In the privacy of the voting booth, personal finances will decide ballots
Many of the issues in this current federal election campaign have important implications for Canada’s political and economic future and its role in the world. They include the Trans-Pacific Partnership, climate change, energy policy, balanced budgets versus deficits, defence procurement, our role in the fight against Islamic State, civil liberties, the future of the Senate, infrastructure spending and much more.
But I suspect that in the privacy of the voting booth, many people will think first and foremost about their own pocketbooks when they mark their ballots. This campaign has brought a number of financial issues to the forefront that could play a pivotal role in determining which party forms the next government.
Here’s a primer of the issues that could have a direct affect on your bank account, with the positions of the three main contenders on each. Personal income tax: The Liberals own this one. They plan to cut the federal tax rate for middle-income Canadians (defined as those with income between $44,700 and $89,401 per year) by 1.5 percentage points to 20.5 per cent. To pay for this, they’ll create a new 33-per-cent tax bracket for those making more than $200,000 annually. The party claims the savings will be up to $670 per person (it doesn’t point out that those at the top of the income range will benefit most). Neither the NDP nor the Conservatives are pledging across-the-board cuts in personal tax. Subsidized daycare: This is NDP territory. Leader Thomas Mulcair has been scoring points with families with young children by promising to create a million daycare spaces at a rate of $15 a day. The catch is that it will take years to implement; the goal is to have the million spaces in place by 2024. By then, today’s preschoolers will be too old to benefit from it. Tax-Free Savings Accounts: In last spring’s budget, the Conservatives raised the annual contribution limit to $10,000 from $5,500, while eliminating indexing. The Liberals and the NDP both promise to roll back that increase, saying it only benefits the rich. Child benefits: This is a hot-button issue for everyone with children. Under the existing Conservative plan, which was beefed up as of Jan. 1, families receive a Universal Child Care Benefit (UCCB) of $160 per month for each child under age 6 and $60 a month for children age 6 to 17. The payments are taxable. The Liberals would replace this with a new, non-taxable Canada Child Benefit (CCB). It would pay up to $6,400 a year for children under 6 and $5,400 a year for those 6 to 17. The amount actually received would be tied directly to income: the more you make, the less you get, with top-bracket families receiving nothing. The Liberals claim that the net result for a “typical” family of four would be an extra $2,500 a year, tax-free. The NDP has indicated it would not change the UCCB, but has urged people who don’t need the money to donate it to the party. Good luck with that! Income splitting: In 2014, the Conservatives introduced limited income splitting for families with children under 18. It allows the higher-income spouse to transfer up to $50,000 to the lower-income one, with the tax saving capped at $2,000 a year. The Liberals would do away with this, using the estimated $2 billion in savings to help fund the new CCB. The NDP has also said they would scrap it. However, both parties say they will retain income splitting for seniors. Help for students: Everyone agrees that students need financial help, but the parties take different routes to achieve that. The Liberals would target low-income students by increasing the maximum Canada Student Grant to $3,000 a year for those attending full-time and $1,800 per year for part-time students. They would also postpone repayment of student loans until a graduate was earning $25,000 a year. The NDP would phase out all interest on federal student loans over the next seven years and would create about 74,000 new student grants. The Conservatives have promised to double the Canada Education Savings Grant, paid into Registered Education Savings Plans, for lowand middle-income families. Old Age Security (OAS): The Conservatives have put a plan in place to gradually increase the eligibility age for collecting OAS to 67. The NDP would restore it to 65 and provide a “modest” increase in Guaranteed Income Supplement (GIS) payments, which go to lowincome seniors. The Liberals would also restore the OAS to those age 65-plus and add 10 per cent to GIS payments. Canada Pension Plan (CPP): The Conservatives have strongly opposed any expansion of the CPP on the grounds that the additional contributions would amount to a “job killer.” They have also refused to assist the Ontario government’s proposed provincial retirement plan. Both the Liberals and the NDP say they will work to enhance the CPP, but neither party has offered any specifics on how that would be done.
One or more of these issues will affect virtually everyone, and in some cases could be the tipping point in how a vote is cast. We’ll see how it plays out on Oct. 19. Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters. His website is BuildingWealth.ca. Follow Gordon Pape on Twitter: @GPUpdates.