A Grey Power Budget? Rivers suggests that without the seniors vote the Harper government is toast.

Rivers 100x100By Ray Rivers

April 25, 2015

BURLINGTON, ON

Last week Canada’s premiers met to brag about each other’s achievements in reducing greenhouse gas emissions. Alberta, whose increases negated everyone else’s reductions, was absent, presumably busy with a provincial election. Saskatchewan’s Brad Wall argued for business as usual, since our greenhouse gas contributions amount to a small fraction of the global total, thereby challenging Ontario’s Premier Wynne on her government’s successes.

Iceberg melting

Climate change is real – except to those who wrote the last federal budget document.

And Mr. Harper’s government with an historic legacy of denying climate change and otherwise doing squat, blamed the provinces for Canada’s crappy performance. With that outburst from the federal environment minister, and given an impending federal budget, even a pessimist might have expected something, even anything, about climate change action in the budget. Sorry pessimists!

When international oil prices tumbled, along with federal income projections, finance minister Joe Oliver panicked, delayed the budget and dumped Canada’s GM shares (bought to save GM in 2008) for a whacking loss of over $3 billion. Next, he robbed the government’s piggy bank, its fiscal reserve for as much as $2 billion, and then pulled some sleight-of-hand around future employee contract negotiations to manufacture a small surplus.

Canada’s economy is heading into recession, led by the faltering Alberta economy. So one would have expected some new measures to stimulate the economy. But there is scant discussion of economic drivers in Joe Oliver’s master plan, unless one considers new corporate tax cuts, or re-announcing the tired old federal training, innovation and infrastructure initiatives.

This budget is arguably the most ideological document to come out of Mr. Harper’s decade of governance, notably excepting Bill C-38, also called the environmental destruction act. It is a common belief among the extreme right-wing that government, itself, is the problem and smaller government is always better government. One wonders why people who believe that government is so insignificant try so hard to get elected into office.

Councillor Sharman has held two public sessions with Senior's as part of his effort to understand their needs and develop policy that Council can put in place to serve this vital community.  At most of the sessions Sharman holds his Dad is often in the audience.

Harper needs the votes of the greatest democrats in the nation – the people who always turn out on voting day – the seniors.

This federal budget is about buying votes in the upcoming election. Mr. Harper’s promised tax break for the highest income Canadian families through income sharing is now formalized. But to win his next election, Harper needs the votes of the greatest democrats in the nation – the people who always turn out on voting day – the seniors.

It was only a couple of years ago that Mr. Harper denied seniors their Old Age Security by raising the retirement age to 67. And by blocking provincial demands to upgrade the Canada Pension Plan he angered seniors groups. So, to make amends, he is upping the contribution limit for TFSAs (interest tax-free savings accounts) to a whopping $10,000. And the well-heeled will no doubt be appreciative.

There was another budget announced this week. Though unlike the feds, Ontario hasn’t yet balanced its budget. Ontario’s finance minister, Charles Sousa, is privatizing electricity generation, going back to the future and completing the job even Mike Harris and Ernie Eves couldn’t get done. The money from this dis-investment will be allocated to infrastructure and building transit and roads for the GTA, in particular.

The Province is finally allowing beer to be sold in supermarkets, albeit with some antediluvian rules to discourage customers. And there is good reason for that since expanded provincial beer consumption might, inadvertently, put a dent in Premier Wynne’s climate change initiatives.

Beer Festival logo

Will Burlington’s Beer Fest benefit from the change in beer selling policy the provincial government put forward?

Apparently global beer consumption in 2004 was 150.392 billion litres, resulting in a significant 9,354,382 metric tonnes of CO2 emissions. Save the planet, drink whiskey.

These are two completely different budgets from two very different governments. Yet, Ontario could get to balance if they only increased progressive income taxes. Instead, the only provincial tax hike is a recessionary ‘buck-a-box’ for beer – likely a concession to the trans-national oligopolies controlling our Beer Stores. The benefits of the planned investments in infrastructure will be almost immediate and broadly felt. And, eventually the rest of the public will appreciate the economic benefits from faster commute times.

Joe Oliver’s budget, on the other hand, has done little but widen the spread between the haves and have-nots. It is understood that the vast majority of benefits from the family income-splitting scheme will go to the wealthiest families. And this interest tax-free account makes no economic sense. Since the average deposit into Tax Free Savings Accounts (TFSA)  was about $3000 when the limit had been $5500, who do we think will benefit when the limit goes to $10,000?

recession

Rivers suggests our economy is heading for a recession.

