The latest CBC poll tracker shows the Libs with a 64% chance of forming government – either a majority (36%) or a minority (28%), propped by the Dippers. So, if this is the outcome in three weeks, we should be ready. And Mr. Scheer should be ashamed.
This election has been all about spending. Giving. Largesse. Big Government’s back – a mothering omnipresent, omnipotent and omniscient mass papering over the individual financial failures of its citizenry. Can a guaranteed annual income be far off? Seems this is where Millennial voters want to land.
But the past 24 hours have unrobed the other side – taxes and debts. Let’s review, then set out an action plan for surviving T2 v2.
The spending promises are historic. More OAS for the wrinklies. More CPP for survivors. More grants for students, Less interest for them to pay. Billions to subsidize first-time house buyers. More billions for enhanced child pogey. More paid parental leave. Pharmacare coming. And $3 billion less in revenues because of a tax cut for the vaunted ‘middle class.’
This atop an existing federal budget already in the red. Actually the Trudeau Liberals have spent more than they’ve taken in from the moment of election in 2015. And now we have a tsunami of additional spending. T2’s oath in the last campaign of a ‘temporary’ deficit of $10 billion for two years was shattered. This time dear leader isn’t even promising to balance the books. Ever.
So a day ago we got data: a deficit over $27 billion next year, then $23 billion, $22 billion and $21 billion. Yes, the better part of $100 billion over the 48 months – and that’s assuming the economy hums. If a recession happens, with falling revenues and increased social spending, we‘re pooooooched. At least your kids are. Today’s debts = tomorrow’s taxes, after all. (The interest on the debt is $35 billion a year. Even at low rates. Ouch.) Deficits simply mean governments are spending money not yet received. Kinda like when you buy a boat with money you don’t have.
Speaking of which, you’d best get it now.
As profound as the new Lib deficits are forecast to be, they’re costed on a wave of new taxes Canadians can expect after October 21st. For example a ‘luxury tax’ will click in on the purchase of a boat, car, RV, airplane or other personal-use items selling for $100,000 or more. So, imagine you’re a ‘rich’ dude making $230,000 a year, in the 54% tax bracket. If you want that 40-foot $120,000 motorhome for retirement cruising it’ll now cost you 13% HST (in Ontario) plus a 10% luxury tax, for a total of $149,000 – all paid in after-tax dollars. Thus you’d have to earn $209,000 to buy something priced at $120,000.
This is but the beginning. Overspending will not just end. The floor on a luxury tax can be dropped easily once in place. A hundred grand could morph into eighty or sixty in a few budgets. And since taxes modify behaviour (more on that in a moment) there’s no guarantee the projected revenue from this kind of tax ($585 million a year) will materialize. Recall the new uber bracket imposed on people earning over $220,000 in the last campaign? It has raised about half the amount expected because – surprise, surprise – people just started taking income in other forms.
That’s the funny thing about tax. Get it right, make it fair, people pay. Go heavy, target a few, they bolt.
In addition to the luxury tax on spending – which may be avoided by leasing – the Trudeauites will also tax non-resident owners of real estate and start whacking Amazon and Google for $540 million a year. Great. Give people and companies reasons not to spend money here. That should work out well. Then there’s the almost $2 billion anticipated from squeezing corporations, making it harder for them to expense debt payments. Less money for expansion and employment, possibly. This also means the war against small business will be back on.
Anyway, see the drift here? All of the parties have engaged in vote-buying, but none so all-encompassing as the guys who’ll likely win. Spending means taxation. So – as stated – get ready.
This brings us to tax avoidance.
First, of course, buy the motorhome now. And that 911 Carrera 4 GTS. That Cessna or sport yacht. Tell your spouse you’re actually saving ten or twenty grand by not waiting. This is an example of fiscal prudence you learned from the prime minister. It’s all good, honey. Seriously.
Next, do not let a single tax shelter slide by you unutilized. The TFSA. Your kid’s RESP or RDSP. Your matched corporate DC plan. Your RRSP. Remember that the more you earn the bigger the tax break when it comes to retirement savings.
Then, income-split. If your partner and you have disparate income levels you can utilize a spousal RRSP. You can loan him/her a boodle of cash to invest and nothing will be attributed back. Split pension income. Split the CPP. Have a joint non-registered investment account. Gift your squeeze or your adult kids money to stuff into their TFSAs.
Invest in stuff that provides a tax break. Shares or funds kicking out dividends come with a dividend tax credit, for example . Be aware that 50% of all capital gains are untaxed, a huge reduction on the hit you suffer with earned income.
Be tax-smart in your family. The person with the lowest income should be the investor while the one making more buys the groceries, gas and kibble. Create a tax-deductible mortgage by borrowing against home equity to invest (prudently). Retain cash in your small business to invest at a lower tax rate – up to the Bill Morneau limit.
If any of this makes you feel like a soiled little fiscal cheat, just remember four in ten families pay no net tax. The top 1% foots about a fifth of the entire national tax bill. And the wealth gap ain’t your fault.
Now, I’m going shopping.