Taxes: you could always use a little of that stash you hid under the mattress to get a good bottle of vodka.

Rivers 100x100By Ray Rivers

March 3, 2017



My grandfather used to keep his money under his mattress, which might have made it lumpy and stiff, had he ever accumulated anything resembling a sizeable stash. And what little he didn’t stuff there, he’d re-invest in commodities, mostly vodka. That was a while ago, before the government introduced retirement saving instruments like RRSPs (registered retirement saving plans), which allow tax deferrals, and TFSAs (tax-free saving accounts), which make the interest or capital gains tax-free.

Under the bed.

Hiding your money under a mattress – and it doesn’t have to always be Canadian dollars.

An economy needs savings, because that is a disposable pool of capital ripe for investment and growth. The Canada Pension Plan was in part created just for that purpose, a fund for governments to dip into to develop highways and other infrastructure back in the day. And no government claims to be more committed to building more infrastructure, and needs those funds more, than our modern day federal government.

But we are just a day or two beyond the deadline for investing in an RRSP – so the question is why are total RRSP contributions falling and why is there so much unused potential in the TFSAs? It could be blamed on low interest rates which dissuade the lazy investor. After all actively managing your registered investments in the rising share-market demands more time and work, more risk and more cost than a lot of people are willing to expend.

And the promise of a more robust CPP (Canada Pension Plan), thanks to our Ontario premier, may have convinced people that they’ll need less personal savings outside of the CPP. But most likely It has to do with the financial squeeze facing middle-income earners, caught between the pressures of keeping abreast in our consumer society and making ends meet in an ever deteriorating workplace economy. Not much is left over for savings.


The baby boomers changed the world every decade as they went from cribs to caskets.

And perhaps the lure of a tax deferred income savings plan has lost its lustre. Today’s young workforce has to be discouraged listening to their parents’ grumbling over paying more taxes now on RRSP withdrawals than they ever gained in tax relief back when. And maybe RRSPs are not the panacea they were sold to be – to these human guinea pigs, the baby boomers.

Since the CPP gets lumped in with all the other deductions on a pay slip, it also tends to be called a payroll tax. After all, your CPP donation goes off to an agency which holds it until you reach a magic retirement age, or die. In some ways that is like sending one’s income taxes to Ottawa and hoping they’ll come back as old age security payments (OAS) when you retire. So are RRSPs and TFSA’s nothing more than voluntary taxes, since they’re also locked-in under some kind of government plan?

There is a lot of talk about taxes from the candidates vying to be the next leader of the Conservative Party these days. Everyone of them is promising to cut income taxes, and Mr. Chong is claiming the biggest income tax cut of all. But then this pinkish Tory explains he’s doing that because he’s planning to keep Mr. Trudeau’s carbon tax, and making it revenue neutral – reminiscent of robbing Peter to pay Paul. Except Paul already has lots of cash, thank you, and Peter is the guy filling his car’s gas tank.

Former Prime Minister Brian Mulroney leads the chorus in singing an Irish song on stage with his wife (Mila) and U.S. President Ronald Reagan and First Lady Nancy Reagan at the conclusion of a gala performance in Quebec City March 17, 1985. (CP PHOTO/Bill Grimshaw)

Former Prime Minister Brian Mulroney leads the chorus in singing an Irish song on stage with his wife (Mila) and U.S. President Ronald Reagan and First Lady Nancy Reagan at the conclusion of a gala performance in Quebec City March 17, 1985.

Listening to the debates one can’t help but get a warm nostalgic feeling – like back in the days when old Irish-eyed singers Ronnie and Brian first introduced their versions of trickle-down economics between their verses. They reasoned that by giving more money to the rich, the poor would prosper because, as Newton said, everything that goes up eventually trickles down.

The conservative think-tanks and their disciples love, and have never given up on, this zany bit of oxymoronic nonsense. So, not to attract disfavour from their spiritual core sources, the Conservative Tory leadership wannabes are goose-stepping to the beat of our southern neighbour, the Donald, who is promising his billionaire buddies even more.

They say It’s about putting more money in peoples’ pockets. Though why the top 10% of income earning Canadians need that much more cash, or what they would do with it, is a good question. I guess they’ll just let it trickle down to those most in need, like we’ve seen them do in the good old days, right?

Thanks to an economic theory called the ‘marginal propensity to consume’, we know that economic growth comes from putting money into the hands of the lower income masses, not the wealthy. Perhaps some of these candidates are hoping to extend Mr. Trudeau’s modest tax cuts, by shifting tax brackets in favour of the middle class, as he did. Though the not-a-snow-ball’s-chance-in-hell Mr. Chong seems intent on playing the role of a reverse Robin Hood.

Working James and Joes

It is the tax deductions from the pay cheques of the working Janes and Joes that keeps the government alive.

As Mr. Trudeau found out there is a lot of income tax revenue coming in from the common person, the working Joe/Jane, and shifting tax brackets to favour the middle class is costly to the public purse. So it’ll be easier for your next Tory government to follow the model set by Mr. Trump, which inadvertently stretches the wealth gap even more. And that would add very little real loonie change into the pockets of those in the middle, making it just as hard for them to save for that next RRSP or TFSA.

So, so much for that new 4K TV, a vacation or new car. And so much for securing those golden years with sound financial retirement planning. Who can blame them for not sticking more money into RRSPs and TFSAs.

Despite all the talk of helping the middle class there is not going to be enough left over, unless you just want to pad your bedding as my grandpa did. And if that interrupts your sleep too much, you could always use a little of that modest stash to get a good bottle of vodka.

rivers-on-guitarRay 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 in 1995.  He was the founder of the Burlington citizen committee on sustainability at a time when climate warming was a hotly debated subject.     Tweet @rayzrivers


Background links:

Pensions –   Taxes –    More Taxes

Interest Rates –    Marginal Propensity to Consume –    Chong

Return to the Front page
Print Friendly, PDF & Email

3 comments to Taxes: you could always use a little of that stash you hid under the mattress to get a good bottle of vodka.

  • Bill Boyd

    Thank you for those insightful words. Although I must hope the economic insanity you describe did not migrate its way to you all from the south. On the other hand, as some used to say, “Misery loves company.”

    By the way, I now thanks the other commentor, that Mr. Pardi, for this insight into the TSP.

    Bill (down in Virginia)

  • Great explanation of a subject which can be too often used in an obfuscatory manner. Your citation of Reagan brings to mind his dismantling of the Civil Service Retirement System (CSRS) which was paid out of General Funds in favor of his Thrift Savings Plan (TSP) which is invested in Wall Street. What was not explained was that the person directing the investment of retirement funds into certain companies was an un-elected administration appointee with no accountability to the Civil Service. Thus, this appointee was able to direct funds to companies of the administration’s choosing, those being the companies most likely to kick back funds in the form of campaign contributions to the Party which developed the TSP. In short, it was pure, unadulterated Fascism. Very few Americans recognized that simply because very few Americans understand Fascism beyond “boots and salutes”. We are again seeing the rise of American Fascism in the coming de-regulation of Wall Street, accounting for the Icarus like rise in the stock market.

    Just as we saw a near collapse under the Bush dynasty, we are likely to see a greater collapse under the Trump cabal. As they say, It will be Yuuuge! And the mutual fund heavy retirements plans, populated by the proletariat, will be the first to collapse.

  • Gary

    So, the only political hero in this rambling piece is Kathleen Wynne. Good luck selling her.