Savings are essential in order to fund new investment. But without consumption there is no demand for investment. All of our income is either spent on consumption or saved. So were that new limit on TFSA’s to be actualized, there could be at least $4500 less consumption per saver per year – which is highly recessionary. And the last thing this faltering Canadian economy needs is to be pushed faster and further towards recession.

I have heard some call this federal budget a blow to generational equity – primarily by young people. Perhaps it is, but at a minimum it is a clear case of ideology trumping sound economics. I always believed the time to reward yourself (with tax breaks) is when the economy is booming – not when you are likely heading into a recession.

Rivers-direct-into-camera1-173x300Ray Rivers writes weekly on both federal and provincial politics, applying his more than 25 years as a federal bureaucrat to his thinking. Rivers was a candidate for provincial office in Burlington where he ran as a Liberal against Cam Jackson in 1995, the year Mike Harris and the Common Sense Revolution swept the province.

Background links:

Provincial Climate Change       Federal Budget      TFSA Changes      Contingency Fund

A Tax on Future Generations       Retirement Savings     Tax Breaks     GM Shares    Bill C-38

Provincial Budget      Provincial Budget Priorities       Beer in Stores      Beer and Climate Change

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9 comments to A Grey Power Budget? Rivers suggests that without the seniors vote the Harper government is toast.

  • Gary

    Dear Mr. Latour,

    You seem to be an angry individual. I am sorry for that.

    I did not leave anything out of the puzzle regarding the couple that live on $35,000 a year — that is after tax income, by the way. They do have a mortgage of about $160,000 on their modest home. They drive a 9 year old Hyundai Tuscon. They do not have a child living at home. And they have a TSFA. I do not know how much they have in it, however.

    For your information, I do not have a TFSA. I admit that I have been a bit slow off the mark here until somebody recently explained how it worked to me, and I intend to open one shortly. I appreciate the comment made by Mr. Rivers that on average only about $3,000 is kept in these accounts, but that is only an average. I also understand that wealthier people will be able to benefit more from them than less wealthy people. However, I stand behind my comment that any individual taxpayer in this country should be able to take advantage of a TFSA no matter what their income level. It is possible that somebody (maybe even you) may derive a windfall from an insurance claim or from an inheritance, or severance, or a lawsuit and I don’t see any reason why they should not be able to put $10,000 of that into a TFSA. So you see, I am considering others.

    If people like you and Mr. Trudeau are genuinely angry at the prospect of wealthy people benefiting more than less wealthy, then the proper policy would not be to roll back or deny, as the case may be, the $10,000 limit, but to cut off the access to a TFSA at some upper income limit, and leave the TFSA as a possible track for less wealthy people to become more wealthy people.

    I am sure that if you were financially better off you would not come across as being so angry with other people.

    Gary

  • Zoe Berfitr

    It must be election time. A couple of Federal Liberal Riding Association Presidents waxing poetic. Mr. Rivers talks about buying votes at election time. Gee, didn’t hear that during the Provincial election. Whoo-hoo – get rid of manufacturing here in Ontario with higher hydro rates and we cut greenhouse gases! High-five! Will the plants down in Mexico be any greener for the sake of Premier Wynne’s grand daughter?

    Mr. Latour, before you completely dismember Jack, consider this; people who don’t work in the public sector don’t have a pension that resembles anything close to a typical (and unsustainable) public sector pension. Many of these folks are prepared to work hard and save hard while they are able, so that they may one day accrue enough wealth to retire. Never underestimate an individuals desire to work virtuously in an effort to sustain, prosper and carry their own baggage through life to the best of their ability.
    Your comment “I can’t imagine what you see in the mirror each day”? Seriously? Are you sure you know Jack?

  • Christian Latour

    With a little more digging, I was able to determine that with a 19.7% tax rate (60k earner) and 11% of the provincial budget going to social services, that means a massive 2% of your annual income goes to “pay for others” as you put it. Here’s the provincial breakdown;

    https://goo.gl/le0dDc

  • Christian Latour

    You come at this with such ignorance, I barely know where to begin. I’m sure a single mother living in Georgetown or Erin will have no trouble getting their kid to and from daycare while working at Tim Hortons and training to become a diesel mechanic. And I’ll tell my neighbor that his mentally challenged son can become a diesel mechanic, he’ll be thrilled to know that. And your tax money also goes to help the 65 year old woman with cancer get treatment. I’ll be sure to tell her that you’ve prescribed a “get yourself to work” pill.

