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AFFORDABLE HOUSING NOT PART OF CONSERVATIVE PARTY DEFINITION

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AFFORDABLE HOUSING NOT PART  OF CONSERVATIVE PARTY DEFINITION

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice).

“Creb now” (published by Calgary Real Estate Board) June 24 to June 30, 2016 states:

‘housing officials increasing rates of overcrowding or “underhousing”  in Calgary’s housing market….Resolve says about 3,500 Calgarians were considered homeless in a recent survey, with about 14,000 at risk for homelessness – and that doesn’t include people “couch-surfing”…we know fundamentally that number is up.  It’s hard to get a handle; people are one paycheque away (from homelessness) or aren’t in appropriate housing.’

 

Appropriate housing definition is interesting.

‘Under the Social Housing Accommodation Regulation, such housing is considered overcrowded if more than two people must share a bedroom, with at least one individual in each of the other bedrooms, and if an individual over 18 “must share a bedroom with another member of the household,” or someone over the age of five has to share a bedroom with “an individual of the opposite sex.”  (Spouses or partners sharing a bedroom don’t count)…..”Affordable housing is intended to be appropriate housing-appropriate to needs of families.   If children age in place or additional children are welcomed into a family, they can transfer within the system…subject to availability.”

“Calgary Herald”, June 29, 2016 ‘City takes aim at failing affordable housing plan” states:

‘just 1,048 new affordable housing units created in Calgary over the past 14 years, the need for affordable housing was great in 2002 and it remains so today.  Calgary has half the amount of affordable housing as the national average, and a total of zero affordable housing units have opened in the city in the past three years….the city wants to see 1,500 affordable housing units built in the next two years – more than the number built in the past fourteen years – and staff believe it’s a goal that’s possible given money pledged from the provincial and federal governments, both of which have recently signalled a renewed commitment to affordable housing. Housing a homeless person has been shown to save taxpayers $34,000  annually….Currently 88,000 Calgary households earning less than $60,000 are in need of affordable housing.’

ANALYSIS

Married or coupled family units tell singles to go live with someone if they are having financial problems.  According to the definition above of appropriate housing this means singles appropriately should not live in a one bedroom apartment with one person couch-surfing, but should live in at least a two bedroom apartment.  By the above definition married or coupled family units with no children can live in a one bedroom apartment.

Affordable housing units of 1,048 divided by 14 years equals only a total of about 74.9 affordable housing units having been developed annually in Calgary.  In fact, zero units were opened in the last three years.   Calgary has 1.23 million population as of 2015.  The number of affordable housing units for a city this size is pathetic.

Alberta has essentially been under Conservative government for many years.  Alberta had a Conservative party in leadership for 40 years until New Democratic Party won the election last year.  During the Conservative reign (particularly in the latter years) money was squandered in what were essentially boom years because of the oil boom.  Oil, government and business persons and families became wealthy because of Conservative policies which favoured the rich. The Conservatives always talked about the Alberta Advantage. Federally, the Conservative party was in leadership for ten years until the Liberals won the election this year.

Right wing Conservatives have done nothing to provide affordable housing for singles and poor families except to line their own pockets and the pockets of their voters.  Just what is the purpose of politicians and political parties if they don’t provide government by the people and for ALL the people? Singles and the poor are not considered to be part of the ‘people’ definition.  There never was an Alberta Advantage for singles and poor families, only for the rich and the middle class.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

MARRIED OR COUPLED FAMILY UNITS MORE ABLE TO WORK THEMSELVES TO RICHES WHILE SINGLES WORK THEMSELVES TO ‘DEATH’

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MARRIED OR COUPLED FAMILY UNITS MORE ABLE TO WORK THEMSELVES TO RICHES WHILE SINGLES WORK THEMSELVES TO ‘DEATH’

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice).

The July 3, 2016 post “Boutique Tax Credits Pushing Singles Into Poverty-Part 2 of 2”  (credits) outlined how married or coupled family units are generally able to achieve greater wealth because of tax credits.  This post will discuss how married or coupled family units with multiple sources of income will likely achieve greater wealth than singles with multiple sources of income.  To achieve the same level of wealth as married or coupled family units, singles would have to work themselves to ‘death’ while paying more income  tax.

Case #2 used information from Financial Post Personal Finance Plan, March 24, 2016 “Couple Sick  of Existing Like College Students Are Living Below Their Means, But Could Use Financial Tuneup” (financialpost).  This case shows how this married family unit, Mark 45 and Cathy 43 with two kids 9 and 12, have already achieved equivalent millionaire wealth in their 40s. They bring home income of $8,670 per month from two jobs and two rental properties. Mark’s job is part time and tenuous. He travels to northern Ontario for his job and to service the rental properties  They say ‘we live like college students, and we are tired of it.’ Financial advice is given on how they can retire at age 65, keep all their properties and have surplus income for travel and pleasure that they now forego.

One could say that some married or coupled family units will work themselves ‘silly’ (like college students) while singles are often told they are spendthrifts, selfish and don’t work hard enough.  In order for singles to achieve the level of wealth this couple has, they would have to work two or three jobs, pay more tax and not get the same tax credits this couple does.  In other words, they would have to work themselves to ‘death’ or to poor health.

Just one example of taxes that all family units most likely will have to pay is 2015 federal taxes of 15% on taxable income up to $44,701, 22% on income $44,701 to $89,401, 26% on income $89,401 to $138,586 and 29% over $138,586.  It is agreed that each person in family units of singles or married  family units pay the same taxes per employed person; however, the married family units with children will get multiple family tax credits, thus paying less tax.

