Tag Archives: rants

Deliberately Misleading Government Ads About Tax Breaks Anger No-Young-Children Canadians Needlessly

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Here we go again. The Federal Government has announced some new income tax changes in a way that grossly over-states what is really on offer. The ads and discussion will focus on some totally misleading numbers and will anger people who no longer have (or never had) children under 18: I get so tired of this.

Why Announce a $50 000 Tax Split If It Has No Meaning Whatsoever?

In this current round of misleading announcements, the Federal Government has said it is proposing a bill which will allow 2-parent families to move $50 000 of income from one spouse’s tax return to the other.

You can practically see the steam rising from the ears of the millions of Canadians who won’t be able to take advantage of this change.

But is the number $50 000 worthy of being announced?

NO. Because the impact of that shift is limited to a maximum benefit of $2 000!

The announcement should have been: Tax change allows families with children under 18 to save up to $2 000.

That’s it. It should not have ever quoted a misleading number like $50 000.

Here’s why.

Why the $50 000 Income Sharing Option is Totally Bogus

I only have access to 2013 tax software to run some tests with but here’s the case I reviewed:

  • One parent is earning $125 000 a year.
  • One parent is earning $25 000 a year.
  • Two children under 18.
  • Various normal types of deductions and small additional income amounts from Canada Savings Bonds etc.

How much should the higher-earning parent shift to the lower earning parent to save $2 000 in FEDERAL income tax?

(Note the proposed tax changes do not reduce provincial taxes at all.)

If they shift $18 000 in earnings from the higher earning spouse’s tax return to the lower, they save $1 667 in federal tax. (NOTE: The actual 2014 savings will vary depending on the 2014 tax return and some other factors.)

So they should keep going, right?

If they shift $30 000, they save $1 667.

What?!

If they shift $50 000 they still save $1 667.

Why??

Because after they shift $18 000 both of the family member’s are in the same tax bracket. Shifting who pays tax on it does nothing. (Many pensioners with near equal incomes are familiar with this.)

Here’s another case:

  • One parent is earning $125 000 a year.
  • The other parent is earning $0.

If they shift $50 000 to the lower earning spouse, they should get more than $2 000 back but they can’t.

So what do they have to shift to get $2 000 back?

For the example test case for 2013 taxes that I’m using, they only have to shift $18 500 to get the $2000 in federal tax savings.

So why announce you can shift $50 000 in income if it makes no difference!?

Because it sounds better! Because it might win votes! Because it’s a nice big sounding round number!

(And I suppose if I ran a few dozen cases, I’d probably find because it is the amount you need to shift between spouses under one or two circumstances to get the maximum $2 000 savings.)

I hate this kind of electioneering!

Why don’t they just announce, a new tax savings of up to $2 000 for parents of children under 18 who have very disparate incomes?

They don’t because $2 000 doesn’t sound that amazing, does it? It’s not even enough to top out one RESP contribution for a year.

Other Examples of an Inflated Unrealistic Tax Announcements

This is not the first outrageous announcement the government has made. How many people have seen ads telling them that families can use a $500 Children’s Fitness Tax Credit per child on their federal income tax return?

But what is the actual amount the parent saves? It sounds like $500. But the real savings is $75.

That is a $425 difference between what people THINK parents are getting and what they may be receiving.

It sounds like a family with three children could get $1500 back. In reality they get back at most $225 on their federal taxes.

Another example is the Adoption Tax Credit. It sounds amazing: $11 669! But that’s not what the parents get back. If they have $11 669 in applicable adoption expenses they can get back up to $1 750 on their federal income taxes. But again, announcing a savings of less than $2 000 isn’t the kind of big splashy number the political parties want to trumpet to the media.

What Is the Serious Negative Effect of these Intentionally Misleading Tax Announcements?

The real problem with this steady stream of misleading tax announcements is that it

  • doesn’t help parents that much
  • makes everyone who isn’t a parent at this time to children in that age group seethingly angry

The people who do not get any tax break see the big numbers:

  • $50 000 tax splitting!
  • $1000 per child sports tax savings!
  • $500 per child arts tax savings!
  • $10 000 (and more with inflation adjustments) per child for eligible adoption expenses!

And they think they are getting royally ripped off.

They don’t see

  • MAXIMUM $2 000 but most of you won’t get that much income splitting credit
  • $150 per child sports tax rebate
  • $75 per child arts tax rebate
  • $1 750 adoption expense tax rebate

Which would let them think, gee, is $150 back really going to pay for a kid’s skating, swimming, hockey and soccer fees for year?

Does $75 buy a lot of music lessons?

Does a child eat and require fewer clothes than $2000 a year provides?

If it costs over $11 000 to adopt a child is saving $1 750 really going to open more homes to children?

It just builds resentment against young Canadian families without really giving them much.

I wish there was a law against it! Some kind of “truth in advertising” law that would stop the government from playing this head-game with Canadians and setting us against each other.

