthless savings accounts. They’re offered half-tax on investments, but they buy GICs. They get a huge gift on dividends, and they want a rental condo. The country drops rates, and they cannot borrow enough.”
Sounds like you don’t support fair taxation Garth, of which the most fair would be none. What does ignorance, fear and stupidity have to do with that? I bet you would be the first to jump on any precious metal taxes. The government is not here to take/steal hard earned money and give some of it back according to how they feel. Government is to secure our freedom and provide services which probably be best set up as fee based (kind of like financial advisors). Sorry to unload on you today, but you came out so ignorant and pro status quo. I hope you don’t end up as one of the stupid one day, because you missed something here or there in the equation.
Another great post Garth which I again agree 90% with. All of the advice is good of course as always.
The part I don’t agree with is the implied suggestion that capital gains shouldn’t have a different tax rate than income. If they were to try and tax both equally, there would need to be an “inflation adjustment” to the capital gains. A portion of capital gains is outright inflation, just like a portion of a bond yield is inflation in normal times. Inflation ruins everything, and I don’t think they should tax inflation.
Another bee that’s been in my bonnet for a long time is how slow the goberment is to raise the tax brackets. When people get a 3% raise the government loves to belly up to a bit more tax revenue but they rarely change the tax bracket steps to reflect that 2% of that that was just a cost of living adjustment to reflect inflation.
> … No tax on Corporations. 0.
Tax dividends and capital gains as income …
doesn’t that favour foreign residents??
The assault on the TFSA is to keep what’s left of the middle class enslaved to the system and to tell them “See what the rich are doing? Yeah, you don’t want to be like THEM!”
You can only fund TFSAs with money that you’ve already paid taxes on and you can’t claim a tax deduction for contributing to it so I say they grabbed enough already. The government is scared that in 30 years, somehow every Canadian is going to have 10s of millions of dollars (ha!) and they won’t be able to grab their share, like they can now with clawbacks on CPP/OAS/GIS and what they tax you on RRSP withdrawals.
In this instance, I hope the PM does what he’s been doing…don’t listen to anyone and do what he wants…Raise the TFSA max limit!
And thank you Mr. Turner for a great gift- wish I could return the favor!
Been reading the comments on the usual media outlets re: TFSA.
Most of those moaning about the “rich” wanting increased contribution room point to living paycheque-to-paycheque and not having enough money to contribute themselves.
Oh well, tough shit. You decided to jump in to a mortgage and debt slave yourself for life. You deal with it. You got your break with your 5% down and CMHC, we want our break. You want to invest in RE and hopefully make a fortune, while those who don’t aren’t allowed any breaks.
As if the genuinely wealthy give two shits about $11k of TFSA room. Their coin is stashed offshore where they can do a lot better.
Crispen Odey runs Odey Asset Management’s Odey European Inc. fund, which was ranked No. 5 on Bloomberg’s 2012 list of the 100 Top-Performing Large Hedge Funds. Odey , one of the great market bulls of our times, ironically, reported in one of his recent newsletters to his clients that equities are in very big trouble. Shorting stuff, as Garth pointed out in reference to Beemoe will make tons of doe for the shorts like Odey, but for the rest of us sheep, we’ll be sheared.
In short, Chrispen wrote, “This down cycle is likely to be remembered in a hundred years, when we hope it won’t be rated for “How good it looks for its age!”. Sadly, this down cycle will cause a great deal of damage, precisely because it will happen despite the efforts of the central banks to thwart it.”
The trick will be to stuff your TFSA with goodies that won’t be dead on arrival. It’s hard to tax something inside or outside of a TFSA that’s worth less with each passing day. As Garth pointed out awhile back, ‘nobody escapes.’ Crispen (mentored by George Soros) cautions that this cycle (right now in 2015) will be remembered in 100 years. Caution would be prudent
37 Dean on 02.24.15 at 8:17 pm
Stupid taxes?
My personal favorite….lottery tickets.
Talk about voluntary taxation.
===================
Few people today know that lotteries were once completely illegal in Canada. In the Fifties, Canadian got their gambling jollies from buying tickets for the Irish Sweepstakes lottery through an underground network of dealers, some of whom were even occasionally prosecuted.
Gambling was completely immoral until government smelled the money. Anyone want to bet on how long before they change their minds on pot. My guess is about five minutes after the end of the Harper regime.
In addition to trying to prop up the export economy by dropping it’s support of the Canadian dollar dramatically, the Bank of Canada…..errr……the government, has also employed a subtle hidden form of capital controls on the populace.
Instead of outright not allowing you to take money out of the country, which would bring out the crowds with pitchforks and torches, having it drop in value by 20-25% effectively does the same thing, because many can no longer afford to take their dollars and spend them outside our borders because of the increased cost of doing so.
Fortunately for me…….I’ve been around this block a few times and was planning for it.
Ka-ching.
@ #62 Oil Is Sticky
“Add in PST, GST, 5 different gas taxes, MSP, hydro and property tax increases, bridge tolls and a myriad of other fees, taxes and levies on goods and services with “ZERO ACCOUNTABILITY” as to where the money goes by govt….and the tax rate here is closer to 60%.”
______
Now you left with 40 % of your money. Then everything you buy with this 40% has 60% tax component in it. Effectively bringing the total to 84%. If you don’t spend it right away add inflation taxes. It’s a racket.
Garth, for pity’s sake, please do a post on how RRSP withdrawal taxes work. Some of the posters’ math is OK but the end result is just plain wrong because they don’t understand the concept of a withholding tax and how it works.
But Garth, the average household has reasons to distrust the financial industry, with an average of MER of 2.5% on mutuals funds, they are being sucked dry and yet, the government isn’t doing anything to help them out.
The White House proposed on Monday a law requiring brokers to have fiduciary responsibilities to retirement accounts (401k) under their care:
http://www.huffingtonpost.com/2015/02/23/white-house-fiduciary-rul_n_6732186.html?utm_hp_ref=business&ir=Business
What are the chances such a bill would see the light of day up here?
So don’t buy mutual funds. — Garth
Richmond Hill is at odds with the Ontario Municipal Board over developer charges for green space or park land in lieu of condo permits. Due to the crush of density in the GTA and housing families in small condos the Richmond Hill counsel wants parks for people…had the province stacked the deck in favour of building outside the GTA in the huge province known as ONTARIO none of this would be an issue. Cities outside of Toronto bordering the states would have JOBS AND HOUSING and the province would be making their budget but noooo we have to have the whole chebang in the bellybutton TORONTO.
I am in Jacksonville Fla in the beautiful southeast suburb where there are miles and miles of office parks and RENTAL HOUSING and retail and all have green medians and trees and grass and sidewalks and a big library and community YMCA….God this place is NICE.
So back in Toronto where Premier Wynn rules and lives people have lost sight of the fact of that big beautiful Ontario.
You have to feel sorry for all those foreign buyers of condos in Toronto and Vancouver after pumping up the prices now they are stuck not only with flat condo prices but a DEPRECIATING currency and ever increasing condo fees and taxes….now all the locals will be on their knees praying for some unsuspecting foreigner to please God take this condo off my hands.
There was no shortage of commenters in the G&M decrying this as yet another example of Harper’s evil plan to destroy the planet… talk about illiteracy.
They don’t see what a gift it is, for those who can read.
I’m 27 years old and make 58k a year. I wouldn’t say I’m rich. But I have managed to max out my tfsa (albeit while still living in moms basement).
Doubling the TFSA is nothing more than vote buying for the wealthy. I try my best to extoll the virtues of the TFSA to my friends who in are in my age bracket (and relative income bracket). Most of them have no idea what it is, or how it works.
But nearly all of them have horny dreams of moist home ownership.
Garth. How do we make TFSAs sexy to dumb young people? Upping the limit doesn’t help.
See? Totally unfair. That’s why rich people invest money instead of earning it doing tawdry things like working. Employees are sitting ducks for government Hoovering, and the top marginal tax rate now exceeds 50% in Ontario. But for business owners taking their income as dividends or capital gains, it’s party time.
=====================
Canada actually had this conversation with itself in the early Sixties. The Carter Commission was formed to make recommendations on overhauling the income tax system. The headline recommendation was “A buck is a buck!” meaning all forms of income should be taxed equally whether it be salary, interest, dividends or capital gains. As capital gains at the time were entirely free of tax, this was a massive challenge to the wealthy.
Not surprisingly the concept was watered down to taxing half of the gain.
I think the system is backwards. Earned income should be taxed more much more favourably than passive gains. A company that can produce consistent annual dividends is likely to have much greater long term social value than some dot.com fizzle that rewards a few insiders by selling overvalued shares to greater fools. In my view, favouring passive gains over dividends has helped create the casino mentality that infects today’s capital markets.