CONCLUSION

It is absurd how singles are perceived to be able to achieve same financial success as married or coupled families unit with children, but when observations using cold, hard down to basics math are used, it quickly becomes apparent that singles and early divorced (with and without children) are unable to achieve same financial success except with $500,000 salaries, huge inheritances or winning the lottery.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

FINANCIAL POST PERSONAL AND FAMILY FINANCIAL PROFILES STAR RATINGS-Part 2 of 2

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FINANCIAL POST PERSONAL AND FAMILY FINANCIAL PROFILES STAR RATINGS-Part 2 of 2

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.)

(six-reasons-why-married-coupled-persons-are-able-to-achieve-more-financial-power-wealth than singles)

(Andrew Allentuck from the Financial Post oversees the personal and family finance profile evaluations.  Anyone can submit their financial profile to the Financial Post for analysis by a financial planner.  Some of these cases have been used in this blog.  It is helpful to know the background behind these financial analyses.  In Part 2 of 2 the following information outlines the top ten questions that the Financial Post receives regarding these financial profile evaluations.  The blog author’s comments re questions are entered below some of the questions.)

Financial  Post, December 22, 2012 “THE TOP 10 FAMILY FINANCE QUESTIONS OF 2012 (financialpost)

‘….In hundreds of letters to Family Finance requesting assistance and commenting on the problems folks face in paying their bills, 10 top issues emerged:

  • Debt…a 1.0% interest rate increase on a home equity line of credit will turn a $100,000 interest-only loan floating at 3.5% or $3,500 to a heftier $4,500 a year…

  • Tax shelters Inability to make the most of RRSPs, RESPs, TFSAs and, for those who qualify Registered Disability Savings Plans (RDSPs) spurred many readers to ask how they could sock away more money and which choices in the alphabet soup of these plans would be most tax efficient.  

  • Downsizing Family transition from children to empty nests and the need to raise cash for retirement spending came up in more than half of our cases.  The amount of money that can be raised or the amount of debt that can be liberated depends on the market price of home or cottage.  Where prices are very high – think Vancouver, Victoria, Calgary and Toronto – readers sensed that they could  take a profit over cost, especially if they had owned the home for many years, pay debts and have cash left over for a smaller home or for renting….’

Comment:  The unfortunate truth is that many seniors (married or coupled and widowers) living in their expensive big homes do not want to downsize.  Many financial assistance programs have been implemented included house tax assistance and renovation assistance.  Many singles and poor families, however, do not have the ability to own big expensive homes.  Singles are told they can move or go live with someone if they have problems  with housing.  It is primarily only wealthy families that have cottages or second properties, motorhomes and other expensive toys.

  • ‘Children Couples and those expecting a first child wrote in dozens of cases to ask what is the cost of raising a child.  A 2011 study by the Manitoba Department of Agriculture suggested that a child born in 2010 would set its parents back by $191,665…..’

Comment:  Some statistics give a figure of $250,000.  To 18 years of each child, this amounts to $13,889 per year and $1157 per month.  It is difficult to understand why parents (beyond replacing themselves with two children) would have three, four, five children when they know they won’t be able to support themselves and their children within the parameters of their budgets and salaries. When it is known that there is a world population explosion and the earth will not be able to sustain this population explosion, why would responsible parents have more than two children?

  • ‘Boundaries It is one thing to know the statistics of child-rearing expense and another to  manage it.  Readers asked many times how much they could afford to give their kids for RESPs and for activities while at home.  It was common to find cases in which parents, strapped for money, spent $400 to  $500 a month for sport yet could have cut down on hockey and put enough money into RESPs to qualify for maximum government grants.  Indulgences included foreign travel with parents and money for cars for teenagers.  When the parents wound up strapped for cash, it was clear that they had failed to set boundaries on what they would spend and what they might ask their older children to earn to support their sports, hobbies and travel.’

Comment:  Straight from a financial person’s mouth-married or coupled families with children often don’t set boundaries in reality to what they can afford.  However, singles are often told they spend too much and are selfish even though they don’t have the same financial income and assets as married or coupled families with children.

  • ‘Limits to portfolio growth

  • Understanding risk

  • Insurance Virtually every reader has insurance for his home and car, but life insurance is another matter.  A third of  our readers need more insurance than they have to cover to risk that the single breadwinner in a family could die prematurely.  Another third have inappropriate coverage with costly whole life that builds cash value slowly, or universal life they (and many financial analysts) can’t understand.  The remainder need to adjust their coverage up or down with how their lives have changed.  The math within life insurance is complex, the tax breaks that life insurance can afford are valuable, and the protection against many creditor claims life insurance can provide are precious, but few readers  understand how intricate a product life insurance is.’

Comment:  Life insurance should be made mandatory for all married or coupled family units, just like home and car insurance.  Life insurance should replace all boutique tax credits directed towards widowers as they are now technically ‘single’.  Ever singles and divorced persons do not get benefits that widowers get and are, in fact, helping to support widowers with these benefits. Also, education on term insurance as the most cost effective insurance needs to be promoted.