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It’s Easy to Save If You’re Rich

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Like most Canadians, I try to keep our costs under control when we’re on vacation. On the other hand, I’ve made a point of saving on boring necessities all year so that I can enjoy things that matter more to me when I’m taking a break. So I didn’t flinch to pay $56 to gain admission to an amazing museum crammed full of dinosaurs, luminous scorpions, Flashlight fish, Dall’s rams, Ruddy ducks, and where I could weigh myself in hummingbirds or checkout the groceries needed to fatten up a Grizzly for the winter. (Ok, I did use my CAA membership bought with Petro-Points to save a bit at the museum: I’m still cheap frugal.) Still, as we’ve wandered around exploring new worlds and new civilizations and boldly going where too many have gone before, I’ve noticed something: It’s much easier to save time, money and exasperation-causing stress if you’re rich.

How Being Rich Can Help You Save

You can stay at a hotel right downtown and walk to the attractions. This saves time, parking or transit costs, and exasperation when you realize you’ve forgotten your camera and it’s 2 buses, a streetcar and a 10-block walk away.

You can afford to pay for a car and parking so you can get to the far-flung museums easily enough to make it worth going on Thursday nights when they have free admission after 5 p.m.

You can own a cell phone so after you line up for 3/4 of an hour for free admission to the Peace Tower you can call your partner and tell him you’re down and arrange where to meet. (There is no pay phone in the Parliament Buildings! As someone who could afford a cell phone but doesn’t bother with one that was a shock.) That saves money on the replacement of shoes worn out by walking back to the hotel each time you need to meet or walking trying to find a pay phone in this cyber age.

You can drive and don’t have to pay Via Rail an extortionate amount for a family to travel from near Toronto to Ottawa or beyond. (One tank of gas = $60 or less for a vehicle carrying 5; train tickets even at Economy Fare $343.52.)

You can afford to buy a canoe and a tent and a vehicle to get you to the launching spot so that you can stay at ultra-low cost accommodation.

You can drive

  • to the dollar store to buy small items (A stool to reach the bathroom sink anyone? New flip flops after the south-shore-PEI mud pulls your first pair apart?)
  • or to a major grocery store or market to buy good food and low-priced drinks to take with on your outings rather than having to buy water at desperation-cart prices and buy snacks that maximize your daily cholesterol-inducing-fat intake while minimizing the flavour.

Why Having a Staycation Only Works If You Live in Vancouver

Another topic absorbed my mind as we idled along river and canal banks watching happy cyclists zooming along groomed paths past large flower beds and decorative ‘wilderness’ stretches. I found myself considering the over-used term Staycation.

Pundits extol the virtues of the “Staycation.” They act as if it’s an unusual and novel idea to stay at home when not at work. I thought of my relatives-in-law who, aside from one momentous year when they drove and camped across Canada, stayed at home for EVERY vacation. They didn’t have any choice: they had no money. In fact, more of my relatives have stayed at home for every vacation than have travelled for even half of them. Where did this new idea come from that people can afford to travel every time they are away from work?

Anyway, I was mostly thinking about Staycations. And I thought during an interval in Ottawa of how easy it would be to entertain yourself inexpensively in such an amazing city in the summer.

Then I thought of another town we’d been in: Tichborne. The name isn’t familiar to you? Not surprising. Both gas stations are gone, although I’m uneasy about whether any gasoline and diesel that likely leaked from their underground storage tanks lingers on.

Tichborne’s only claim to fame now is a level crossing that subsides badly enough each spring to launch unsuspecting cars into flight if they dare to drive at the posted 50 km/h over them. Oh, and maybe the sign stating “Deaf Child at Play” that’s been there for 22 years suggesting either a large brood of hearing-impaired youngsters or that maybe the sign has been kept more for traffic-calming reasons than for truthful ones.

What would one do on a Staycation in Tichborne that they didn’t already do all year?

  • Walk to the store? What store? There no longer is one.
  • No museum.
  • No pool.
  • No sports complex or playing fields.
  • No public transit of any kind to even a small town much less the city.

Not really very much that wouldn’t be used on a daily or weekendly basis while working. It’s close enough to undeveloped Crown land that it offers some recreation possibilities, but it’s hardly like staying at home in Vancouver and walking the sea wall or visiting one of the museums and galleries.

Staycations sound much better in theory than in practice to many Canadians, I’m afraid.

Wherever Your Summer Takes You, I Hope You Can Find Things to Enjoy!

I hope this summer brings you a few unexpected pleasures wherever you are. A Chestnut-Sided Warbler singing from a Dogwood bush can be just as amazing a sight in Tichborne as it is in Ottawa. And seeing a Monarch soaring and dodging in its erratic journey south to a country it’s never seen can lighten your heart even if you can’t afford to drop everything and follow it. Life is everywhere and it can be very, very good.

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Do you have any tips for saving money on vacation? Or does your vacation consist of sleeping in and then working on repairing the roof and front porch? Please share your views with comment.