“at retirement, would have $1,783,919. That’s enough to generate an annual cash flow of $125,000 (without diminishing the principle),”
You seem to always use 7% ROR. That wouldn’t be considered a ‘conservative’ portfolio would it? Seems most people would opt for a conservative “slow and steady” ROR of maybe around 3.5%. Just asking.
‘Most people’ aren’t wealthy. — Garth
# 35 Lazy Jason
“So only 30% (2/3 of the tax) is deferred but 15.8% is saved.
You have not accounted for the withholding tax (10-30%) of the withdrawn amounts. So if you pull $180,000 out all at once, that’s 30%, or $54,000, held back immediately. You are taxed on the balance at your marginal rate. So if at 45.8%, that’s another $57,000 in taxes.”
I think what Huibolshei at item #12 meant was, if your tax rate was lower when you took the money out of the RRSP , you got to pocket 15.8 % because your tax rate was lower than when you put it in. If you are still making pots of money when you pull it out, yes, you would have to pay your marginal rate. Garth covered this in his Plan B posting.
BF
‘Most people’ aren’t wealthy. — Garth
I am referring to those who are risk averse but are still wealthy, which is why i was asking how risky your 7% ROR portfolio is?
The average annual return on a 60/40 balanced portfolio over the last decade is 7.4%. Find me a more tumultuous decade. — Garth
Somebody with a portfolio of $1.2 million in bank stock kicking out about $48,000 in annual dividends (an average of 4%) would end up paying zero tax. That’s right. Nothing.
Now imagine if the annual contribution limit was $11,000. Then this same person, at retirement, would have $1,783,919. That’s enough to generate an annual cash flow of $125,000 (without diminishing the principle), which you can take as non-reportable income. That means you still get to collect your government pogie, no clawback.
So what’s the diff between zero tax and non-reportable income?
Married. Self-employed. No rrsp’s. Have joint margin. TFSA’s maxed out. I’ve been treating our investments as one big account and spread the 60(equity)-40(bonds) split wherever they are most appropriate, tax-wise. At this point, only the bond portion fits into our TFSA’s. If we do 60-40 in tfsa and then a separate identical 60-40 in the margin account, we are taxed unfavourably on bonds/reit’s whilst being unsheltered in the margin account. Flip side, we miss tax free growth on the equity portion in the tfsa accounts. Ideally, there would be no withdrawls until retirement Any opinions or links to articles on max efficiency regarding this matter?
What will people do when the biggest tax free lottery ends in this country?
Invest in the tax me later gizmo’s … lol
#79 Andrew Woburn
At one time, life insurance was illegal under British common law. I say only life insurance because I studied insurance law a long time ago. It may have been all types of insurance.
Why? Because it was considered gambling. It is a bet. The insured is betting that he/she will die before the insurance company and their actuaries predict you will (more premiums paid).
Now, like lotteries, it is legal. Times change.
And if you have a $3,000,000 invested in a house in Vancouver and it gains $200,000 in value this year, you will pay no tax.
Nor will you have any income. But a lot of expense. And vastly more risk. — Garth
Nice cherry-picking, The comment was that programs like OAS should not be giving money to those who don’t need it, so those who do, get it. — Garth
(from my earlier comment #63)
Garth,
First of all, I want to apologize for my earlier tone, it was a bit off. I should not have called this one of your “dumbest” blogs, since few if any are that way; what it truly is to me is “disappointing”, considering much of the otherwise smart things you have written.
That may have provoked your response, which I think either deliberately or through a semantic lack of clarity actually demonstrates the “cherry-picking” you suggest I have committed, I believe. (I know you might be rushed in crafting your daily blogs and responding)
Your comment that I objected to:
“The more we allow people to create and shelter wealth, the more that precious public resources can be targeted to those who need them. (Which is why the OAS should not be universal.)”
You offered OAS as an example, literally one (presumably of many, based on rhetorical structure, or why not include it in the main clause if it was essential and singular?) parenthetical example supporting your point.
Your comment back to me suggests this was the main (and only) point you were making.
That really is the essence of cherry-picking, in the way you used it in your defense.
Fair enough, I was a bit off myself and no one is perfect, and I see you are getting some criticism tonight. Moving on then…
I think my most salient point is that the rhetoric of cutting government to make it “more efficient” at helping the most needy is now very long in the tooth – and with what proven results?
None that I can think of. It really is a non sequitur as an argument.
Just more rich getting richer, more blame on the poor, more ‘gated-community’ mentalities and social separation (with cloying dollops of noblesse oblige and charity here and there to make the rich feel good about themselves)
I cannot speak for you. I know for myself, when I think of turning so many people into “the other”, I am speaking from a wound in my own spirit somewhere that I might want to spend some time reflecting on.
This is the undercurrent that I find disappointing in today’s post.
We really HAVE had this kind of neocon rhetoric at work big time for decades, taxes and programs have been cut, and the needy have not been better taken care of, and the rich have gotten richer and the middle class has been decimated.
Do you have access to data that I don’t that suggests the era encompassing Reagonomics to Harpernomics has produced different results than those, and more of the same going forward is the best approach?
That could be a good fact-based discussion. And I think evidence is really essential if you want to assert that such policies going forward will make us better off.
TFSAs increased to $11000 will only result in the wealthier benefitting more, since only about 16% I hear are topped out now. When the effect of a policy change so obviously benefits the few and takes tax revenues away from the rest, it behooves us to take the tougher path to get to what is right.
Garth, totally agree about oas only for those in need. Another point to tickle your fancy might be investigating why people who turn 65 magically have their drugs paid for by the government regardless of financial circumstances. This will drain our healthcare coffers for years to come. Currently we have designated lower income seniors vs higher income seniors and this is the only designation to whether someone pays a copay or not in ontario for prescriptions. Many seniors (especially of the aforementioned and widely studied boomer generation) can readily afford to pay for a percent of their medications. Something you may consider investigating and passing on to someone higher up… Also my take on the this post is Canadians pay a higher percent of their earned income to taxes than a lot of other countries. There are only a few was to ease that burden and the Tfsa is one of those ways… I say bring it on.
Has there been any entries on resps? I have some money in unregistered accounts. Was thinking of maxing my kids rrsp and forgoing the 20% contributions from the govt. assuming they goto post secondary education, the pro is tax free growth. Comments?
As per Smoking man The Fed spent more time bozzing than tappering.
#92 Mr Average on 02.24.15 at 10:05 pm
Married. Self-employed. No rrsp’s. Have joint margin. TFSA’s maxed out. I’ve been treating our investments as one big account and spread the 60(equity)-40(bonds) split wherever they are most appropriate, tax-wise. At this point, only the bond portion fits into our TFSA’s. If we do 60-40 in tfsa and then a separate identical 60-40 in the margin account, we are taxed unfavourably on bonds/reit’s whilst being unsheltered in the margin account. Flip side, we miss tax free growth on the equity portion in the tfsa accounts. Ideally, there would be no withdrawls until retirement Any opinions or links to articles on max efficiency regarding this matter?
————————————-
http://canadiancouchpotato.com/2013/10/30/making-smarter-asset-location-decisions/
http://canadiancouchpotato.com/2012/03/12/ask-the-spud-investing-with-multiple-accounts/
http://canadiancouchpotato.com/2012/03/15/a-spreadsheet-to-manage-multiple-accounts/
Best,
HD
“Opposition is growing. The Parliamentary Budget Officer weighed in this week, saying the action would end up costing the feds almost $15 billion in lost tax revenue by 2060 ”
Justin time Trudough can easily close the gap:
1. Legalize and tax pot.
2. Next, tax Smoking mans rentals.
Just keep upping the TFSA limit.
A comment on the taxation level. I am in the same boat as the person that is earning capital gains on the $2.6 million portfolio at a lower rate. In order to have that portfolio I earned income and paid the highest marginal rate at the time to net out the portfolio. It is no longer “earned” income but “investment” income. In order to risk these funds, there needs to be incentive. Thus a lower rate. In addition, in order to declare a dividend, a corporation has already been taxed at about 25%. Wages are an expense that reduces the corp tax so the recipient pays an “income” tax at a higher rate close to the combined corporate tax and div tax. How much more should the gov’t get?
The lower your household income, the higher your debt level, relative to income. That’s just the natural outcome of the desire to appear prosperous through conspicuous consumption, as opposed to working to build actual wealth (ie the millionaire next door).
Poloz is officially….an idiot…I mean what can you say with this guy swinging in any direction the wind blows with our national economy? He admits to making a big mistake…of being incompetent…but he justifies his actions in the most juvenile ranting we’ve ever seen.
http://www.vancouversun.com/business/Bank+Canada+chief+Stephen+Poloz+throws+markets+another+curve/10839630/story.html
Mr Harper….please….you made a mistake with this guy….put on the big boy pants and admit it. Get rid of the Wacko Poloz before he does any more damage to Canada.
http://www.vancouversun.com/business/Bank+Canada+chief+Stephen+Poloz+throws+markets+another+curve/10839630/story.html
#95 Alberta Economist on 02.24.15 at 10:09 pm
And if you have a $3,000,000 invested in a house in Vancouver and it gains $200,000 in value this year, you will pay no tax.
