Tax-free savings accounts are a gift to the banks, not to Canadians

73 posts / 0 new
Last post
Summer

LOL, hadn't caught that Spector.  Wonder if he goes to Vegas much?  Big risk, big reward here I come. 

contrarianna

M. Spector wrote:

Jamie Golombek is full of shit when he says, "Typically, the bigger the risk, the higher the expected rate of return." If that were true, then everybody would invest in the riskiest, most speculative investments around!

The bigger the risk, [b]the lower the chance of any positive return at all.[/b] That's what "risk" means.

You are grasping at straws and resorting to quibbles.
Golembek's contextual meaning would be apparent to anyone familiar with investments.  That is, "One would not knowingly take a higher risk gamble unless they expect that risk to be potentially compensated with a very substantial win". 
Though I find many of your posts informative, I have yet to see analysis from you on this subject that demonstrates you understand it.
I didn't realize I was  "yelling and screaming", nor using gratuitous obscenities to insist on feeble points.

Summer

Contrariana, unless you are talking about insider-trading which is illegal - one never knows.  They may think they know but they can still be wrong.  Evidenced, my good friend the trader who thought she had hit a pay dirt in some risky investment, then Iceland went bankrupt and the deal fell apart.  The stock market is a gamble. 

Give us some numbers.  What does the gov't stand to lose in income? Without number, this seems like a strawman to me.

What are you proposing in the alternative? Scrapping TFSA's altogether? (baby, bathwater, goodbye). 

martin dufresne

This is not about TFSAs per se, but in the current issue of L'aut'journal ("200 MILLIARDS AUX BANQUES - La face cachée du budget Flaherty"), Michel Chossudovsky estimates at 200 billion $ the Canadian gov't handout to the banks, with nary a word from the Opposition.

Opening lines:

Les médias ont fait grand cas du déficit de 85 milliards sur cinq ans du budget Flaherty, mais ils ont complètement passé sous silence le montant faramineux de 200 milliards $ (12 pour cent du PIB) prévu dans ce que le gouvernement appelle un « Cadre de financement exceptionnel » pour venir en aide aux institutions financières canadiennes. En soi, ce transfert monétaire auprès des banques est la principale cause du déficit budgétaire et de l'endettement du gouvernement fédéral.

Déjà, le gouvernement Harper avait débloqué en catimini un premier montant de 25 milliards $ le 10 octobre dernier, puis un autre de 50 milliards le 12 novembre, pour racheter des prêts hypothécaires des institutions financières. Malgré l'importance des montants en jeu, ni les partis d'opposition, ni les médias n'ont crû bon de poser des questions au gouvernement, d'analyser les implications de cette « aide » aux grandes banques canadiennes. (...)

 

M. Spector M. Spector's picture

contrarianna wrote:
You are grasping at straws and resorting to quibbles.

Golembek's contextual meaning would be apparent to anyone familiar with investments. That is, "One would not knowingly take a higher risk gamble unless they expect that risk to be potentially compensated with a very substantial win".

Though I find many of your posts informative, I have yet to see analysis from you on this subject that demonstrates you understand it.

I didn't realize I was "yelling and screaming", nor using gratuitous obscenities to insist on feeble points.

I don't understand where your hostility is coming from.

And your paraphrase of Golombek's statement turns it into a trite observation of no real insight at all - and one, moreover, that has nothing to do with the point he is making about the supposed attractiveness of TFSA's for highly speculative investments.

As for which of us understands this subject better, I will leave that to others to decide.

M. Spector M. Spector's picture

martin dufresne wrote:

This is not about TFSAs per se, but in the current issue of L'aut'journal ("200 MILLIARDS AUX BANQUES - La face cachée du budget Flaherty"), Michel Chossudovsky estimates at 200 billion $ the Canadian gov't handout to the banks, with nary a word from the Opposition.

Is this available online anywhere? I couldn't find it at the link you provided.

The excerpt you quoted talks about the 25 billion in October and the 50 billion in November. Chossudovsky talks about the same figures in [url=http://www.globalresearch.ca/index.php?context=va&aid=12007][color=mediu... English article a few days ago.[/u][/color][/url] But how does he get the total up to $200 billion?

contrarianna

M. Spector wrote:

contrarianna wrote:
You are grasping at straws and resorting to quibbles.

