CP: Harper urged to apologize to Senate which he now needs to kill tax benefits bill

OTTAWA — The Liberal leader in the Senate says the Harper government should apologize for denigrating the upper chamber it's now imploring to kill a costly private member's bill aimed at providing tax benefits to parents saving for their children's education.

"I'm waiting for the dozen roses and a little word of apology for not appreciating the good work that's being done," Celine Hervieux-Payette joked in an interview Saturday.

Hervieux-Payette promised the Liberal-dominated Senate will give open-minded, sober consideration to the bill - both its merits and its potential impact on the government's bottom line - even though some senators may not be inclined to do any favours for a government that has maligned them as lazy, unaccountable, unelected, partisan hacks.

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Still, Hervieux-Payette expressed little sympathy for the quandry the government now finds itself in after two years of slashing taxes and hiking spending, leaving only a tiny surplus to cushion the blow of any unexpected developments.

"If they have put themselves in a straightjacket and they have no margin, we're certainly not going to take responsibility for that."

http://canadianpress.google.com/article/ALeqM5i0b_CrRCukNqjqj7Nw9Lje9tWX-w

In favor of the $5000 tax sheltered RESP. The former is mainly helpful for the very rich (use the future value function in Excel and run the numbers) while the latter helps middle and lower middle class families.

I agree the $5K savings plan will mostly benefit the upper income groups, but I don't see why the $5K resp won't do exactly the same thing.

Whenever you have a tax break built around savings, it will always end up benefitting disproportionately people who have the income needed to allow for savings.

If you want to do anything progressive using taxes, you have to do it through the income tax system, since this is the only type of taxation we have that adjusts benefits according to income levels.

- B

First is that it is to be capped at $50,000 lifetime, whereas the other "savings account" has no upper limit, other than the human lifespan ($5000 per year for as long as you live after 18).

Secondly is that the RESPs are targeted for post-secondary education, so they are a tax shelter but one with constraints, and one that serves a socially useful goal.

I agree that tax sheltering RESPs doesn't help lower income groups much (the same is true of RRSPs). But the RESP idea is much better than the $5000 per year savings plan.

Here is a little math, so that people can get a feel for what a benefit this plan (the $5000 savings plan) is to the rich:

A person who put $5000 per year into these accounts from age 18 to age 65 at 5%, could shelter some $655,000 from taxes. If that same person got married at age 28 and put in $5000 for their spouse, the tax sheltered amount grows to a cool million.

Most people can't afford to sock away $5000 per year for their whole life, but this would be nothing for a person who came from a truly wealthy family. I note that the CD Howe institute is already lobbying to increase the yearly contribution, to $15,000, to match Britain. At that rate (and a 5% return), a rich family could shelter over 3 million from age 18 to 65.

Not everyone is in such a situation.

Some 85% of women (similarly for men) have at least one child over their lifetime, so the RESP idea taps into a large political constituency. And even those people whose children are past post-secondary will generally still have grandchildren, or the expectation of grandchildren, so they are likely to be supportive of any plan that is directed at saving for PSE.

Granted, the childless are left out, but politically they are a fairly small group. And they usually have nephews and nieces, so they will tend to go along.

Now, RESPs may not be the best way to fund post-secondary, but that's another debate.