“Nor will you have any income”
……………………………………………………………………
What are you going to live off with your small amount of money invested in equities or ETF’s …. dividends? lol
#45 Washed Up Lawyer
The January stats on RE in Ft. McM were up on the RE Board website for a few hours. I saw them. They were ugly. I did not take notes to report to the blog dogs. Why would I. I thought I would simply pass along the link. Three hours later the stats were gone.
——————————-
Foolish F McM RE Board – they should just do what the RE Board in Victoria does and find some positive number, no matter how insignificant or divorced from the market reality, to focus on. The MSM eats it up. If you can’t substantiate, obfuscate.
But ultimately its buyer beware and if people in F McM do not see the writing on the wall…….
Garth, whatever you might have intended the TFSA to be, Harper is turning it into what he loves best: a tax break for the wealthy. The bigger the TFSA cap gets, the more this becomes true.
First off, not many people end up with $11K just lying around at the end of year. But rich people do.
Secondly, not many people have the time or resources to actively manage their money in a TFSA to obtain large gains. But rich people do.
I spoke with a guy who works at a bank who told me that he sees TFSAs with 70-80K in them. These people with 80K in their accounts are people who already have large financial resources who can hire others to manage their money full time. They have enough money socked away in other, zero risk investments that the TFSA is like their “fun money” at the casino.
Joe blow meanwhile, his entire life savings is in the TFSA, so he’s buying GICs and mutual funds hoping to eke out 1-3%. Joe has a busy life working to scrape by. Joe does not have the time or the skills to be a part time stock broker on the side, trading ETFs and re-balancing portfolios.
So what happens? The rich get richer, Joe stays the same or gets poorer as service cuts, inflation, and backdoor taxes eat his income away. This is what is happening in Canada.
And guess where Joe has all his money? — Garth
Oil price is still drifting. Lots of downside ahead as US production is still on the increase as oil companies finish off their frac work. In Canada and in North Dakota breakup is approaching (when the ground is thawing and is too soft to move heavy equipment.)
We’ll have a better idea once breakup is done and the rigs start to move in again in July. So far we laid down 33 % of the drilling rigs since December. Won’t be surprised if another 20% are laid down once we start up again this summer.
#97- Not all people who turn 65 have their drugs paid for. I know people who earn less than $30.000 a yr who pay for their drugs.
#60 Parliamentary Pension Plan
Which followed a devastating world war resulting in decades of private (and consequently also public) rebuilding, growth and investment, ie, the boomer generation.
It’s not really comparable, is it? Maybe we should have another global calamity to see how that theory works out.
DELETED
#106 omg the Original
Yup.
Dogs, ignore my comment #94. I do not know what I am talking about. Hence I am washed up. It had to do with people taking out life insurance on other peoples’ lives (that would give rise to questionable motivation – get my drift?). Henceforth I will stick to my areas of expertise, so no further comments.
#109 april. In ontario they do. There is no income limit to that particular benefit. I know for absolutely for sure… (Not sure about other provinces thou.)
#109 april …Also assumes that your follow the Ontario Drug Formulary. Any drugs outside that are not covered. Most Doctors can accomodate for Benefit only drugs.
If someone is hellbent on living off wages, insisting on being an employee, living from paycheck to paycheck and pay full taxes they are not really taking any advantage of living in a Capitalist country.
They might as well enjoy the sunshine after the shift in Cuba.
#94 Washed Up Lawyer
Why even compare insurance to gambling? Insurance is risk sharing vs negative outcomes. Knowing negative outcomes are rare, people with similar risk profiles pool their money, so those afflicted receive compensation. Who hopes to collect life insurance (you die) or fire insurance (your house burns down) or unemployment insurance (you’re fired)?
I’m not surprised (some forms of) life insurance were illegal, as the field was rife with scams and deception.
Lets see mr harper make some more changes to OAS…
http://news.nationalpost.com/2015/02/24/pmo-oas-ei-changes-angry-response-0/
Article in Vancouver Sun:
Q In a blog post last year you wrote that wealthy clients in China are more interested in placing their children and a portion of their wealth outside of China than they are in immigrating themselves. Why do you think that’s the case, if it still is the case?
A It still is the case. If you’re a wealthy Chinese individual it’s likely because you have a large business still in China. China does not recognize dual citizenship and it’s just more difficult for you to actively operate your business without Chinese citizenship. So a lot of people, they’re not willing to give up their business so they’re not willing to give up their Chinese passport either.
http://www.vancouversun.com/business/commercial-real-estate/Vancouver+firm+offers+stop+real+estate/10839183/story.html?__lsa=24e7-5836
#I’veSaidItBefore*&I’llSayItAgain… #*WhilstArguingWith’TheManagement’,Or… #ToParaphraseLeonaHelmsley… #”OnlyTheLittlePeoplePayTaxes”…
http://youtu.be/tVi88apOnA0
#EssentialComicRelief… #Still’Smarting’FromHisAlienAbductors’… #AnalIntruder… #SmokingManVolunteersToKamikazeAnF-16….
http://youtu.be/OmhGrJJjI7E
#113 wages wrote
“If someone is hellbent on living off wages, insisting on being an employee, living from paycheck to paycheck and pay full taxes they are not really taking any advantage of living in a Capitalist country.
They might as well enjoy the sunshine after the shift in Cuba.”
Lol…a stunning admission of an incredible lack in understanding. Say, wages, could everyone in a capitalist society be a capitalist? OMG.
Ironic, ain’t it, that eastern bastards are indeed freezing in the dark…
http://news.nationalpost.com/2015/02/24/pity-alberta-where-ski-season-has-been-ruined-by-weather-that-is-too-warm/
Bastards, ok, a bit looped at the moment. But I know I got best seller on my hands, let wife read my book, she hated it just as much as fifty Shades of Grey… She hated it more. Jesus Christ.
This is going to be huge.
I don’t want to be famous, any dogs want to go on talk shows pretending to be me . I’ll pay you well.
That way, I continue doing what I do. Massing fortunes incognito.
Great succinct post tonight GT, you have a knack for taking complex concepts (at least to the unwashed masses) and explaining them in a way that I suspect even Reality TV watchers can probably understand.
You can’t fix stupid, but you CAN prevent it. This post would be a great starting point for a nationwide Financial Literacy high-school curriculum. Just sayin’…
SM, are ya ever not looped?…
#87 Andrew Woburn wrote
“I think the system is backwards. Earned income should be taxed more much more favourably than passive gains. A company that can produce consistent annual dividends is likely to have much greater long term social value than some dot.com fizzle that rewards a few insiders by selling overvalued shares to greater fools. In my view, favouring passive gains over dividends has helped create the casino mentality that infects today’s capital markets.”
Absolutely Mr. Woburn. Its becoming hard not to laugh at those who figure that unearned income should be taxed at a lesser rate because there is more risk involved in the investments they made. To make this claim post ’08 bailouts and central bank reflation of the global financial system is to suffer some form of psychosis.
“OAS should not be universal”
FINALLY AND THANK YOU!!
If im making 70k in retirement income, do i really need to stress the system more and collect $6 grand In OAS?I never understood people who make good income in retirement bitching about OAS clawback. Come on, your lucky enough to live in this safe and beautiful country that has supported you, so give a little back.
People who piss and moan about OAS clawback need to give their head a shake. So much entitlement!
Now if it was CPP they tried clawing back thats a whole other story.
But if I have an investment portfolio of $2,600,000 and earn 7% in capital gains in a year.
—————————————————————–
Hi Garth, can you give me an example what portfolio your are talking abt in term of bank language? Bank told me 3 portfolio are available. high risk, medium risk and low risk.
also, which ETF is good to buy. can you refer some? thx.
@ Alberta is FINISHED
This will probably interest you and feed the fire.
“NDP finance critic Brian Mason said Tuesday that by ruling out corporate tax and energy royalty hikes, Prentice has decided that “the burden of resolving these problems lies on people who work for the government (and) people who depend on government services.”
http://calgaryherald.com/news/politics/no-recession-in-alberta-says-finance-minister
Thanks for the info Garth. It’s appreciated.
I enjoyed today’s post. The upshot is do not be stupid.
#124 Wildnutter on 02.24.15 at 11:31 pm
SM, are ya ever not looped?…
Yes, 5am to 9pm week days only.
#116 devore
As usual, your analysis is sound.