Golembek's contextual meaning would be apparent to anyone familiar with investments. That is, "One would not knowingly take a higher risk gamble unless they expect that risk to be potentially compensated with a very substantial win".

Though I find many of your posts informative, I have yet to see analysis from you on this subject that demonstrates you understand it.

I didn't realize I was "yelling and screaming", nor using gratuitous obscenities to insist on feeble points.

I don't understand where your hostility is coming from.

And your paraphrase of Golombek's statement turns it into a trite observation of no real insight at all - and one, moreover, that has nothing to do with the point he is making about the supposed attractiveness of TFSA's for highly speculative investments.

As for which of us understands this subject better, I will leave that to others to decide.

You are right. I did make a "trite observation" and provided  a completely obvious context (to most at least).   
I'm still concerned about locating my "yelling and screaming" so I can get some tips on anger management.  

M. Spector M. Spector's picture

I didn't say you made a trite observation. I said your paraphrase turned Golombek's statement into a trite observation.

And the context for understanding Golombek's statement is to be found in [b]his[/b] words - not in any context provided by you.

If you could see past your sarcasm, you might be able to comprehend what others are saying. 

tostig

Did anybody forecast how much lost revenue these TFSAs will cost the Federal and Provincial governments.  If successful, these accounts will contribute to the deficit.

 

While we are entering into a recession and economists are proposing stimulus packages to get consumers spending again, these TFSAs are aimed to do the opposite - get people to hoard their money.

JoeAnne10

spam and spammer deleted.

 

thanks M. Spector

 

og

bagkitty bagkitty's picture

I had almost forgotten about this thread. Rereading it does give me pause though... perhaps I was expecting more of a response to my suggestion (dated though it is) that the former "coalition" parties make bank regulation part of their platform, that they suggest programs to put an end to gouging by the banks. Was it really such a bad idea? Is it really that hard to implement?

Fidel

For some large percentage of Canadians, saving money is not likely when their debt to income began increasing since before the start of this meltdown. [url=http://www.banqueducanada.ca/en/fsr/2009/highlights0609.pdf]Bank of Canada review of the financial system[/url](pdf) says that rising household and personal debt represent the greatest risk to the financial system. And Canadian families with incomes of around $35,000 a year have seen their debt increased the most. And these debts are generally not due to frivolous living but for basic necessities of life, like rent, mortgages, groceries, utilities, transportation to and from work etc.

Quote:
"There has been a further deterioration in the financial position of the Canadian household sector as a result of the continued turmoil in financial markets, the deepening global recession, and worsening labour market conditions."

And regardless of what Stephen Harper conservatives say about our "sound banking system", they have been lying to us same as Mulroney era conservatives. The $75 billion dollar bailout of Canadian banks, which occurred two weeks aftyer the last $300 million dollar federal election, is the equivalent of the US bailout of Wall Street when it was just $700 billion US taxpayer dollars old. Equivalent on a per capita basis according to Canadian economist Michel Chossudovsky. And Canada's big six banking monopoly has actually been bailed out by Canadian taxpayers several times since deregulation began in the 1980's, including the great bank robbery of 1991 before Brian Mulroney exited stage right in avoiding to face the electorate.Tory times have been bad times for workers and increasingly indebted Canadians

 

 

janfromthebruce

thanks Spector

M. Spector M. Spector's picture

Looks as if you didn't read the thread before you posted here, tostig. You are simply restating what Alice Klein said in the article in the OP. We have already dealt with this "hoarding" thing at length.

M. Spector M. Spector's picture

[size=20]DO NOT CLICK ON THE LINK IN THE POST ABOVE AT #61[/SIZE]

It's a [b]browser hijack[/b].

Post has been flagged for the moderators' attention.

 

SCB4

As a self employed person I do find the TSF account helpful for 'rainy day' planning. I once had to withdraw some of my RRSP savings when I was unable to do much work for 3 months (caring for my father recovering from a heart attack). Ever had to pay the withdrawal penalty? Now THAT is a gift to the banks!

 

Lard Tunderin Jeezus Lard Tunderin Jeezus's picture

So the convenience and benefit to some of us outweighs the inherent inequality here? Has babble become the new home of the "I'm all right, Jack" political philosophy?