    And did you think to take out the positions that need 1 or more years experience? I can’t just wake up one day and have 3 years experience as a diesel mechanic.

    Someone who makes 60k keeps about 48K. The 12k gets them access to libraries, education, healthcare, food that has been inspected, fire and police services etc. A very good deal, even if a small percentage goes to social assistance.

    Someone making 120k keeps 85k. Google a tax calculator and you’ll find out how absurd your statement is that taxes are such an evil thing.

    You simply appear to want more, more, more for you and don’t care about what others get. I can’t imagine what you see in the mirror each day.

  • Jack Fernihough

    One last thought. I could find jobs for about 3000 diesel mechanics in Canada right now. These would be $30-$40 per hour jobs. Can you get to some of those folks who are so “destitute” that they need the money I earned and that you want to tax the crap out of me for? Can you reason with them?? Can you get them trained???? And MOTIVATED ??? Please???? For the good of the Canadian economy????
    No, you can’t. They all want to be striking teachers with big fat civil service unions and lots of benefits, don’t they?
    Thank God Prime Minister Harper still offers incentives for workers who work, save and pay taxes all their lives.

  • Jack Fernihough

    Sitting in Winnipeg tonight reading the Winnipeg Free Press. There are 250 Foreign workers at Maple Leaf foods in Brandon, there are 320 Foreign workers at Hylife Foods in Neepawa. Maple Leaf in Brandon wants to hire 350 more workers but must go outside of Canada to get them. We don’t pick our own tobacco, strawberries, nothing. We are all “elites”.
    So…why are you picking upon the folks that worked, saved, made a life for themselves? What is wrong with me saving some money? If you work, apparently you need to get your ass taxed. If you don’t, let the other folks do the work, then tax the folks that worked.
    Never did make sense, doesn’t make sense today. Except to Liberals.

  • Christian Latour

    Gary, if you are in a position to take advantage of more than 5k in tax free savings, you may be normal but are not the average. While you’re happy to have an additional tax break, little to nothing is being offered here for families actually living in poverty. I can’t image you believe they poverty.

    And without a source I strongly question the numbers you give above of 35k with a TFSA. You’re leaving out pieces of the puzzle such as they could be seniors who have already paid off their mortgage. Ours is a household of 2 adults, 1 child, with a higher total income and we have nothing left for a TFSA, despite not being drinkers, smokers, vacationers or anything else of that sort. We have 1 vehicle and it’s a Hyundai Accent. We would in fact benefit from the family tax credit however I recognize the imbalanced approach and therefore stand against it. It’s time we look for an approach that is more than just thinking about benefits for ourselves.

    For supporting data, see the governments own statistics (chart 3) which shows that the higher the income, the more likely they are to use this tax shelter. This might be fine if we had a fixed tax rate, but it’s variable and already favours the rich.

    https://www.fin.gc.ca/taxexp-depfisc/2012/taxexp1202-eng.asp

    This is as backwards as the GST rate decreases. It’s time we look for an approach that is more than just thinking about benefits for ourselves.

  • Gary

    Young Mr. Trudeau has disappointed me by promising to role back the Tory promise of raising the TSFA to 10k dollars annually. The normal individual taxpayers in this country, of which I count myself as one, have very few opportunities to take advantage of tax savings being offered. The TSFA is a wonderful vehicle available to people of all means. It should have been created years and years ago. I personally know a couple who are very frugal and live on $35,000 a year. They have a TSFA account. I don’t know why you think this is some benefit that only some guy like Conrad Black can gain advantage from. If you are suggesting that money put into a TSFA is money withdrawn from useful economic activity like consumption you are assuming that the money is only used as a bank savings account. Not true. Many people use the account to purchase equities because the income from those is tax sheltered. That income tends to get spent.

  • It is fascinating that Mr. Rivers’ delineation of the issues and his explanatory comments on the approaches mirrors so closely similar issues and approaches in the United States. His insights and eloquence would no doubt gain him many right wing enemies on this side of the divide.

    At the same time it is very saddening that Canada, for so long admired as a mature and ethical culture, seems unable to learn from the disastrous history of these issues and approaches just to its immediate south.

    Sincere appreciation goes to Mr. Rivers, even though his insights further erode the illusion that there is somewhere to turn in this world for governmental ethics and wisdom.