We will find out shortly whether government can fix what’s wrong with your finances.
The Liberals won the 2019 campaign with a platform focused on helping ease the financial strain of everyday life. We used to rely on economic growth for that, didn’t we? Now, politicians of all parties compete to find ways to cut taxes and increase government benefits and services.
Before we look at what the winning Liberals promised, let’s get some context. A decade of slow global economic growth has shaken our sense of prosperity. We’ve had low interest rates that encouraged people to buy things their slow-rising incomes wouldn’t let them afford. We’ve been left with a lot of household (and government) debt, and a sense of unease about money.
Each of the federal parties offered a package of measures to help people feel more in control of their finances, as if it’s in the federal government’s power to fix the problem. That’s not the case, unfortunately.
The global economy – not just Canada – is sluggish and could lapse into recession at some point. The personal-finance-related promises made by the Liberals will help some, but they’re limited in scale compared with global economic trends. Let’s zero in on six Liberal promises:
LOWER TAXES, BUT NOT FOR HIGH-EARNERS
The basic personal amount, which is what you can earn without paying taxes, will rise by close to $2,000 over the next four years to $15,000. The average family will ultimately save $600 from this tax cut, while high-earning families save nothing. You fully benefit from this measure if you make less than $150,605 and it gets eliminated entirely at $214,557. While the overall level of tax relief from this measure sounds modest, H&R Block tax expert Lisa Gittens believes it will have an impact. “When you’re filing your taxes, savings of even $100 means a difference,” Ms. Gittens said. “Every dollar that goes back into your pocket as a taxpayer means less that you’re giving to the government.”
A BREAK FOR UNIVERSITY AND COLLEGE GRADS WITH STUDENT DEBT
Here’s something that will help grads who have struggled to land continuing well-paid work. They won’t have to start repaying their loans until they make at least $35,000 in income, and payments can be put on hold if income falls below this level. Also, new parents will be able to pause student-loan payments interest-free until their youngest child reaches age 5. For middle- and lower-income students, the Liberals will increase the amount available through the Canada Student Loans program by up to $1,200 a year.
MORE TAX-FREE HELP FOR NEW PARENTS
The Canada Child Benefit was one of the previous Liberal government’s success stories. Federal-government numbers show that families benefiting from this program are receiving an average $6,800 in tax-free payments annually. The Liberals say they will boost this amount by up to $1,000 a year for parents with children under the age of 1. Also, maternity and parental benefits will be made tax-free.
HELP FOR FRUSTRATED FIRST-TIME HOME BUYERS
Not much help, but something. Look for an expansion of the First-Time Home Buyer Incentive, which provides an interest-free loan to lower- and middle-income buyers to bulk up their down payment and thereby reduce mortgage costs. The proposed changes target pricey Toronto, Vancouver and Victoria by setting the maximum eligible home price in those markets at $789,000. It remains a complex program that will help a small group. That’s kind of the point – don’t do anything to turn up the heat in the housing market.
ANOTHER HIT FOR HIGH-EARNERS
If you spend more than $100,000 on a car, boat or personal aircraft, you’ll have to pay a 10 per cent luxury-goods tax.
HELP FOR SENIORS (INCLUDING SOLO SENIORS)
There’s a small increase in Old Age Security payments for people aged 75 and older – a maximum of $729 per year. As well, the Canada Pension Plan Survivor’s Benefit will be increased by up to $2,080 per year. The survivor’s benefit goes to the spouse of a CPP contributor who has died. The benefit has long been criticized for being too small, an issue that affects women especially because they often live longer than men. Ms. Gittens said her firm’s experience with clients suggests the extra OAS money will be useful for covering the cost of medication. “Yes, they have their [provincial] health plans, but more and more things we see are not covered.”
PERSONAL FINANCE COLUMNIST
The Globe and Mail, October 22, 2019