So what do you think of the budget?

January 28 2009 by Ellen Roseman

The home renovation credit was one of the incentives handed to taxpayers yesterday. Ottawa hopes to stimulate local business and also lift home renovators out of the underground ecoomy.

You can get a 15 per cent tax saving on fix-up projects from $1.000 to $10,000 you do before next February, as long as you have receipts. You can also “double dip” by getting an ecoEnergy retrofit grant of up to $5,000 on the same project if it qualifies.

I commented on the budget in print and on video here. I also did a CBC radio commentary on three smaller announcements that didn’t make the papers. Now I’d like to hear what you think.

* The government thinks Canadians are not getting a fair deal on credit cards. It has a long list of what it wants credit card issuers to do, based on complaints received by the Financial Consumer Agency of Canada.

Federally regulated institutions that issue credit cards need to beef up their disclosure of terms and conditions, the budget says. They should set a minimum grace period on new purchases made with a credit card, provide clear and timely advance notice of changes in rates and fees and improve their debt collection practices.

* The government thinks Canadians aren’t getting a fair deal on mortgage insurance. You’re required to take out insurance, which protects the lender from default, if your mortgage is less than 20 per cent of the value of your house. It’s underwritten by Canada Mortgage and Housing Corp., as well as private sector insurers Genworth and AIG.

Mortgage insurance needs to be more transparent, understandable and affordable, the budget says. Also, consumers should not be charged more for mortgage insurance than the true cost of obtaining that insurance. This refers to commissions and referral fees paid by mortgage insurers to financial institutions.

* The government wants to raise the level of financial literacy among consumers. This means improving the ability to understand financial issues, applying that knowledge and assuming responsibility for one’s own financial decisions. Financial literacy is an important life skill. It’s not taught in schools and it’s often provided by the companies that get people into trouble with credit cards and mortgage insurance.

This spring, an independent task force will be established to make recommendations to the Finance Minister on a cohesive national strategy on financial literacy. The task force will include representatives of business, education, volunteer grous and academics and will be supported by a federal secretariat.

Hear, hear. I really like this idea of strengthening Canadians’ financial literacy. It’s hard to tell people to look after their best interests when they’re confronted constantly with advertising messages that send them in the other direction.

9 comments

  1. WG

    Jan 28 2009

    You forget to mention a group completely ignored in the Budget — seniors living only on CPP/OAS/GIS.

    In my case, the inflation level between Jan 08 and Jan 09 increased my CPP by about $10 a month. But the OAS/GIS, because of the decline in inflation in the last quarter of 2008, remained the same.

    And, since all projections indicate lower inflation through 2009, that’s it for the year.

    My income was below the tax threshold anyway, so increasing the age exemption is of no value.

    Since I have no tax liability, the credits for a monthly transit pass, any political contributions or medical expenses in excess of the 3% are “a waste”. I can claim them but they do nothing to “reduce taxes” since I owe no taxes.

    I live in a Toronto Housing unit so my rent is set, and at the next lease anniversary, that should increase by about $15 a month. So at that point I “lose $5”.

    Further, increased food costs and other items make it difficult. It would have been a positive step to increase the GIS by a modest amount.

    We’re not all elderly types sitting in a chair with a cup of tea and a bikkie. Nor are we all with $60K/year retirement pensions.

    I do all my own grocery shopping and cooking. I tracked my grocery spending, no change in basic menu, and discovered that the same items cost about $5 a week more than a year ago.

  2. FF

    Jan 28 2009

    Can you write a column that is an Open Letter to the over-educated flunkies at the Department of Finance? Points:

    1. Them as can, do!

    2. Many if not most skilled capable people have jobs that put them in or at the break point between 15% and 22% federal tax rate. When the Ontario provincial tax rate is added, this is really is an effective tax rate slightly over 31%.

    3. When anything is done in the official/above ground economy, GST and PST is often applicable for the work.

    4. Thus, if someone with ability & capability wants $20/hour for his moonlight work in a neighbour’s, friend’s or relative’s home, he or she can ask for the $20 in cash (no receipts & no records). Otherwise, the charge in the aboveground economy must be, at minimumn, ((20*1.315*1.13) = $29.72) plus cost & nuisance of recordkeeping or a minimum tradesman invoice of $33 per hour.

