Noticeably absent from yesterday’s unveiling of the 2011 budget are many of the measures called for by wealthy old people. I think the government made the right choice on these issues.
Many have called for big increases in RRSP and TFSA limits as well as making TFSA contribution room retroactive to age 18. None of this would do much for the average Canadian who can’t make use of all available room now, but a sudden large increase in RRSP room and particularly TFSA room would allow the wealthy to earn investment income tax-free.
One could imagine an extreme situation where a couple derives an income of $100,000 per year tax-free from a very large sum invested in TFSAs, but collect the GST rebate because their declared income is negligible.
If we keep creating tax measures to shelter more and more investment income from taxes, only income derived from actual work will be taxed. I don’t think we want a world where only working people are punished with taxes. RRSP and TFSA room should be at levels to encourage average people to save rather than allowing the wealthy to avoid taxes.
For information on what is actually in the budget, check out Canadian Capitalist’s summary.