The Tax-Free Savings Account (TFSA) is a useful new tool for Canadians to reduce future taxes, but the $5000 limit per year makes them of little use to wealthier Canadians. Helping Canadians of modest means is an admirable goal, but you can count on wealthier people to complain.
This brings us to Malcolm Hamilton’s proposal for retroactive TFSA room of $5000 per year back to age 18 (proposal details here and reader reaction here). Jon Kesselman gave a counter-proposal to give older people more TFSA room each year than young people get.
Both of these proposals amount to a transfer of future wealth from young to old. To put a finer point on it, because only wealthier people can make use of large amounts of TFSA room, these proposals would transfer wealth from the young to wealthy older Canadians.
Only self interest could blind people to the obvious flaws in the justifications offered for these tax changes. One commenter, yvrapx, made some intelligent observations:
Recall the people he proposes get higher limits are the same folks who depending on their age were not taxed on capital gains before '72, at all. ... From the mid 80's until '94 there was a $100,000 lifetime capital gains exemption for all types of property; that exemption no longer exists. My point is the people he wants to give a break to are the same ones who have always been given a break.
Being a baby boomer of above average means myself, these proposed TFSA changes would likely help me. But, I don’t want it done on the backs of my children.