    Ellen, I am an old retired fellow in his seventies. Once upon a time, I used to do a bit of moonlight work. You can see how things go.

    Currently, my old house requires upgrading but under no existing circumstance can I consider using the official contractors.

    I will purchase necessary items and “do the work myself” with friendly assistance from ablebodied skilled acquaintainces, a 2-4 of beer and a barbeque. Ya get the idea.

    Flaherty’s budget totally ignores this reality. Since most of the preparation of the budget is by Finance-Flunkies, these type of flaws are more attributable to the Flunkies than Flaherty.

    Ought to be a funny satirical column here.

  3. RR

    Jan 28 2009

    Montreal is sorely in need of repairing potholed roads and sidewalks that are broken and uneven.

    But by the time the federal government gets the money to the City of Montreal, it will be diminished by at least 50%….hey, all the players have to receive a bit of cash for being in the game.

    The program will be so filled with graft and corruption, it will have no merit.

  4. ME

    Jan 28 2009

    If you look at the income tax form, you will see that there is no space, after your income addition, to subtract the whole basic personal exemption as there used to be.

    Follow the form until near the end and you will find that only 15.5% of the personal tax exemption is allowed. Over 80% IS TAXABLE.

    I have been writing to politicians, both federal and provincial, about this for some time. Neither the P.M., Minister of Finance nor Party leaders have anything positive to say on this topic. See below.

    ————————————————————————————————-

    Mr.Gordon O’Connor, Minister
    Parliament Hill
    Wellington Street
    Ottawa, Ontario
    OConnor.G@parl.gc.ca

    Dear Mr. O’Connor:

    When is $9,600 not $9,600?

    I am unhappy that $9,600 in personal exemptions is, in reality, only 15.5% of that figure.

    Many times I have heard from the stumps during election campaigns the supreme tax cutting and generosity by the government. But only $1,488 is allowed, according to National Revenue.

    My dictionary defines exemption as “free from an obligation or liability; a person who is exempt esp. from payment of tax.”

    That means the common understanding of the term ‘personal tax exemption’ means NO TAX ON THIS AMOUNT.

    English law is made step by step, practise by practise, and precedent by precedent. Real personal tax exemption is a deeply established part of our common law.

    You say non-refundable tax credits and personal exemptions were introduced in 1988 “with the objective of making a fairer tax system.”

    Any person I know would challenge the act of removing $8,112 in deductions from the income tax of the poor to be fair. Any such law would be ultra vires to the common law.

    Reducing the personal exemption from the poorest is the farthest thing from both common law and basic common sense.

    Let me illustrate. A person making only $9,600 before paid NO TAX. Now almost all of it is taxable ($8,112).

    There should be no taxation of income under the poverty level. Pretending that the exemption is almost a $10,000 deduction is fraudulent.

    If there are to be non-refundable tax credits, make sure the law is followed and make them effective over the poverty level. Why not make the Revenue Act honest?

    ————————————————————————————————-

    Dear Ms. E:

    Thank you for your email regarding the basic personal amount. I also received a copy of your email from the office of the Right Honourable Stephen Harper, Prime Minister of Canada.

    You are correct in your understanding that for many years taxpayers received personal exemptions against their income, before calculating their tax payable.

    Nonrefundable tax credits were introduced in 1988 with the objective of making a fairer tax system. Certain deductions and personal exemptions, such as the Basic personal amount and the Age amount, were replaced by non-refundable tax credits, which are applied against tax payable to reduce federal and provincial tax payable.

    In the past, exemptions and deductions provided greater tax savings to higher income earners. However, non­refundable tax credits are worth the same amount to all taxpayers, regardless of their income level.

    I trust that the information provided is helpful.

    Sincerely,

    The Honourable Gordon O’Connor, P.C., M.P.

  5. DJ

    Jan 28 2009

    In your video clip, you mention the home reno credit. In my view, 15% on $1,000-$10,000 just barely returns the sales taxes you’d pay on the material, so I don’t see it as particularly great.

    They give with one hand and take away with the other. 🙂

  6. Charles in Vancouver

    Jan 29 2009

    Ellen, do you have any comment on the pay equity changes? Or on the potential of this budget to break wage increases that were signed in collective agreements?

  7. REDDY

    Feb 2 2009

    Surfing the net, found this page. In the US, mortgage interest paid in a year is tax-free. Is this the same way in Canada?

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