#127 ETF Q
You could do worse that just this:
http://canadiancouchpotato.com/wp-content/uploads/2015/01/CCP-Model-Portfolios-Vanguard.pdf
It’s 3 ETFs with weighted average MER of 0.18%. One bond, one Canadian equity, one world ex-Canada equity. The 60% growth 40% safe version returned 6.37% over past 10 years.
Seriously, can all the goldbugs screw off from this site and go post on infowars or kitco or some other wackjob site?
#113 – I should have stated I live in BC. Estrella I cannot make sense of your second post – #114.
In the spirit of “fairness”, I wonder why the critics of the proposed TFSA changes have failed to identify a plentiful and yet untamed source of government revenue: capital gains on houses (primary residences).
So how is it “fair” for renters to allow house owners to reap often massive untaxed capital gains on a house? How much revenue is the government forfeiting by not taxing capital gains on “primary residences”? Surely, at least an order of magnitude greater than “$15 billion … by 2060”!
Riiiight! >70% own houses, so what are the chances that such a move could ever be deemed “fair”?
Both TFSAs and houses are funded with after-tax dollars, yet the untaxed gains in the former are “unfair” whereas the ones in the latter are not?! Why?
Why is a million made investing in a TFSA less “morally palatable” than a million made inhabiting a house, when both are untaxed and paid for with after-tax dollars?
This unfair blind spot is fairly huge – why have the critics missed it?
Is Canada’s RE religion so hazardous that the above has become dogma? Are the new pharisees pointing out the speck of dust in savers’ eyes yet missing the planks in their own?
Are the rich able to save because they are rich, or are they rich because they save(d)?
Hope one day I can count myself among them!
#77 Mr Skunk .Here here.
Thanks HD.
#122 Smoking Man on 02.24.15 at 11:23 pm…
“…Massing fortunes incognito…”
Did you forget you told all the regular readers of this blog who you were – multiple times?
Methinks it’s not a good idea to post when you are ‘looped’
I think the major way government will get more revenue in the future is the federal and provincial governments downloading and municipal governments increasing property taxes. It’s a guaranteed source of income and it can be done indirectly by reasessments if they are scared to increase rates.
In its current set up the TFSA is unsustainable. The rules will change before its 10 Year anniversary.
I’m sure they will limit the amount one can put in every year. With no allowences for missed contributions in previous years
I say screw all this TFSA, RRSP, RESP crap. Saving for retirement, saving for death.
A fool earns his money trading it for time.
Start a business, build the money in it, move profits to a holding company and keep skimming the one into the other.
It takes one good job to make a futune that lasts a lifetime. As far as bad jobs, manage the risk and you’ll never have one.
Working by the hour? Waste of time.
Obvious truth:
I haven’t won anything. I worked hard for where i am. Everyone had that chance.
Now I enter the real world and will want the best for myself while helping others. And that does not mean I would work for free like teachers do.
Has anyone noticed that the president of OPEC is now a black woman who is the also Nigerian oil minister. So much for my stereotypes about macho Africans and Arabs. But if she visits Saudi, will they let her drive her own car?
“Diezani K. Alison-Madueke (born 6 December 1960) is the first female President of OPEC, elected at the 166th OPEC Ordinary meeting in Vienna on 27 November 2014.” Wikipedia
#136 Two-thirds.
Good one! Hadn’t thought of that. You’d have to be an incredibly courageous politician to propose this! :-)
M. Dion, where are you?
CO
I had a long discussion with my 18 year old son today about opening up TFSA’s and maxing them out. In BC he has to wait until he’s 19 to open one, but at least he can then catch up on his previous year’s contribution.
Once I explained the ins, outs, opportunities and quirks of TSFA’s to him the lights went on. He’ll need one to save him from the wrinkly boomers.
Youre on the right track today with the enemy being the rich. Since you designed these TFSA’s however, perhaps you can partly blame yourself for this mess! If they were called Tax Free Investment Accounts, then maybe people would use them like you suggest.
A tax free savings account implies saving. I mean that’s a no brainer. Most ordinary people see investing as a risky gamble and saving as a prudent safety net. Most ordinary people are financially illiterate and risk averse. I am not proud to say that I am. I worked hard for every dollar and am not going to lose it to the ups and downs of the market. Or so i believe.
Really, TFSA’s are just another tool for the progressive left to complain about why their centrally planned, totalitarian, state controlled economic system is unfairly hobbled and disadvantaged by innovation, industriousness, self-reliance and responsibility.
Non-leftist systems just do not generate the vast numbers of victims needed to reach critical mass. A nation of financially independent people is the progressive lefts worst nightmare. No victims, no need for progressivism.
People who work are not stupid. What is stupid is the nation that does not favour the worker over every other sort of person.
“Financial literacy” does not matter all that much for those who do not yet have much capital.
Since wages have been flat, while housing, food, and other essential costs have risen, capital formation is difficult for most wage earners.
ah-, the money!
don’t u have anything better to brag about!!!
#112 Washed Up Lawyer
Point taken about insurance in general…we still like ya!
Another great post, thanks Garth.
I’m sick of all this anti TFSA nonsense. If the middle class were smarter, they’d sink more of their wealth into these vehicles and less into rotting, decaying houses.
I think the government should boost the TFSA contribution room. Like you said, those smart enough to take advantage of it will be less of a drain/burden to the overall system. And it’s not unfair…the “tax-free” nomenclature is somewhat of a misnomer. All earned income going into these things has, after all, already been taxed. What the TFSA is actually doing is preventing double taxation while offering room for sheltered growth.
But Jonathon Chevreau makes a much better case for the TFSA than I do:
http://www.macleans.ca/economy/economicanalysis/the-case-for-tax-free-savings-accounts/
But if I have an investment portfolio of $2,600,000 and earn 7% in capital gains in a year, then of the $182,000 received I’ll pay only $21,436, and end up with more than $160,000. So, I keep an extra forty grand. Because I’m wealthy.-garth
—————————————
Garth to do this all the money would have to be invested in equities ?
Who pays all these experts to go on the 6 o clock news and say that TFSA’s are bad and they will cost government money. I guess academia doesn’t pay enough.
Oh wait.
H to Joe O, whisper whisper “we can’t raise TFSA’s, go get a bunch of PHD’s and likeable news people to make them look bad”
Raise them dammit!
End of discussion
RE: #24 Glen Margaret on 02.24.15 at 7:57 pm
Raising the TFSA limit seems to reduce government income, and why would the Conservatives do that? I think it’s a cynical policy for votes in the next election.
The tax implications for TFSAs are practically the same as for RRSPs, except for one difference. RRSPs take tax revenue away from the current Harper government and give it to a future NON-Harper government. But if people put money in a TFSA instead, the money is taxed TODAY (when you earn it) and not in the future. Can you see why now the government of today likes the TFSA more than the RRSP?
#31 Short WTI –
”No wonder, TFSA is the sexiest in town.”
Yes it is. And sexy for the gov’t as well since most people cannot afford to invest in both the TFSA and RRSP so if majority now choose the TFSA the gov’t is not having to give you a tax refund on your contribution. Win/Win.
http://www.reuters.com/article/2015/02/24/us-usa-fed-idUSKBN0LS0BD20150224
Everyone knows the “US growth” is a sham. Only 33% of Muricans even qualify to buy a “regular” car. Low unemployment? Easy to fake when so many people are not counted.
No way they will raise rates. And even if they do raise rates a paltry 0.25% in 2015……big deal. The market will consider that “not” raising rates.
There is information in this post that I only discovered when I first owned a business in the late 90’s. When I learned of these tax realities I was both shocked and set on a path of low taxation and fast tracked financial freedom. The system is indeed unfair. Figuring this stuff out took some time back then. Great post.
C’mon Garth. I think it’s totally unfair to suggest that the rich guy gets to keep the 40 grand because he’s rich. He gets to keep the 40 grand because he has to take a lot of risk, with money he has earned and already paid taxes on, to try to earn the 7% return.. something the wage-earner doesn’t have to do. Otherwise.. where is the incentive for taking such risks.
#134 A box in the Sky on 02.24.15 at 11:57 pm
Seriously, can all the goldbugs screw off from this site and go post on infowars or kitco or some other wackjob site?
——
It’s simply amazing that as every empire eventually burns itself out……the touters of said empire always laugh at the people pointing out it’s falling apart. I’m not a goldbug……but more and more and MORE of these so called “conspiracy theories” are being proven as conspiracy fact all the time. Do some research and check out all the dozens of false flags that have been proven to be real as in…..what the govt said was total BS. But yet you continue to have the “name calling” from the people who love govt, love corporations, love anti-terror laws (pro dictator laws) until it all falls apart. Simply amazing.
The countdown is on, 1 week until the next BoC policy rate announcement. Another -25bp??
#110
Exactly…where would we be without those “great wars”.