  • ‘Retirement age A generation of readers grew up aspiring to retire at age 55.  Two-thirds of the letters to Family Finance raise the question of how they can get enough money to retire then or a little later.  Today, the mid-50s goal is so 1980 – before the crashes of the dot-coms, 9/11 and the 2008 debt crisis.  In fact, few readers have sufficient capital to make it to 55.  Instead, working another decade to 65 or even 67….is necessary.  Working longer not only allows more savings, it postpones the time that retirees have to start drawing down their capital.  Working longer also provides a reason to get up in the morning, maintains associations, and even sustains credit ratings.  Full retirement at age 55 is an idea whose time has come and gone for most.’

Comment:  Again, straight from a financial person’s mouth-married or coupled family units seem to believe they can retire early after having received multiple family tax credits, and then be able to pension split without paying very little for these credits.  Many singles have to work longer while paying to help support married or coupled family units and the multiple tax credits they receive.  Singles receive very little of these tax credits.

  • ‘Make a budget Many requests to Family Finance ask for help making a budget.  Readers regard having a set of rules as a key to meeting savings goals for their kids and retirement.  Where cash is tight, a set of rules for the road is surely a good  idea.  Just thinking about what categories of spending should have various allocations each month is helpful.  Mundane it may be, but writing a budget can be a first step to sound family finance.’

Comment:  Everyone should have a budget.  In addition to family budgeting, parents need to teach their children about budgeting, the Rule of 72 and what the real costs are for items like expensive sports activities.  If singles are thought to be spendthrifts and selfish, maybe it is because their parents never taught them anything about finances.  Or, maybe it is because married or coupled family units with children don’t even to try to understand what it costs single persons to live once they leave  home.  More married or coupled family units with children need to educate themselves on all the benefits they receive, how little they are paying for these benefits and what it is costing other family units like singles to support these benefits that they, themselves, do not receive.

CONCLUSION

It would be helpful if all citizens learn to take responsibility for their own financial well-being instead of looking to others to support them in the form of government tax credits. The present upside down financial situation of giving to the wealthy (particularly married or coupled or family units with children) while making them pay less needs to be reversed so those who truly need assistance receive this assistance (poor singles and poor families with children).  It is absurd that the wealthy are accumulating huge inheritances like TFSA accounts without paying taxes on these accounts.  It is absurd that the wealthy parents want to leave huge inheritances for their children, but do not wish to give up assets like big houses while receiving tax credits such as house tax financial assistance and pension-splitting.  It is absurd that governments do not take into accounts assets as well as income when handing out tax credits.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.)

FINANCIAL POST PERSONAL AND FAMILY FINANCIAL PROFILES STAR RATINGS-Part 1 of 2

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FINANCIAL POST PERSONAL AND FAMILY FINANCIAL PROFILES STAR RATINGS-Part 1 of 2

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice).

six-reasons-why-married-coupled-persons-are-able-to-achieve-more-financial-power-wealth than singles.

(Andrew Allentuck from the Financial Post oversees the personal and family finance profile evaluations.  Anyone can submit their financial profile to the Financial Post for analysis by a financial planner.  Some of these cases have been used in this blog as in last post.  It is helpful to know the background behind these financial analyses).

Star ranking system as stated by Allentuck is as follows (top rating is five stars):

Financial Post, December 21, 2013 “HOW MANY STARS DOES YOUR RETIREMENT DESERVE?” (financialpost)

*One star means the potential retiree is in a troublesome place.  Few people who write to Family Finance are in the level at which there is no way to sustain a way of life without such major transformations as selling a home to raise cash, working to age 68, 70, or even 72 or telling children for whom money has not been set aside for post secondary education that they will have to finance it on their own.

In this category are people with business failures from which they have not recovered, low paying jobs, and modest savings.  Some one star cases involve what may be called “elective poverty”. The result is that the individual will have no hope of maintaining the present, rather modest standard of living.

Blog Author’s comment:  That ‘few people who  write to Family Finance are in this level’ explains why there are so few singles without children in these profiles.   Many singles and the poor fall into this category.  They are often told they cannot afford to buy a house and put money into savings.  They can only do one or the other, not both at the same time. Singles are often told they have to work longer than married or coupled person families to achieve a decent retirement lifestyle.  Many families with children seem to  make bad financial choices like putting their boys into hockey or going on yearly family vacations instead of, for example, maxing out RESP contributions to get the government grant.

**Two stars means that present savings and pensions will be insufficient to maintain a desired way of life, but that with time, perhaps restructuring of debt to eliminate loans with double digit interest rates, perhaps sale of a cottage and downsizing to one car, a retirement plan will be reworkable.  Some Family Finance cases get two stars as a result of divorce splitting assets that would have been adequate for two people sharing expenses but that are inadequate when savings have to support two  homes and when, as a result of loss of spouse, pension splitting is no longer possible.

Blog Author’s comment:  For singles and the poor the sale of a cottage is out of the question because they have no cottage to sell.  Straight from a financial person’s mouth – some profiles ‘get two stars as a result of divorce splitting assets that would have been adequate for two people sharing expenses but that are inadequate’ to support an individual and pension splitting is no longer possible.  This blog has stated over and over again that married/coupled family units require less money to live and pension splitting is financially discriminatory to singles and poor.  Singles are not able to pension split and poor families receive less value from pension splitting than wealthy married or coupled persons.  Many singles and poor families get two stars simply because they are financially discriminated against by not receiving equal benefits to wealthy married or coupled family units.

