Cyberwanderer’s Blog

March 11, 2008


  1. You should read the budget.

    The proposed $5000 savings plan is actually quite different than the RSP and RESP plans we currently have.
    As I understand it (and I’m not a personal accountant) RSP and RESPs are tax free accounts but they have many restrictions on them. They have to sit, untouched, until a child begins to use them for post-secondary education or you begin retirement. If you take them out before this time you get taxed on every year since you began investing in them.

    The new $5000.00 maximum effectively creates a new account in your name (the same as the savings or chequeing that you currently have) that has a maximum amount in it of $5000. You are not taxed on whatever is in this account. The big difference here is that there is no minimum amount to put in each year and you can withdraw money from it every time. Because of this, it actually does help Canadians of all income because every person will just put the first $5000.00 that you make in the account. You can withdraw and deposit money in it throughout the year but come tax time, make sure that $5000 is in it and it will be tax free. This is very different from the RSP or RESP concept which is effectively forcing people to save for the respective account.

    I’m not 100% sure this is how it works but it is much closer to actuality than what you have described.

    Comment by Geoff — March 11, 2008 @ 6:53 pm | Reply

  2. I understand RESP and RRSP is more restrictive. But say in my situation, I don’t have lots of cash left at the end of the year and I have to pay tax. So I prefer to contribute to my RRSP and in turn get a bit of a refund. If I have contributed instead to Flaherty’s tax plan, I would not get any refund. I guess the good part from what you mentioned is you could withdraw it anytime and it does give you another option for saving your money. I am not an accountant also so I won’t be surprised if an accountant would try to correct my investment decision. :)

    What I find problematic is Flaherty’s argument that RESP would only benefit the rich? I guess that would be true if you consider RRSP as benefiting the rich only. It is simply another option for parents to save their money. Rich people could take advantage of it more, just as they would be able to take more advantage of Flaherty’s tax savings account. So naturally, they benefit more than lower income.

    At a time when middle income families are struggling to pay for the high tuition fees in university, I personally think this is a good plan. Flaherty’s assertion that there’s no fund left only highlight how he managed to deplete our $10 billion surplus to just barely a billion or two. Even though they are aware of our slowing economy, they still went ahead and cleared the treasury and not left any cash for rainy days. Toronto Star referred to it as “a move designed to deny opposition parties fiscal room with which to plan campaign promises for a possible 2008 election.” So now if opposition introduce any plan, he wold just scream deficit.

    Comment by cyberwanderer — March 11, 2008 @ 11:12 pm | Reply

  3. […] – Liberal threaten election over budget (March 11, 2008) Flaherty criticize his own tax savings account (March 11, 2008) Is Flaherty hiding a deficit already? (Feb. 26, 2008) Conservative fear mongering on budget (Feb. […]

    Pingback by Election likely in spring « Cyberwanderer’s Blog — March 12, 2008 @ 12:25 am | Reply

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