M. Spector M. Spector's picture

[url=http://www.theglobeandmail.com/globe-investor/personal-finance/tfsa-move... the overcontribution and other loopholes[/url]

Quote:

In an announcement released late Friday [Oct. 16], the Finance Minister unveiled a series of changes designed to clamp down on "inappropriate transactions to draw excessive benefits." The changes, which kicked in on Saturday, aim to eliminate schemes that involve investors making deliberate over-contributions or unapproved investments because the tax-free gains exceed the penalties.

The first loophole Mr. Flaherty is trying to close is [b]deliberate over-contribution[/b], where people put money into their tax-free accounts in excess of the annual $5,000 limit. The old penalty for going over the limit was 1 per cent a month tax on the excess contribution. Under the new rules, people will also have to pay a 100 per cent levy on any gains or income they make with the excess contribution, effectively erasing any incentive to earn that money.

One theoretical situation involves an investor putting an extra $100,000 into a TFSA and buying a junior mining penny stock on bets it will be taken over. If the company does indeed get scooped up and the stock doubles, the investor would have to pay a penalty of $1,000 (the 1 per cent a month on the amount of the over-contribution) but would be left with a large gain that is then secure in a tax-free shelter. The new rules will mean that all of the investor's stock gains and/or income from the $100,000 excess contribution will go to the taxman.

"For the average person who invests a little more than $5,000, this is not a big deal. Again, this is targeting people making enormous amounts of over-contribution," Mr. Golombek said.

The government was also concerned about [b]asset transfer transactions[/b], where investors were trying to make gains in the value of their investments by transferring money from their RRSPs and other registered savings plans, which discourage early withdrawals with heavy taxes, to their TFSAs. From now on, TFSA amounts that are "reasonably attributable" to these kinds of transfers will face a tax of 100 per cent.

The last loophole Mr. Flaherty tackled relates to [b]prohibited or non-qualified investments[/b]. It appears some investors were making these investments despite the existing penalties because the gains remained in the accounts even after the offending purchase was removed. Again, under the new rules, any gains on prohibited investments, such as shares of a company in which you own a significant interest, will be taxed at 100 per cent while any secondary income related to non-qualified investments, such as land or general partnership units, will be taxed at regular rates.

Fidel

[url=http://www.progressive-economics.ca/2008/02/26/budget-notes/]Andrew Jackson on TFSAs[/url]

Quote:
Flaherty's long-term legacy to Canadians will be not just the shrunken federal tax produced by corporate tax and GST cuts, but also a new financial vehicle which will eventually result in very significant tax savings for the affluent. Indeed the Budget states that this new measure will, over time, and in tandem with RRSPs, virtually eliminate taxation of investment income for 90% of Canadians. Officials estimate foregone federal revenues of $3 Billion per year within fifteen to twenty years.

TFSA's were a conservative party election gimmick that will cost several billion dollars in lost revenues for federal governments down the road. TFSA's good for financially secure seniors, and some of who represent the greying old line party support base. And may they go gently to that goodnight.

M. Spector M. Spector's picture

Did you read the date on Andrew Jackson's piece?

The loophole closings render it completely obsolete.

Fidel

Not all Canadians can afford to salt away $100G in penny mining stocks, or even so much as $5K a year. Especially not the millions of Canadian adults not earning $10 dollars an hour.

What many Canadians need is an expanded public pension plan as proposed by the NDP. And one in four Canadians with private pension plans are at risk right now with the financial meltdown if their company plans are under-funded. The NDP says workers need front of the line treatment in the case of bankruptcy, like Nortel workers being hung out to dry by our old line party governments at both levels.

contrarianna

M. Spector wrote:

Did you read the date on Andrew Jackson's piece?

The loophole closings render it completely obsolete.

I disagree. There is nothing in the Jackson piece that even hints that he was aware of the embarrassing loopholes that were closed (ie. deliberate over-contribution, asset transfer transactions, and prohibited or non-qualified investments.).
All Jackson talks about is the lost revenue over time from "standard" reinvestment by high earners.
Jackson doesn't even talk about the speculative windfalls--still perfectly legal "qualified investments"--available to the savvy minority of daytraders who play, say, double and triple long and short leveraged funds, or someone who has an insiders tip on a penny stock (not legal, the latter instance, but you can bet it happens with few being caught), etc.

Pages