***Three stars means that a person or couple is on track for retirement as planned.  Debts may have to be reduced or a job stretched for a few more years, but time will be an ally.  A modest rate of return on conservatively invested assets and continuing or perhaps increased savings rate will achieve sufficient capital to produce investment income, perhaps bolstered by expected benefits from government and private pension plans.  At this level, it may be necessary to trim expenses to raise the rate of savings, but the machinery for a satisfactory retirement is in place.  It may be useful to suspend savings to pay down debt, then, when money is no longer draining to pay interest, to  restore savings and add what has been spent on debt service to retirement savings.  This financial engineering works on a solid foundation for asset growth.  Most Family Finance cases get this average but satisfactory rating.

****Four stars means a retirement plan is well conceived and that restructuring of savings or assets or lowering of expectations will not be needed.  There may be a need to reduce the costs of generating income, for example, by shifting from mutual funds with high fees to exchange trade funds with low fees.  This level is an adjustment process, not a restructuring of personal finances.  Many people with defined benefit pensions get four stars.  Their pensions are managed by experts, the management fees they pay are low and payments are guaranteed no matter what happens, for investment risk is borne by managers, not beneficiaries.

Blog Author’s comment:  Regarding statement ‘many people with defined benefit pensions get four stars’, benefits received from defined benefit pensions depend on how many years employee has contributed to the pension plan.  A few years of contributions will yield a very small pension.  Also, married or coupled person family units fail to realize that singles get less from defined benefit pensions because they have to pay more taxes on their pensions and cannot pension split.  Defined benefit pensions are inherently financially discriminatory to singles because survivors of the spouses get survivor benefits, but survivors have not contributed to the plan.  When spouse of plan deceases then whatever is remaining should be willed to the surviving spouse, just as single’s remaining benefits are willed to his or her estate.  Surviving spouse should treated equally to a single, after all, they are now ‘single’.

*****Five stars means that the person or couple will have sufficient income for living as planned.  If nothing changes, the plan will work and sustain income at the required level.  The five star evaluation is, in a sense, a level at which people with average jobs will not have suffered such crises as asset division in divorce, major investment loss or ill health forcing premature retirement.  Structurally, at the five star level, retirement income source are diversified with substantial pensions and a clutch of investments to provide discretionary income.  Most people with five stars have defined benefit pension plans and almost all have two breadwinners.

Blog Author comment:  It seems most profiles presented in the Financial Post do not achieve five star status even with a million dollars or more in assets.  Again from financial person’s mouth, in regards to two breadwinners, it is almost inherently impossible to a singles to achieve same financial retirement wealth as married/coupled persons unless they ‘work themselves to death’ with addition of part time or full time job in addition to regular job.  Many single parents are forced to work more than one job to make financial ends meet.

Allentuck provides the following methodology for rating retirement readiness:

  • Savings rate:  if savings are 10% or more of disposable income, score 1 point, if 20%, 2 points, if 30% 3 points, etc.  If less than 10% of disposable income, then no stars.

  • If job has a defined benefit pension, add 3 points.  If indexed plan, add 1 more point.

  • If there are no significant debts other than credit card charges paid each month, add 2 points.  If debt service costs are 20% or more of take home income, take off 1 point, if 20% of take home income, take of 2 points, etc.

  • If spouse can split eligible pension income, add 1 point.  If no spouse to split, take off 1 point.

  • If you have ten or more years to retirement add 2 points.  If less than 10 years, add 1 point.  If retired, 0 points.

  • If total investments both registered and non-registered less debts equal 20 or more times estimated annual pre-tax retirement income, add 5 points.  If 15 times estimated retirement income, add 4 points.  If 10 times, add 3 points.  If less than ten times estimated retirement income to two times retirement income, there are no points.  If negative net worth, deduct 5 points.

  • If total after tax retirement income is 120% of estimated retirement expenses, add 2 points, if 100% of retirement income, add 1 point.  If 90%  of retirement income, take off 1 point for each 10% it is less than estimated retirement expenses.

  • TOTAL:  If you have 10 points or more, you would probably get 5 stars.

Blog Author’s comment:  The five star rating and point system is interesting and does provide value in determining retirement readiness.  It also shows some of financial discriminatory aspects that governments perpetuate against singles and poor families. The system also continues to hide salient details as to why singles and the poor face financial discrimination and are unable to attain same financial power and wealth as married or coupled family units.

Savings rate:  Only the wealthy will receive top points because they have the most disposable income.  Defined pension benefits:  Benefits received depends on how many years of contribution there were and, as stated above, pension plans are inherently financially discriminatory to singles and the poor.  Three points will have more value to a married or coupled family unit  than they will to singles because of this discrimination.  Pension splitting:  Straight from financial person’s mouth, pension splitting is financially beneficial to married or coupled family units.  Singles will never get this point and, in fact, will lose one point because there is no spouse to split pension income with.  Total Investments:  The wealthy and married or coupled family units generally will have been able to accumulate more investments than singles and the poor; therefore, they will get more points in this rating system.  Total after-tax retirement income:  It is interesting to note many of the married or coupled family units profiled in the Financial Post cases will have even more retirement income with less expenses than while earning income and raising children.  This is because they are able to accumulate more wealth and have received many government benefits, so they will receive more points.

It is ironic that singles most likely are inherently excluded from receiving  a total of five stars because they receive less value from their defined benefits pensions and can never get the one point for pension income splitting and actually have to take off one point.  As stated those most likely to receive five stars have two breadwinners as opposed to one.