#115
You are right. The great socialist experiments have all died an untimely death. They do not work. But we are still banging away in certain provinces..Oh yeah and the Fed Liberal party.. he might be the new” Mr Dithers” stolen from Mr Martin.
#120
An incredible lack of understanding..awwww
I love it ! So true. Stupid is as stupid does LOL
#128
““NDP finance critic Brian Mason said Tuesday that by ruling out corporate tax and energy royalty hikes, Prentice has decided that “the burden of resolving these problems lies on people who work for the government (and) people who depend on government services.”
I love the NDP. I mean everybody knows that if your cow is starving you should milk it harder.
Fact is services are paid for by revenue and if the revenue goes down you have to lower the level of services or borrow money, not squeeze the poor cow’s tits even harder.
And to all those Alberta haters out there, fear not, Keystone will get approved eventually. We just have to wait for 2 things: The shale oil boom to run its course, and for US interests to buy up all the assets in Alberta on the cheap. It’ll be a bit of a rough ride until then though.
Keystone is a political decision, not a financial or environmental one. Therefore it will be resolved when it is in the interest of the people who make large political contributions in the US to do so. But it’s dead for at least 3 more years.
Case in point they built the southern leg of it. But that leg can get shale oil from mid-America to the refining centers in the south.
Once Trans-Canada is majority owned by Berkshire Keystone goes through. Until then they get squeezed like a tube of toothpaste.
I agree with you 100% on this one Garth. The tax system is unfair as it stands.
But the Conservatives are able to win elections by splitting the Left – now divided three ways between the Liberals, the NDP and the Greens. If those three parties don’t combine forces in some way or another, the Conservatives will get elected again.
32 sideline – if you contribute to the RRSP before tax (ie no refund at time of filing) and your marginal tax rate is the same in retirement it is a wash with the TFSA . But for those of us that will have a lower marg
rate in retirement the RRSP would win.
Dont contribute to RRSP with after tax income – you never catch up even if you re-invest the refund.
This pathetic blog has had many past discussions on this complete with examples.
#140……..increasing property taxes.
You are absolutely correct about increasing property taxes.
Property Tax = Wealth Tax
And to the tax collectors, this form of taxation is far more efficient than income tax, consumption tax…….
http://www.zerohedge.com/news/2015-02-23/1967-he-cia-created-phrase-conspiracy-theorists-and-ways-attack-anyone-who-challenge
Conspiracy Theory……invented by the conspirators. Laugh away…..
What did the BoC governor say in London, Ont., yesterday? Was he warning those idiots who are salivating in anticipation of another rate cut (right away too) that they’ll be disappointed? What might be the opinion about this London speech in the Prime Minister’s Office? Was it necessary to speak while Yellen is speaking –
ALBERTA IS FINISHED has got it absolutely right –
CARLY IN CABBAGETOWN has her finger on the country’s pulse –
I submit that the vast majority of Canadians hate oil companies, landlords, the rich, and government. For starters. And with good reason.
To WHOM was Poloz speaking?
Was there polite applause?
Nice cherry-picking, The comment was that programs like OAS should not be giving money to those who don’t need it, so those who do, get it. — Garth
You know what would happen if they changed the OAS to something need-based? Some wrinklies who are not receiving Boomer-sized pensions AND have trustworthy and loyal adult children would restructure their finances (and give out enough early inheritances) in order to qualify. I know of a lady who likes to live modestly. She doesn’t have a company pension. Her daughter’s well-off in-laws helped her liquidate enough assets such that she receives the GIS now, too. My parents would totally do the same thing to get the GIS if not for my dad’s decent blue-collar Boomer pension.
Garth should talk about the ccpc tax rate for small business earning up to 500k net. tax rates are low, 13-15 percent depending on province.
rich people operate business, dividend out so they pay no tax up to about 50k person. rdtoh asside.
basically, these tfsa are for regular people with 5500 bucks, those people are all old, who already have money at the bank who simply transfer it over. it does nothing to build business investments.
they should instead have tax credits to people who invest in small business, this will help a lot to create new business and jobs. tfsa at 5500 or 11000 is irrelevent, wealthy people with money moving it from one pocket to another, saving trivial amounts of tax, remember most people are like 55 years and older who have tfsa. i dont know anyone 30 who has a tfsa.they are too busy living, having kids, buying houses, cars, vacation etc. living having fun.
in terms of the poor which i know well, because i see them everyday in hamilton, well they dont know tfsa or care, irrelevent to them what the dividend tax credit is, etc. poor people bread poor, a person i know had his kid at 19, by mistake and last week his 19 year old daughter had a little boy, yes the cycle continues.
investment tax credits for new investments in small canadian companies, using dead money to buy etf in your tfsa is just money shuffling for already wealthy people, no job creation or new investment occurs.
poor people are poor, you see them freezing waiting for the bus everyday.
Two-thirds (#136)
“Are the rich able to save because they are rich, or are they rich because they save(d)?
Hope one day I can count myself among them!”
*******************************************
Hang on to the dream my friend. Trust me, it’s far better than the reality. Unless you’re Queen of England rich, wealth is just another empty promise.
Only the young and dumb can have fun with money. By the time you reach a certain age, wealth will never buy you what you really want or need.
You’ll also discover that around the time the doc puts the kibosh on the boozing is just when you need it most. All the ego stroking and self-important chatter in a room full of the aging wealthy is damn hard to take stone cold sober.
And did I mention b-o-o-o-o-r-i-n-g. Why do you think Garth hangs out with losers like us on the net? Stupidity and poverty are highly entertaining.
Wishful thinking hoping for the ‘end of oil’ guys. Obama is gone in 22 mos and the Saudis are already blowing a quarter billion hole in their budget..this quarter…..they have less than 2 years reserves.
What smart people are asking is what do the Saudis get from the Obama game? Most say that the Iraqi surplus war machine stash worth a trillion has crossed into Saudi.
Since 90% of the worlds population is falling into starvation the Obama attack on oil will be short lived. His legacy as a climate crusader is fried….he’s desperate. Which is why he’s lashing out at old friends..like Canada..and Israel…everyone else has already told him to ‘F’ off.
Except Iran…now that he’s promised them a nuke in ten. Long enough to get another democrat a chance at a second term…funny how that works eh?
Wow, blowout earnings from RBC. And a 3% dividend increase tells me that they’re still finding lots of stuff to invest in.
if you are able to use and maximise your tfsa. consider yourself wealthy:
http://www.canoe.ca/Canoe/Money/News/2015/02/24/22252741.html
Whether tfsa is increased or not the govt will most likely revise the rules around OAS and GIS reducing income thresholds to receive an OAS/GIS cheque and possibly introduce some asset testing too (e.g. You live in a million dollar house, you are then ineligible for GIS).
#148
Really, TFSA’s are just another tool for the progressive left to complain about why their centrally planned, totalitarian, state controlled economic system is unfairly hobbled and disadvantaged by innovation, industriousness, self-reliance and responsibility.
Bingo. The sheep bleat “oh, but I have no money to put into a TFSA, I can’t save” – the same people who welcome the ORPP (in Ontario) with open arms and don’t have any issue with affording the 1.9% coming off their paycheques for that utter scam.
#143. Ubc md
The drs I know are some of the most thoughtful and hardworking people you could ever meet. I’m sure we can expect the same from you. Wherever that may be.
When I say stop whinning it’s strictly on the money side. Every advantage in this post will be yours. And garth gave you the lay of the land for free.
From the blog entry and the posts you should have become aware that the tax system will treat you more favourably than most.
Everyone I know gets up early and works hard. But the majority don’t get the same preferential tax treatment. Perhaps you have had a course on money and practice management at the med school. I’m not sure how much of what is in the post you would understand but as a highly intelligent person I’m sure you could learn it quickly.
Hoping this blog keeps you away from [email protected]. That might be your biggest financial worry.
“Somebody with a portfolio of $1.2 million in bank stock kicking out about $48,000 in annual dividends (an average of 4%) would end up paying zero tax”
Can someone clarify the statement above, does this meant that dividends gains are not taxed even in a non-tfsa marginal account?
Correct, thanks to the dividend tax credit. — Garth
RBC hikes dividend as profits rise 17% to record
http://business.financialpost.com/2015/02/25/rbc-hikes-dividend-as-profits-rise-17-to-record/
What’s he smoking? (Or sniffing)
$62 a barrel average.
Typical politician … Pray for steak, dole out a baloney sandwich.
http://www.theglobeandmail.com/news/politics/tories-expect-old-age-security-costs-to-reach-461-billion-next-year/article23193709/
The Conservative government expects to spend billions more this coming year on benefits for the elderly as a growing number of Canadians qualify for Old Age Security.
Federal spending plans for the fiscal year that starts on April 1 show spending on these benefits is expected to reach $46.1-billion in 2015-16, which is $4.3-billion more than was spent just two years earlier…
The most recent actuarial report on the Old Age Security program estimated the number of Canadians eligible for the benefit will increase from 394,000 in 2013 to 537,000 by 2030.
