WATCH: Jacques Bourbeau breaks down exactly what’s in the 2015 budget – and what was left out.
OTTAWA — There isn’t much new or that wasn’t previously leaked. There’s also a notable lack of flash in the 2015-16 federal budget.
Experts say the pre-election document presented Tuesday is exceptional for one big reason: It brings into laser focus who exactly the Conservatives are targeting for votes when Canadians begin casting ballots at the opening of polls this fall.
“It’s crystal clear,” Ian Lee, a business professor at Carleton University, said.
The details of the budget, which will leave a $1.4 billion surplus in Ottawa’s coffers while allowing the Harper government to “cut taxes further for Canadian families and individuals,” underscore who the federal Conservatives are pinning their hopes on for a majority.
In no particular order, they are: Canada’s business community, seniors (or soon-to-be retiring boomers) and middle-income families.
For the “hardworking Canadian families” federal Conservatives tirelessly attempt to appeal to, the budget proposes a grand total of $6,600 in new tax relief and increased benefits for a “typical two-earner” family of four, budget documents say.
Here are the biggest financial goodies the Harper government is dangling in front of Canadian consumers and households in its pre-election budget, in no particular order (and how much they will cost in the form lost revenues):
TFSA moves up
The maximum yearly contribution one can make to a Tax Free Savings Account (TFSA) will move up to $10,000 from the current $5,500. Oliver says most of the 11 million accounts opened since the TFSA was introduced in 2008 are held by middle- to low-income Canadians.
But that doesn’t mean they’re using them all that much. Critics like David Macdonald, an economist at the Canadian Centre for Policy Alternatives, suggests many Canadians don’t come close to maxing out TFSAs under the current cap – expanding it won’t mean much for the majority of households.
It will be meaningful for those with comfortable incomes who can afford to increase their contributions, such as seniors with low expenses, late-career workers (read: boomers) and higher income households.
Still, other experts say younger savers in their 20s and 30s can take advantage of the higher cap to save for major, short-term financial goals, such as down payment for a home. Instead of diverting money to an RRSP only to tap the Home Buyers’ Plan to borrow funds for a down payment, taking that money from a TFSA nest egg won’t come with all the strings attached to paying back your RRSP.
Cost: Around $250 million, annually
Lower tax bills for seniors
In keeping with their appeal to older Canadians (and or those sizing up retirement now), the budget legislation calls for a reduction in the minimum withdrawal amount for Registered Retirement Income Funds (RRIFs) – the savings vehicle RRSP savings roll into once a person hits 71.
Under the current rules, retirees must withdraw just under 7.5 per cent of their savings in the first year of retirement, a percentage that increases with each year that passes. The budget proposes to “substantially lower” that mandatory withdrawal amount, a move that will lower the tax paid on that income (which can be augmenting with withdrawals from an enlarged TFSA nest egg). The new mandatory amount seniors must withdraw is 5.28 per cent.
It will also mean more money can remain in retirees’ nest eggs (and able to grow, tax-free), something that will help ensure seniors don’t outlive their savings.
Cost: $135 million
Beefing up childcare benefits, claims
First announced last fall, the new budget puts into motion enhancements to the Universal Child Care Benefit and Child Care Expense Deduction, moves aimed at reducing the financial burden on families with children. To wit, the UCCB is being increased to $160 a month for all children under 6, and $60/month for children between 6 and 17. The Child Care Expense Deduction is also being increased by $1,000.
The clock is ticking for an estimated 200,000 eligible families who have yet to register for the monthly UCCB cheque, with a May 1 deadline fast approaching.
Cost: $2.7 billion.
‘So-called’ income splitting
A.k.a the Family Tax Cut, another tax-saving proposal first announced in the fall. Allows couples to shift up to $50,000 in income from a high earner to their lower-earning spouse. Tax savings from this measure max out at $2,000.
The move benefits only about 15 per cent of Canadian households, according to the government’s budget watchdog, the Parliamentary Budget Officer. Lower income households will get virtually no benefit, a report from the PBO said last month.
The report suggested the biggest gains will fall on about two million households, or 15 per cent, with the largest gains concentrated on medium-high to high-income households where one big income can be pared back to reduce that individual tax bill.
Cost: $2.2 billion annually, or the same as if Ottawa cut all federal taxes by 0.3 per cent across the board.
Small biz tax cut
A new measure that will reduce the effective tax rate on businesses with less than $500,000 in sales to 9 per cent from the current 11 per cent.
The move will ease the tax burden on roughly half of the private sector companies, experts say – but also help line the pockets of already high income earners who own their own small businesses, such as small consultancies like those owned by doctors or other professionals.
“A lot of consultants will do quite well” from the tax cut, TD deputy chief economist Derek Burleton said.
Cost: $1.2 billion (once fully phased in in 2019).