Financial Post, December 26, 2012 “THE MAKING OF FAMILY FINANCE” (financialpost)

QUOTE:  ‘The question is a common thread in our email messages and Web comments:  Why don’t you look for real problems of lower-income people who really need free financial advice?  For the record, the after-tax income of about 50% of those who ask for our help is in the range of $58,000 to $65,000 for families with two parents working and $45,000 to $55,000 for single people seeking our help.  About 30% have incomes between $100,000 and $200,000 a  year.

We hear from a few people, about 5% of inquiries, with incomes over $200,000.  And 15% have incomes below $35,000 a year.  So the vast majority of the 40 inquiries or so we receive every week fall between $58,500 and $200,000 a year.

We take on few cases of folks with incomes over $200,000 since, at that level, people can afford accountant and portfolio managers.

Those on the lower end of the scale also often fall off before reaching the final stages of our analysis because for many there is just no constructive advice on debt management and investment solutions to be offered.  When money is so tight, there is little room for creativity and finessing financial plans.’

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

BOUTIQUE TAX CREDITS PUSHING SINGLES INTO POVERTY-Part 2 of 2

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BOUTIQUE TAX CREDITS PUSHING SINGLES INTO POVERTY-Part 2 of 2

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.

six-reasons-why-married-coupled-persons-are-able-to-achieve-more-financial-power-wealth

(The last two posts discussed how detrimental boutique tax credits can become to the financial well-being of a country and its citizens.  These were based on ‘Policy Forum:  The Case Against Boutique Tax Credit and Similar Expenditures’ by Neil brooks (abstract).

This post itemizes four personal finance cases showing how certain family units may benefit far more  than other family units like ever singles and singles with children).

CASE 1 – Financial Post Personal Finance Plan, June 11, 2016 – ‘Farm Plan Risky for Couple with 4 Kids’ (financialpost)

Ed age 32 and Teresa 33 have four children ages 5, 3, 1 and newborn in British Columbia. Ed works for a government agency, Teresa is a homemaker.  At age 32 and 33, already have a net worth of $502,000 ($208,000 home not in the Vancouver area fully paid and $177,000 land with $37,000 (21%) mortgage.  They would like to sell their house, move out of town and set up a small farm.  Ed would give up his government job and secure income by selling eggs and produce.  Would like to retire with about $4,000 in present-day dollars and after tax.

Ed brings home $2,680 per month plus tax-free Canada Child Benefit (CCB) $1,811 for their four children, all under the age of 6 for total family disposable income to $4,491 per month (CCB is about 40 per cent of take-home income.  (When all four children are ages 6 to 17, the CCB will be $1,478 a month based on 2016 rates).

Financial Planner’s Recommendations – Maximize Registered Education Savings Plans (RESP), so they can capture Canada Education Savings Grant (CESG) of $500 per beneficiary for total of $7,200 (three per cent annual growth after inflation would generate about $270,000 or about $67,500 per child for post secondary-education).  Advice is that Ed continue working until the age of 60 and when the youngest child is 18.  Advice is also given for purchase of the farm, details of which will not be discussed here.  Each spouse would add $5,500 to their TFSAs for every year until Ed is age 60.

At retirement, if Ed retires at age 60 and Teresa continues as a stay at home spouse, in 2016 dollars they would have a total pre-tax income of $68,495, or $5,137 per month to spend after 10 per cent tax and no tax on TFSA payments.  At age 65, they would have total income of $86,163 with no tax on TFSA payouts and pension and age credits or $6,460 a month to spend.

If they follow financial planner advice for retirement at age 60 and maxed out contributions of RESPs and TFSAs, rough calculations show they will have received approximately $339,000 child benefits, $308,000 tax free TFSA savings  and $28,800 RESP government grants for total $675,800.  This does not include all possible benefits from other sources such as provinces, GST/HST credits and interest generated from investments.  If Ed is deceased before Teresa, as a widower Teresa will receive even more benefits as a survivor with survivor pension benefits.

All things remaining the same their assets at age 60 with farm/house $485,000, RRSP $48,000, and TFSA $349,000 will equal a total of $882,000.  So, at age 60 they will have assets close to millionaire status while paying very little in taxes.  (Financial Post rating – two stars out of five).

CASE 2 –  Financial Post Personal Finance Plan, March 24, 2016  ‘Couple sick of existing like college student are living below their means, but could still use a financial tuneup’ (financialpost)

Ontario couple Mark 45 and Cathy 43 have two kids 9 and 12 and bring home $8,670 per month ($7,000 from jobs and net rent income $1,670 from two rental properties that produce good income  in North).  At ages of 45 and 43 they already have assets of $1,480,272 including RRSPs of $300,322, liabilities of $536,315 for net worth of $943,957. Their two cars are 10 and 15 years old.  They feel like they are living like college students. Mark’s job is not secure and produces a lot of stress. They have not contributed to children’s RESP and 130 year old house requires repairs.

Financial planner advice is to restructure their finances, put money into RESPs for children and maximize RRSPs.  Both spouses have defined benefit pension plans from past employment..

At retirement pensions, RRSP, rental income and CPP/OAS at age 65 would generate  pre-tax income of $105,672.  After age and pension splitting, after-tax income at 16% tax would be about $7,400 a month.  Financial planner states they would have surplus income for travel and pleasure which they now forego, (plus they will still have assets of home and rental properties). (Financial Post rating – four stars out of five).

