The Newest Con

The Conservatives, true to their tax-cutting ideology, have presented Canadians the Tax-Free Savings Account. This is supposed to make the "hard-working Canadians" who deserve a real tax break, feel all warm and grateful towards the Conservatives. It's a gimmicky way to buy votes for real cheap, because virtually no one, apart from the Banks, will actually gain any significant benefits.

The hook is the Conservatives bombard us with their ads touting how wonderful it is that you can now save money and pay no tax (because paying tax is so very, very bad, right?) on the Tax-Free Savings Account that every major bank is enthusastically promoting.

The bait is that most people are left to infer that the return on the investment is the amount of tax saved. So, the major banks, looking to benefit hugely from having all the extra deposits on their books, advertise with examples showing projected rates of between 4 and 6 percent per annum that demonstrate how the untaxed savings would, eventually, far outstrip taxed investments.

The catch is that in reality, the rates offered are just 2.5% and the taxed "savings vehicles" - used for comparison - haven't, in fact, grown at 6 or 7%: they just finished tanking into seriously negative territory.
All this is assuming, of course, that the taxpayer in question happens to have an extra $5000 to spare each and every year for the next 20 years. I know I don't and I'm pretty well off.
Finally, at 2.5%, an account earns $125 and people are encouraged to calculate this as the amount they are saving on their taxes. And they are wrong: this is just the profit that would otherwise be taxed. Remember, the $5000 put into the account has already been taxed. It's left over.
So, the actual amount of money that should be taxed is $125 which, at 27 percent tax rate (which is what I payed last year), amounts to $33.75 in taxes. CIBC somehow calculates $40 in savings.

By comparison, a night at the movies for two, with popcorn and a couple of sodas runs about that much these days. The Conservatives have saved me enough money to take a date to the movies.

My thimble runneth over...