Andy McKay

May 03, 2015

TFSA


In the budget the Conservatives increased the TFSA in allowance from $5,500 to $10,000. This was claimed to be:

11 million Cdns use Tax-Free Savings Accounts. #Budget2015 will increase limit from $5500 to $10000. Help for low and middle income Cdns.

Wai Young MP

"Low income" really? According to Revenue Canada we can see that most people are not to maxing out their TFSA room. In fact since 2009, the amount of unused contribution has been growing each year.

Year Aveage unused contribution Change
2009 $1,156.29
2010 $3,817.25 $2,660.96
2011 $6,692.37 $2,875.12
2012 $9,969.19 $3,276.83

People are having trouble keeping up with TFSA contributions as it is. But what's low income? Depends how you define it, there's a few ways.

LICO is an income threshold below which a family will likely devote a larger share of its income to the necessities of food, shelter and clothing than an average family would

Statscan

And "Thus for 2011, the 1992 based after-tax LICO for a family of four living in an community with a population between 30,000 and 99,999 is $30,487, expressed in current dollars.". That is after tax.

Of that income by definition, over 50% of the families incomes is on food, shelter and clothing. Meaning that there's $15,243 left. Maybe, these are all averages and many people will be way, way worse off.

Is $10,000 in TFSA reasonable for families who have less than $15,243 a year? No. It benefits people with more money and the ability to save. Further we can see that the actual amount of money going into TFSA has been dropping every year since its creation and the unused contribution has been growing.

There isn't really a good justification for increasing the TFSA except as a way of helping the rich just before the election.