Other commentators have already painstakingly sifted through the details of last week’s federal budget, but there is one element in particular that I’d like to talk to you about.
In my view, it doesn’t get enough attention or praise.
In a nutshell: The Conservatives have essentially eliminated the tax on capital gains for a majority of Canadians.
Mind you, that sentence can’t be found in any of the budget documents.
But, since 2009, the Conservatives have allowed a growing number of Canadians to put their investment money outside their RRSPs out of the reach of the ever-hungry state. The Tax-Free Savings Account (TFSA) was first announced in the 2008 budget.
It allows every Canadian (18 and older) to let their savings grow without ever being taxed.
This year, you can put a maximum of $5,500 in your account, but since an individual’s unused TFSA contribution room is carried forward and accumulates in future years, the cumulative effect is up to a total of $31,000.
According to the Department of Finance, between 2009 and 2012, TFSAs saved Canadians $690 million in taxes.
These are taxes that would have been otherwise paid to the federal government on income from assets placed in these accounts.
And you don’t need a large sum of money to benefit from this policy.
In fact, anyone having a little bit of money sleeping in a savings account can put it into a TFSA.
Even if you end up saving just a few bucks, why send it to the government when you can keep it in your pocket?
At a time when we get crushed by taxes from all sides, the fact the Conservatives have eliminated this tax on capital gains for a majority of Canadians is welcomed.
Ottawa estimates that by the year 2030, registered accounts and TFSAs will permit 90% of Canadians to hold all of their financial assets in tax-efficient savings vehicles.
It’s also a good policy for our economy.
We often hear in the media that Canadians are piling up debt and not saving enough. These TFSAs provide an incentive to save, thereby nudging Canadians to put more aside for their retirement.
It also helps the economy by increasing the funds available for capital and productive investments.
So I tip my hat to the Harper government for progressively eliminating, de facto, the tax on capital gains for an ever-growing majority of Canadians.
Even if this doesn’t get talked about a lot, it might end up being the most important legacy of this government.
Michel Kelly-Gagnon est président et directeur général de l'Institut économique de Montréal. Il signe ce texte à titre personnel.