The ratio of Canadians at the age of 20 to 64 – which is used as a rough estimate of the number of working taxpayers – to the number of Canadians aged 65 and over is projected to drop to 2.4 to one in 2030 from 4.1 to one in 2013.
The Conservative government has announced that, starting in April, 2023, the eligibility age for OAS and the Guaranteed Income Supplement for low-income OAS recipients will be 67 instead of the current 65.
@ Jacobs Ladder –
“What smart people are asking is what do the Saudis get from the Obama game? ”
*****************************************
Saudis are getting exactly what they want. They never get what they deserve.
The Saudi Wahhabis and Salafists currently have a hate-on for Russia (fighting over oil market share, backing Syria, etc). Canada and Norway are just collateral damage.
US military is the Saudi proxy army. Israel develops the high tech weaponry for the west – computer and otherwise.
Just a few years back oil was pushing $150 and it stayed high for years. Now we have a very marginal oversupply and the oil price absolutely craters.
Stock Market math :
1% oversupply = 50% drop in crude price
This math ensures that the insiders continue to personally profit mightily. How much do you think they hauled in shorting oil? We’re not talking small numbers like millions or billions here.
The People’s Math :
100 X 0 = 0
We get looted on the way up and on the way down! Worse for Canada this time round because plenty of Albertans had their jobs vaporized.
BTW- Saudis hated Saddam Hussein. It would have made sense in an evil sort of way to bomb Iraq if the hijackers were Iraqis. But they were SAUDIS. So Iraq gets sent back to the stone age and Saudis get to keep playing chop-chop. Orwell sends his regards.
“If you buy a condo and lease it out, the rent is fully taxed as income – on top of any other money earned, at your full marginal rate. ”
If you play the game right, you never pay your building income as full rate.
I have a rental building I paid 600k$. On given year I make 10k$ profit (1k$ cashflow, 9k$ equity by repaying the mortgage). I take 10k$ depreciation (a class asset 1 can go up to 4%) and pay ZERO tax this year as the depreciation is offsetting the profit.
The downside is that my book value is now 590$ so if I sell I will have 10k$ more in capital gain. Voila… rental income taxed as defered capital gain.
I’m not talking about closing cost, the fact thats its not liquid, tenants problems…. all those are valid argument. My only point is that if you pay full rate on rental income, get a better accountant.
You make $1,000 cash flow on a $600,000 investment? You need more than a good accountant. — Garth
Yay RBC!
Dividend increase from. 75 cents to 77 cents!
#183 Sky — “The Saudi Wahhabis and Salafists currently have a hate-on for Russia (fighting over oil market share, backing Syria, etc). Canada and Norway are just collateral damage.”
Actually, it’s Canada not cutting production to try to force Norway out of the market that’s causing all the problems; Russia and Saudi Arabia are just collateral damage.
Does that make any sense? No less than your explanation.
There’s a global oversupply of oil, and nobody is cutting production. Some players have announced that they’re cutting back on drilling new wells and building more oil sands mines, but I’ve seen nobody cutting current production, save natural depletion.
So why is it the House of Saud’s fault in particular? They’ve got some sort of obligation, as the low cost producer, to cut their production to bail out the bondholders of projects with $80 breakeven? No, when there’s a commodity glut, it’s generally the high cost producers who end up, one way or another, cutting production.
Garth – thank you.
This is what school should be teaching!
Most of us were thrown into our game of Monopoly without knowing the rules.
Also,
There is comfort in owning shares of a company.
There is great anxiety in working for a company.
So much for the idiots shorting Canadian Banks.
hohoho on 02.24.15 at 9:20 pm
> … No tax on Corporations. 0.
Tax dividends and capital gains as income …
doesn’t that favour foreign residents??
=============================================
i have a Corp and am no foreign resident
I like paying taxes and I’m in the highest tax bracket.
Why? Because it helps our society, it raises our standard of living, it’s for the greater good. It’s makes Canada a better place to live.
Sure, Gov’t spending is inefficient and by making it better it helps even more = less taxes needed.
Sure, everyone would love to pay little to no tax, but then you don’t want to live in South Sudan either with a $15k automatic rifle and a few thousand rounds as your friends.
A much more optimistic view of Cdn cities & housing from a respected UK publication.
Although I was suprised to see Cowtown on their list, it’s undeniable that Canadian cities are AMAZING to many overseas people.. expansive, clean, crime-free, affordable (yes, compared to London, NY etc)..
As our dollar falls, Cdn R/E becomes that much cheaper, relatively speaking.
http://www.theguardian.com/cities/datablog/2014/apr/11/most-resilient-cities-canada-toronto
RBC man. Wow. The Bank of Canada and the Royal Bank of Canada are clearly not on the same planet. One of them must be wrong, right?!?
@ Ralph Cramdown :
The price of oil is political. Take your eyes off the dancing puppets called supply and demand and look behind the curtain.
Undersupply did not warrant the astronomical prices of past years anymore than current oversupply warrants this SWIFT and brutal drop. Economic slowdown, sure, but did I miss an EMP attack or something that suddenly shut down all the car engines in the US and China? Don’t be silly. Oil is both a weapon and an instrument of enormous wealth for the elite.
Americans aren’t too happy with the damage to their shale oil industry either. Saudis are pissed at them too for not bombing Syria. Maybe they’re waiting until after the antiquities have been safely looted.
Western trained and funded ISIS is currently burning the ancient manuscripts in Iraq. Well, there’s a great show of the buildings burning anyway. The manuscripts and other treasures will no doubt show up on the auction block at Sotheby’s and Christie’s in a few years. As usual.
http://www.elginism.com/similar-cases/looted-treasure-from-beijings-summer-palace-up-for-auction-at-christies-in-hong-kong/20110114/3462/
It taxes higher levels of perceived risk aversion.
Which in theory should encourage less financial risk aversion, which it did but not in the way intended due to misrepresentation and misleading marketing on behalf of a certain sector.
What is worse is the defined contribution pension racket which encourages this behavior. When you work for a company that has one, you have to participate (usually) and are held hostage to the fees and their list of choices (which usually all stink). But it’s hard to justify refusing (or contributing the largest allowable amount) because of the matching contributions from your employer which boosts your return beyond what you can do on your own.. even with the outrageous fees.
Garth and Blog Dogs,
I’d like to know how the numbers in today’s blog are calculated (with a clear break-down). Does anyone have a URL to a calculator that covers this based on average annual rate of return, dividends, withholding tax, etc, etc?
Much appreciated!
Dan
One of the best posts in a while. I like it.
This sounds like an excellent idea. If only the present government had the good sense to pursue this alternative route. But ideology gets in the way of pragmatic compromise.
http://www.bloombergview.com/articles/2015-02-25/mike-bloomberg-keystone-xl-solution-runs-through-canada
186 Ralph Cramdown on 02.25.15 at 10:10 am
“Actually, it’s Canada not cutting production to try to force Norway out of the market that’s causing all the problems; Russia and Saudi Arabia are just collateral damage.
Does that make any sense? No less than your explanation.”
Thank you for that! Very well-put. It’s getting fatiguing reading all these theories about why oil prices are going down.
programs like OAS should not be giving money to those who don’t need it
Wow. I guess the Boomers won’t be satisfied until they’ve robbed their own children completely blind, huh? First they drove up housing prices for following generations, then they ran up the national debt while keeping their own taxes artificially low, then they decided we don’t deserve to retire at the same age they did, so they jacked up the retirement age from 65 to 67, now they’re sitting on millions of dollars in assets, splitting their pensions to keep qualifying for OAS, and you want to cut that little cherry for Gen-X and later, too? We can’t even have THAT to look forward to?
It’s a good thing most Canadians are too financially illiterate/disinterested to realize how badly their Boomer parents are screwing them over.
#193 Sky — “did I miss an EMP attack or something that suddenly shut down all the car engines in the US and China?”
https://research.stlouisfed.org/fred2/series/M12MTVUSM227NFWA
— and —
http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_04_23.html
…gets you:
http://www.indexmundi.com/energy.aspx?country=us&product=gasoline&graph=consumption
And then there’s this:
http://www.businessinsider.com/markets-chart-of-the-day-february-4-2015-2
Long article about Mexican and US oil production. $40 oil seems reasonable with so much about to be developed.
http://www.forbes.com/sites/thomaslandstreet/2015/02/25/why-oil-will-fall-to-40-as-obama-looks-the-other-way/?utm_campaign=yahootix&partner=yahootix
One option for the federal government to balance the budget is to dump the stock they hold in General Motors. Right now the 73.4 million shares have done very well and with the low dollar(coincidence!!)are worth about $3.4 billion. Everything is about timing when you are heading into an election!!