 

 

CASE 3 – Financial Post Personal Finance Plan, May 21, 2016 ‘Home Ownership Possible but Tight’ (financialpost)

Jessica, age 54 lives in Ontario and has three grown children.  She would like to buy $150,000 house in small town Ontario.  Assets are $40,000 LIRA, $2,400 in TFSA, $10,000 RRSP and $19,000 in company defined contribution pension plan, car $10,000 and debts of $10,700 for $70,400 net worth total.  Her take home pay is $3,315 per month. She puts $240 in TFSA, $100 in RRSP and $300 in non registered account per month. “Her outlook is to retire in 10 years, but that will be struggle.  She has to make a middle income (so stated) go a long way”.

Financial planner advice is to pay off debts in nine months.  Advice is given for purchase of a home with three per cent twenty five year mortgage and saving for retirement but it will be on a financial shoestring.  At retirement and after age and pension credits and 10% tax, she should have take home pay of $2,300 per month.  Final comment:  “her retirement will be hostage to unexpected expenses.  But she will have the security of a home of her own”.  (Financial Post rating two stars out of five).

CASE 4-Public Service Canadian employees

In same job/wage categories with 2013 annual income around $67,000 for never married singles, no children (calculations may vary slightly in provinces regarding tax and other deductions) approximate payroll deductions include income tax $11,000, CPP and EI $3,200, union dues $900, public pension contributions $5,300, RRSP deductions $3,500, parking $1,200, health premiums and insurance $600, for total of $25,700.  This leaves $41,300 take home yearly income or $3,441 per month.

personal finance cases 1

personal finance cases 2

CONCLUSION

The above four cases show four distinctly different cases, two family units with children, one single parent family unit with children and one family ever single family unit.

  • It is astounding how two parent family units with children can accumulate wealth while single parent and unattached person family units struggle to live on on $3,300 and $3,400 after tax dollars per month or $39,600 and $40,800 annually while working and into their retirement years.
  • It is absurd that tax credits should comprise 40 per cent of a family’s income when  they have the ability to become wealthy enough to not have to pay mortgage or rent. In some provinces, singles cannot have assets of more than $7,000 to get affordable housing, so why should families have assets of half a million dollars and still get full child tax credits?
  • It is absurd that a family unit never pay full taxes at any time during child rearing years only to have the ability to retire early at age 60 and have more retirement income than they had during child rearing years  and have paid little or no taxes.
  • It is absurd to claim poverty because of what it costs to raise children when in age thirties and forties family units with children already have assets of half a million dollars and higher.
  • It is absurd that married/coupled family units with children in retirement pay less than 20 per cent in taxes on very healthy retirement incomes because of pension spitting and other credits.  Where is fairness when they pay same or less level of taxes as singles on lower incomes?
  • Financial planner calls Jessica’s income middle class, but she has difficulties living on it.
  • Married or coupled family units possibly have a much better retirement life than singles in family units with and without children.  (Singles with children generally have the greatest financial struggle).
  • Life during working years is just as difficult for singles as it is for married or coupled family units.
  • Government, politicians and families need to consider all family units in financial formulas.  These should be based on equivalence scales to provide financial fairness for all family units.  Financial fairness should include not only income, but also assets.
  • It should also be stated that when examining many of the Financial Post profiles for divorced persons with children, particularly those beyond child rearing years, many appear to have assets beyond $750,000.  How is this possible?  One reason might be inherited wealth.  Second reason which has been stated over and over again in this blog is the ability for married/coupled persons with children family units to gain wealth and, therefore, already have considerable wealth when they are divorced later in life.

LESSONS LEARNED

IT IS INHERENTLY WRONG FOR GOVERNMENTS TO NOT INCLUDE ASSETS AS WELL AS INCOME WHEN DOLING OUT TAX CREDITS.  THESE CREDITS SHOULD BE GIVEN TO THE POOR, NOT THOSE WITH LOW INCOME AND WEALTHY ASSETS.  BETTER YET,  TAX CREDITS SHOULD  BE COMPLETELY ELIMINATED AND REPLACED BY TAXES WHICH ARE BASED ON  INCOME AND ASSETS.

(This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice).

BOUTIQUE TAX CREDITS PUSHING SINGLES INTO POVERTY-Part 1 of 2

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BOUTIQUE TAX CREDITS PUSHING SINGLES INTO POVERTY-Part 1 of 2

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice. (six-reasons-why-married-coupled-persons-are-able-to-achieve-more-financial-power-wealth)

(The last two posts discussed how detrimental boutique tax credits can become to the financial well-being of a country and its citizens.  Boutique tax credits once they have been implemented are very hard to repeal because of voter sense of entitlement.  These were based on ‘Policy Forum: The Case Against Boutique Tax Credit and Similar Expenditures’ by Neil brooks).  This post was updated on July 8, 2014.

This post itemizes a personal finance case showing how certain family units benefit far more from boutique tax credits than other family units like ever singles.  One could say this case is totally bizarre in how benefits can be doled out in excess while recipients pay little or no tax).  This post was updated on June 24,  2016.

CASE 1 – Financial Post Personal Finance Plan, June 11, 2016 – ‘Farm Plan Risky for Couple with 4 Kids’ (financialpost)

Ed age 32 and Teresa 33 have four children ages 5, 3, 1 and newborn in British Columbia. Ed works for a government agency and Teresa is a homemaker.  At age 32 and 33, they already have a net worth of $502,000.  Their $208,000 home is not in the Vancouver area and is fully paid for.  Their land is valued at 177,000 with $37,000 (21%) owing on the mortgage.  They would like to sell their house, move out of town and set up a small farm.  Ed would give up his government job and they would get income by selling eggs and produce, hopefully at a profit.  Their plan is to retire comfortably and securely with about $4,000 in present-day dollars and after tax.  At age 32 and 33, they also already have a net worth of half a million dollars ($502,000).

