Thumbs Down:  Few Pros Think Families Will Save Tax Cut Dollars

Knowledge Bureau’s November Poll Question attracted close to 200 respondents to the question: Do You Think the New Family Tax Cut Provisions will Help Canadian Families Save and Invest More for the Future? 

The vast majority -  83% of our readers did not agree that this $5 billion in tax relief and benefits would help Canadian families bolster their savings.

Arguments have been made that despite any potential tax cuts, the real issue may be behavioural in nature, and the average Canadian family would not see enough of an impact to influence their own saving / spending habits.  We are also reading a modicum of cynicism on the scope of the family tax cut for the average Canadian family.

Dan states:  “The savers will continue to save and the borrowers will continue to borrow. In other words, the tax cuts aren’t significant enough to change the spending or saving habits of the average family. An extra $1000, say, will be a nice surprise on their income tax refund but the spenders will continue to go to Disneyland with it and the savers will put it in their RRSP/TFSA/RESP or against their debt.” 

Don makes this point:  “While the ‘tax savings’ are up to $2k there is NO allowance for the actual transfer of cash from one spouse to another.  Consequently, the family is limited to investing in the lower income spouse’s TFSA.  Rules of attribution on any open investments still apply.

From comments I have seen online about the subject, there will be very little in the way of savings, because of the way the new child credit structure now works, so most lower income families will spend the savings on rent, their mortgage, food…. basic necessities.”

On the positive side, Delores sees an opportunity:  “I see couples with young families reaping tax-saving benefits.  This is particularly true when the individual’s taxable income is in a different tax bracket than their partner, one in the lower tax bracket with the higher income earner in the third tax bracket.  Having the ability to shift income to create a level playing field for both will reduce taxes payable and increase their cash flow.”

Thanks to all for participating.

Next month’s poll: Do you believe CRA privacy and security procedures require review in light of recent breaches?