#193 Sky on 02.25.15 at 11:11 am
@ Ralph Cramdown :
The price of oil is political. Take your eyes off the dancing puppets called supply and demand and look behind the curtain.
Undersupply did not warrant the astronomical prices of past years anymore than current oversupply warrants this SWIFT and brutal drop. Economic slowdown, sure, but did I miss an EMP attack or something that suddenly shut down all the car engines in the US and China? Don’t be silly. Oil is both a weapon and an instrument of enormous wealth for the elite.
Americans aren’t too happy with the damage to their shale oil industry either. Saudis are pissed at them too for not bombing Syria. Maybe they’re waiting until after the antiquities have been safely looted.
Ralph has it right (which means you’re wrong).
Not sure where you’re getting your information but the meetings OPEC had (which included additional meetings with other major non-OPEC suppliers like Russia) prior to their “no cuts” decision are well documented and public domain.
Saudi Arabia was under pressure by other OPEC members to cut production to support prices. They told the other OPEC members (and Russia) that Saudi Arabia could not be the only country that cuts production. Russia balked. So did many other OPEC members. With the failure to reach an agreement for a unified production cut, Saudi Arabia declined to “take one for the team”.
Their actions are sensible given the long-term threat that shale oil poses to the market share of all OPEC (and major non-OPEC) members.
For those following such matters here is your bottoming and engulfing reversal candles on oil in the short term
http://finviz.com/futures_charts.ashx?t=CL&p=h1
But it’s still going to $20 right? Oh that was two week ago…
#WildRides&Luxury
TaxesWraps,Or… #IfYouHaveToAsk,Gweilo… #YouDefinitelyCan’tAffordOne…“It was a hobby to start with.” – Marcel Lech [Who has more Facebook followers than The Vancouver Canucks, the Vancouver Sun and CBC Vancouver combined]
[SCMP] – Chrome Ferraris and camo Lamborghinis: A wild ride through the streets of Vancouver
…”The number of supercars in Vancouver – a modestly-sized city with no particular industry to create grand wealth – can surprise outsiders. Median household incomes in the city are, in fact, among the lowest in Canada.”…
http://www.scmp.com/comment/blogs/article/1722896/chrome-ferraris-and-camo-lamborghinis-wild-ride-through-streets
uh oh alberta:
http://rt.com/news/209619-sunfire-water-synthetic-fuel/
interesting that the german nazis were making synthetic oil during wwii.
So the Alberta governments new forecast predicts only a slight reduction in housing starts this year, coupled with a 1 percent increase in employment rates.
Slightly delusional perhaps?
http://www.theglobeandmail.com/report-on-business/top-business-stories/canadas-depressing-day-alberta-warns-of-woe-poloz-of-setback/article23182014/
#35 LazyJason
When you pay withholding taxes on your RRSP withdrawals, the difference is balanced out in March/April when you do your taxes. The total tax you pay on your withdrawals are at your marginal tax rate, period. For example if you pay a 15% withholding tax and your marginal rate is 30%. You will have to pay an additional 15% only at tax time.
If you buy a condo and lease it out, the rent is fully taxed as income – on top of any other money earned, at your full marginal rate. Interest earned on a GIC, bond or savings account gets equal treatment. Investors in ETFs, stocks or preferred shares, on the other hand, pay half. And guess where most TFSA money sits? You bet – in interest-earning cash or investment certificates.
______________________
Garth, I agree with all you said but the above makes it sound as though interest from a GIC in a TFSA gets taxed which, of course, it does not. Not to say that it is a good investment strategy.
Correct. I said GIC interest is treated equally with condo rent – taxed at your marginal rate. That assumed neither lived in your TFSA. — Garth
To #7 Markymark: TFSA writing is on the wall, at some point it will be taxed or a “cap” on contributions is brewing.
_______________
What should be taxed? Contributions are made with after-tax money. The profits should be taxed? The withdrawals? Like a RESP?
I think it would be extremely difficult to change the rules after the fact. But I guess the government in place can do anything in times of desperation. However, I do not intend to live my life in fear.
TFSAs will never be taxed. The worst outcome is a permanent cap on contributions. — Garth
#199 Kevin on 02.25.15 at 11:55 am
My parents live well below their means, and contentedly so. Their OAS money (full OAS, because they’ve lived here that many years) is finding its way into my TFSA (deposit-only – it’s my self-imposed rule – and I grew it by 10% in 2014, so yay me). THAT is an intergenerational wealth transfer. Maybe they’re afraid I won’t get OAS when I’m old. Love you Mom & Dad.
Had some time to waste last night so took in the “Mr D” sitcom on CBC about the loser teacher in the private school. Lots of jokes about how only losers rent and don’t own (made me feel proud as a renter having investments and my landlord paying my rent)
Anyways it was a great reminder of the pop culture opinion of renters. It was also hilarious when the teacher tried to sell some investments short and screwed up the process. Great stuff.
Its started. Canadian residents who are ‘Americans for tax purposes’ not wanted at Alberta bank.
http://www.theglobeandmail.com/report-on-business/international-business/alberta-online-bank-first-in-canada-to-shun-us-clients-amid-tax-rules/article23186804/
Should you use a TFSA to hold your ETF?
Because of the tax treaty, dividends from U.S. stocks held in a *retirement* account are not subject to the withholding tax. In a TFSA, they are withheld, and you can’t get them back.
A tax on the stupid? No, it’s a tax on very intelligent people who have focused any of their time, education, or smarts on any other than making money. A system designed by money-grubbers to benefit the money-grubbers. What a surprise.
“Surge in Chinese housebuying spurs global backlash”
http://on.ft.com/1zIijcq
@195 Dan
dividend tax credit is a key
http://www.investopedia.com/terms/d/dividendtaxcredit.asp
#SpeakingOfTaxes… #Ooops,Or… #”HAM,WhatHAM?”
[FT] – Surge in Chinese housebuying spurs global backlash
…”Australia plans to impose a new tax on foreign property buyers after Chinese investment in Australian real estate soared 60 per cent last year, in the latest sign of a gathering international backlash against wealthy Chinese property investors.
The move, which came after locals complained about being priced out of the housing market, follows the introduction of similar, more punitive, taxes in Hong Kong and Singapore aimed primarily at discouraging the flood of mainland Chinese money into those markets…
…Jin Guo, head of Asia at Cordea Savills, a real estate investor, says: “It is actually very difficult to properly trace volumes of individual Chinese property purchases abroad since most people do not register with any government agency and they get their money out of China using informal channels.”…
http://www.ft.com/intl/cms/s/0/fcc2d346-bcd3-11e4-9902-00144feab7de.html?siteedition=intl
#184 TheEighthDigit
You make $10,000 per year on your rental you paid $600,000 for? Holy crap, do you own a calculator? Get yourself out of that “investment” now!
We are doing well today. Most comments are on topic (except this one), and there are no major personnal insults/attacks. It has been really pleasant to read all the comments today. Wish it was like that all the time.
It could end in a second if someone said they have a public work-related defined benefit pension, or they own an expensive house (or worse both), then all hell would break loose. Maybe it did not today because the post itself is not inflammatory.
‘TFSAs will never be taxed. The worst outcome is a permanent cap on contributions. — Garth’
TFSA’s can and have been taxed.
If you choose to day trade inside an TFSA and actually make a decent amount of money the CRA apparently considers that running a business, and wants it’s cut.
Pity they didn’t clarify that upfront. Does that mean I can claim losses inside a TFSA?
The media will help the conservatives get elected again.
They will give ample airtime to the Green Party and the NDP to split the other vote.
The sheep will buy it.
They are too dumb (didn’t want to use that word) to vote strategically.
Sad.
#215 Nemesis on 02.25.15 at 1:37 pm
#SpeakingOfTaxes… #Ooops,Or… #”HAM,WhatHAM?”
[FT] – Surge in Chinese housebuying spurs global backlash
…”Australia plans to impose a new tax on foreign property buyers after Chinese investment in Australian real estate soared 60 per cent last year, in the latest sign of a gathering international backlash against wealthy Chinese property investors.
——-
Someone contact “The Hague”. The boys down under are now racists for protecting their country and keeping RE affordable for their own people. And now their country will economically plummet because RE will not be invested in. The horror !! Meanwhile back in HAMcouver…
Sorry if this was already posted, but looks like Toronto unsold condos have spiked.
http://www.huffingtonpost.ca/2015/02/24/unsold-condos-toronto-21-year-high_n_6744344.html
How oil shock will affect B.C and others, housing etc.
http://www.landcor.com/sites/default/files/reports/upload/Q4%20Report_2014_Final.pdf
Landcor study.
Check out the cartoon in the New Yorker, Feb 16, pg. 26.
Right on topic.