 Ed brings home $2,680 per month.  They will receive the new, non-taxable Canada Child Benefit (CCB) (brought in by the ruling Liberal Party to replace the Conservative Universal Child Care Benefit) at $1,811 for their four children, all under the age of 6.  This brings their total family disposable income to $4,491 per month.  The CCB makes a huge difference by contributing about 40 per cent to take-home income.

(When all four children are ages 6 to 17, the CCB will be $1,478 a month based on 2016 rates).

 

 

boutique tax credit case 1

Financial Planner’s Recommendations – Apply $17,000 cash already reserved for kids to Registered Education Savings Plans (RESP), so they can capture the Canada Education Savings Grant (CESG) of the lesser of 20 per cent of contributions or $500 per beneficiary.  Using the children’s present ages of 5, 3, 1, and one month, subsequent annual contributions of $2,500 per child plus the $500 CESG (to a maximum of $7,200 per beneficiary) with a three per cent annual growth after inflation would generate a total of about $270,000 or about $67,500 per child for post secondary-education.

Re job, advice is that Ed continue working until the age of 60 and when the youngest child is 18.  Advice is also given for purchase of the farm, details of which will not be discussed here.  Each spouse would add $5,500 to their TFSAs for each year until Ed is age 60.

Re retirement, if Ed retires at age 60 and Teresa continues as a stay at home spouse, in 2016 dollars he and Teresa would have his $26,208 defined benefit pension and the $7,200 bridge, Registered Retirement Savings Plan (RRSP) payments of $5,727 a year and Tax Free Savings Account (TFSA) payments of $29,360 for a total pre-tax income of $68,495, or $5,137 per month to spend after 10 per cent tax and no tax on TFSA payments.  At age 65, Ed would lose the $7,200 bridge but gain $11,176 in annual Canada Pension Plan (CPP), plus Old Age Security (OAS) payments of $6,846 each spouse, for total income of $86,163 with no tax on TFSA payouts and pension and age credits.  After tax, they would have $6,460 a month to spend.  Both before and after 65, they would have achieved beyond expectations their goal of $4,000 monthly income.

The unknowns of this plan are the cost of farm and whether it will make a profit.  The financial  planner states:

 “As a retirement plan, it is a wonderful goal.  As a financial endeavour, it is speculative.”

ANALYSIS

All calculations in 2016 dollars and assumes there is no wage increase for Ed and Teresa will remain stay at home spouse and all federal benefit plans and credits will remain the same.

Child benefit non taxable:

All four children up to and including age 5 – $1,811 per month times 12 months times 5 years (not fully calculated for age)  =  approximately $108,000

All four children age 6 up to and including 17 –  $1,478 per month times 12 months times 13 years = approximately $231,000

Total benefit for eighteen years = approximately $339,000

TFSA contributions in after-tax dollars and tax free and not including interest earned $5,500 times two persons times to sixty years of age (Ed) $11,000 times 28 years = $308,000

RESP contributions $2,500 per child per year times four equals $10,000 per year plus $500 up to maximum $7,200 grant per child will generate with three per cent growth a total of about $270,000 education savings for children.

$7,200 grant per child times four = $28,800.

Retirement – they want to retire at age 60, will pay only 10 per cent tax on $68,495 pre-tax including tax-free TFSA income or $5,137 per month.  At 65 they will have total income of $86,143 and  with pension splitting will have $6,460 after-tax monthly income (not able to calculate total benefits received).

These calculations do not include other possible GST/HST credits and tax credits offered by the provinces (example: BC Low Income Climate Action Tax Credit even though this family unit of six will use far more resources affecting climate change than a family unit of one person).  These calculations also do not include benefits of reduced fees, etc. that families get, but ever singles do not.

If Ed retires at age 60, when his youngest child is age 18, he will never have worked a year where full taxes were paid.

All things being equal, this couple will receive benefit upon benefit from present year to when they retire at age 60 and beyond age 65.  If Ed is deceased before Teresa, as a widower Teresa will receive even more benefits as a survivor with survivor pension benefits.

In reality,  they likely will receive approximately $1 million dollars in benefits which is essentially the cost of raising their children and their children will have healthy education accounts.   The parents will retire with even more income than they had while raising their children, and have accumulated a healthy sum in assets.  With assets and value of assets remaining same at age 60 retirement, parents will  have $485,000 in farm, $48,000 in RRSPs and $349,000 in TFSAs for total of $882,000.  So, they will essentially be close to millionaire status while receiving multiple benefits and paying almost no taxes.

This couple from the time they are married until one spouse is deceased will have received shower, wedding, baby gifts, possible maternity/paternity leaves, child benefits times four children, TFSA benefits times two, reduced taxes, pension splitting, possible survivor pension benefits, and retirement before age 65.

While it is understood that is expensive to raise children, it is bizarre that  parents believe they can raise children, retire before age 65 and pay very little in taxes to support the benefits they believe they are entitled to.  Why should these families get benefits beyond raising their children like pension splitting when they have huge TFSA tax free accounts including other assets?   (Neil Brooks calls the pension splitting tax credit outrageous).  The plethora of benefits given to parents with children is what the blog author calls ‘selective’ social democracy or situation where benefits are given to one segment of the population so they can achieve more wealth at the expense other segments of the population such as ever singles and divorced persons without children.