This commentary seems to be everywhere today. Although elected as a republican when mayor of New York, Bloomberg has been a life long Democrat. I think Mr. Obama may be trying to tell Harper something.
http://news.nationalpost.com/2015/02/25/michael-bloomberg-keystone-veto-is-an-opportunity-for-canada-rather-than-a-loss/
“If you choose to day trade inside an TFSA and actually make a decent amount of money the CRA apparently considers that running a business, and wants it’s cut.”
——–
Is this a fact?
#222 Oil Is Sticky on 02.25.15 at 2:12 pm
#215 Nemesis on 02.25.15 at 1:37 pm
#SpeakingOfTaxes… #Ooops,Or… #”HAM,WhatHAM?”
[FT] – Surge in Chinese housebuying spurs global backlash
…”Australia plans to impose a new tax on foreign property buyers after Chinese investment in Australian real estate soared 60 per cent last year, in the latest sign of a gathering international backlash against wealthy Chinese property investors.
——-
Someone contact “The Hague”. The boys down under are now racists for protecting their country and keeping RE affordable for their own people. And now their country will economically plummet because RE will not be invested in. The horror !! Meanwhile back in HAMcouver..
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Yes it’s well known that my homeland of Australia has had similar problems to that of Canada .
The difference being that enough people cared there to protest ,where as here people just go about their daily business .
Nothing to see here ,move along type of mentality .
Maybe a change in government could do something .
The foreign investors are doing nothing wrong they are just playing by the rules as they currently stand.
Hi Garth,
Liked the post but what I am trying to wrap my head around is what is will take for any Government to end or phase out OAS? Like a tax or any other social security once it gets established, rightly or wrongly it’s hard to get rid of.
The reality of current political factors aside it would seem a good strategy to phase out OAS in conjunction with phasing in higher TFSA limits to place the risk and reward/benefit with the individual promoting individual responsibility. This would have other spin off effects of youth having access to more money earlier in life to do productive things, rather than just wait and get your money at 65/67 like everyone else regardless of if they did anything productive or not.
But, as much as I would like to see that happen, the current reality is that the older generation have far greater voter turnout than the youth, so I can’t really see a strategy of any significant impact within the near future to phase out OAS. In the meantime, the rest of us not yet collecting have to continue to pay the bill. Maybe they should just expand the program and have welfare for all age categories – not. If only money grew on trees.
174 Mark on 02.25.15 at 7:20 am
Wow, blowout earnings from RBC. And a 3% dividend increase tells me that they’re still finding lots of stuff to invest in.
—–
RBC fees the crap out of you for everything. This is why we left RBC and went to CIBC. Fees are where banks are stealing their money from you.
#191 Kris
Germany is much cleaner and cheaper. So is Austria.
When you see somebody actually moving from London or New York to any place in Canada as of our AMAZING cities, give me a shout.
Are loans by banks to condo developers insured by CMHC or any other insurer?
http://business.financialpost.com/2015/02/25/big-banks-boost-condo-financing-even-as-unsold-units-in-toronto-hit-21-year-high/
199 @Kevin
I agree. Why move the age up two years? What difference will this inevitably make? This is such a control freak issue the Conservatives have with changing everything to their liking. These guys didn’t even have a rainy day fund for the oil sands. Prentice is looking more and more deflated everyday as they spin the magnitude of the oil revenues in the media.
http://www.huffingtonpost.ca/nick-bergamini/employment-insurance-reform-canada_b_4326387.html
I think a lot of people get favouritism and racism mixed up .
The government should favour it’s own citizens ,but also needs to encourage foreign investment .
I just don’t think real estate is the best vehicle for this to benefit this country .
Also the rest of the country should stop being dummies and over bidding for fear of missing out .
The houses aren’t going anywhere after all!
Garth;
That’s a different take on the matter, calling it taxing stupid, something you would never hear of in mainstream media. Recently some analysts have criticized the idea of increasing TFSA contributions, calling it a big tax break for the rich at the expense of everyone else. The rationale is, the reduction of tax revenues will cost the rest of us in decrease in services or increases in other taxes or user fees, and they are quite right. It’s quite obviously a vote buying strategy for the Conservatives.
That said, you are quite right about the idea of taxing stupid. Everyone has the opportunity to take advantage of tax breaks like the TFSA, the dividend tax credit, or capital gains taxed at 50%. Add to that the mistakes a lot of investors make, like bailing out of stock markets when they are on sale and they should be buying. It’s buyer beware out there, if you play your cards right (as in not being stupid) you can accumulate wealth and the benevolent government will even help you along the way if you choose the right investments.
#204 TurnerNation — “But it’s still going to $20 right? Oh that was two week ago…”
Could be. The more I look at oil market behaviour, the more it seems everyone’s fooling themselves.
The EIA just announced that US crude inventories are up another 8 million barrels in a week. Contango in the futures market has spiked the charter rates on VLCCs and ULCCs as traders can profit by buying a tanker full in the cash market and selling it a year forward, but that’s just soaking up supply today and adding it a year from now. Encana is “slashing” 2015 capital spending by… wait for it… 25%, and is predicting its liquids production to grow 30% from today’s rate. More projects are coming online in the oil sands, and basically everybody is acting like low prices won’t last long, or go lower. Gasoline inventories are high.
Aside from producers who’ve sold their production forward, it appears the whole world is long oil. Good luck with that trade.
#227 TFSA….’is this a fact?’
http://business.financialpost.com/2014/12/02/canadians-with-too-many-wins-in-their-tfsa-being-targetted-by-cra/?__lsa=0e5d-a9ac
Hereditary non-doms?
HSBC files reveal how UK’s non-dom tax concession is being exploited
Leaked files show how controversial tax status, aimed at encouraging foreign investors to spend time in UK, is used to legally hide fortunes in HSBC’s Swiss private bank
http://www.theguardian.com/business/2015/feb/11/hsbc-files-reveal-how-uks-non-dom-tax-concession-is-being-exploited
========
The day I tried to become a non-dom – a scheme worthy of an Ealing comedy
Ian Jack
http://www.theguardian.com/commentisfree/2015/feb/13/the-day-i-tried-to-become-a-non-dom
#139 Snowboid on 02.25.15 at 12:17 am
#122 Smoking Man on 02.24.15 at 11:23 pm…
“…Massing fortunes incognito…”
Did you forget you told all the regular readers of this blog who you were – multiple times?
Methinks it’s not a good idea to post when you are ‘looped’
_____________________________________________
Do inquiring minds really want to know who Smoking Man really is…………………………nope………………
As you were!
Slumping sales in Alberta…. http://calgaryherald.com/business/real-estate/slumping-mls-sales-in-january-hit-most-alberta-real-estate-boards
Simon #231;
You disbelief is not well-founded.
I personally know of three just in our circle in Calgary alone. All moved from London proper to Calgary, and couldn’t be happier. One worked for me and one is spouse’s golfing buddy — other is our former next door neighbor.
Just because Austria and Germany are closer and ‘cleaner’ doesn’t mean they are attractive.
RBC fees the crap out of you for everything. This is why we left RBC and went to CIBC. Fees are where banks are stealing their money from you.
High fees are just a way that RBC (and other banks) tell customers they really don’t want your business. And really, do you think RBC or any bank for that matter makes money on low-value stuff like tellers, handling $20 deposits from kids, etc.? Of course not. Its mortgages, investment banking, and mutual funds where the real money is. Not collecting nickels and dimes on service fees.
Here’s another ‘aberation” for mr mark’s spread sheets
46 eagle in 416
12 offers
list 828
Sold 980,500
Lot value.
#243 just the facts Mam on 02.25.15 at 6:08 pm
Here’s another ‘aberation” for mr mark’s spread sheets
46 eagle in 416
12 offers
list 828
Sold 980,500
Lot value.
———————–
the sales mix , Dammit! the sales mix!
oh, and risk premia. yeah, that too.
—————
otherwisw new/forigerner taxes in Au/UK/HK/Singapore will only drive up the 416/604 even more.
#239 Holy Crap wheres The Tylenol on 02.25.15 at 5:24 pm…
“As you were!”
Are you my former NCO?
#63 Carly in Cabbagetown on 02.24.15 at 9:01 pm
“So sad to hear you support this, along with the blaming of the losers you point to, as if their ‘errors’ in dealing with a rigged system makes it just.
Ask yourself when you review this, one of your dumbest blogs ever, how it is that you sounded like you were making such a reasonable case, then simply veered hard right….for what?”
“Nice cherry-picking, The comment was that programs like OAS should not be giving money to those who don’t need it, so those who do, get it. — Garth”
What tripe.
Essential programs such as OAS need to stay exactly as they are. They get clawed back above a certain income anyway.
If the public purse has been compromised, it is due to irresponsible and disastrous monetary policy which favors market-manic thinking and destabilizes the real economy.