CONCLUSION

So who is paying for all of this?  One group of Canadian citizens subsidizing families as in case above are ever singles (never married, no kids) and divorced persons without children.  They will never achieve a monthly income of $4,500 per month unless they are making a very good income.  They don’t have the money to max out TFSA amounts like this couple has.  The only benefits ever singles and divorced persons without children will ever receive is if they are in an abject state of poverty.  They also will never be able to accumulate the retirement and other assets that this couple has.  They are never likely able to retire at age 60 unless they have equivalent income to the above couple (at least $60,000 per year).  A middle quintile income for unattached singles is $23,357 to $36,859.  At $55,499 income an unattached single is considered to be in top quintile of income for the country (moneysense), but they have problems living on this income as has been shown in previous posts.

Ever singles and divorced persons without children with before-tax income equivalent to this couple will pay much more tax, for (example $60,000 to $70,000 income).  If one calculates the income tax contributed by an ever single at $15,000 per year time 40 years of employment total contributed to Canadian coffers is $600,000 over working life. Employment insurance deductions (used in large part for maternal/paternal leaves) at $1,000 per year adds another $40,000 to  the total.  Ever singles never get any of this back because they pay more taxes, can’t pension split and are not considered to be part of the financial family by politicians, government and even their own families and married/coupled siblings..  All political parties are guilty of excluding ever singles from financial formulas.  Ever singles have very little financial and voting power because they are a minority in a society where parents and children rule.

Ever singles and divorced persons without children are being pushed into a state of poverty by the plethora of tax credits given only to families, but for which ever singles and divorced persons without kids have to pay without getting equivalent of same benefits.

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.

BOUTIQUE TAX CREDITS INCONSISTENT AND FINANCIALLY DISCRIMINATING (Part 2 of 2)

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BOUTIQUE TAX CREDITS INCONSISTENT AND FINANCIALLY DISCRIMINATING (Part 2 of 2)

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.

(The following information is taken from:  Policy Forum: The Case Against Boutique Tax Credits and Similar Tax Expenditures by Neil Brooks (brooks) (abstract) which show SELECTED TAX EXPENDITURES INTRODUCED OR SUBSTANTIALLY AMENDED FROM 2006 TO 2015 (page 129).  His article states:  

The table that follows lists selected tax expenditures introduced or substantially amended by the Conservative government between 2006 and 2015. These tax expenditures are listed under the headings and in the order shown in the Department of Finance’s Tax Expenditures and Evaluations 2014. To provide some context, a few of the listings have a brief introduction. The year in parentheses following the listing is the year the measure was introduced or enriched. The projected cost for 2014 of new and amended tax expenditures is then given, if it was provided in that year’s tax expenditures and evaluations report.

Where the tax expenditure takes the form of a tax credit, the table indicates the amount of the credit. The actual value of the credit to the taxpayer is almost always 15 percent (the lowest federal tax rate in 2015) of the amount claimed by the taxpayer.  For example, although the maximum amount of the children’s fitness tax credit was increased to $1,000 in 2015, the maximum federal tax saving to the taxpayer is $150 ($1,000 × 0.15).

Some of the costs to the government as outlined in the Brooks article for the Selected Boutique Tax Credit Benefits are as follows:  charitable donation benefits and exemption of capital gains $265 million from 2017 to 2020,  first time donor’s super credit $7 million, children’s arts tax credit $42 million, textbook tax credit for post-secondary education and certified occupational training $34 million-amount claimed by students (not transferred to parents), post-secondary scholarships, fellowships, and bursaries exempt from tax $45 million, Canada employment tax credit $2.145 billion, volunteer firefighters tax credit $17 million, search and rescue volunteers tax credit $4 million, family caregiver tax credit $65 million, age tax credit $2.955 billion 2009 (parliamentary budget officer estimates that the two increases in the age credit since 2006 will have a fiscal impact of $950 million in 2014), registered disability saving plan $8 million, pension income tax credit $1.12 billion, changes to registered retirement savings plans and registered retirement income funds $670 million from 2016 to 2020, first-time home buyer’s tax credit $110 million, home renovation tax credit $2.265 billion in 2009), public transit tax credit $190 million.

(It should be noted that some of these have changed or been deleted since the Liberal party won the 2015 election).

Table – page 1 of 4

boutique tax credit 5

Table – page 2 of 4

boutique tax credit 6

Table – page 3 of 4

boutique tax credit 7

Table – page 4 of 4

boutique tax credit 8

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.

 

 

 

BOUTIQUE TAX CREDIT INCONSISTENT AND FINANCIALLY DISCRIMINATING (Part 1 of 2)

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BOUTIQUE TAX CREDIT INCONSISTENT AND FINANCIALLY DISCRIMINATING (Part 1 of 2)

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.

Revisions were applied to this post on June 19, 2016.

(Preface:  Every political party has introduced tax credits to give financial benefits to certain members of the population more than others.  However, during the reign of the Conservative party under Prime Minister Stephen Harper, a plethora of tax credits were introduced.  This led to coining of the phrase ‘boutique tax credits’.  Much of the following information has been taken from the ‘Policy Forum: The Case Against Boutique Tax Credits and Similar Tax Expenditures by Neil Brooks’ (brooks).  The Neil Brooks discussion provides an excellent overview of why boutique tax credits are so wrong and discriminatory.  While many families, especially poor families do not benefit from boutique tax credits, ever singles also do not benefit from most of the tax credits.  If there are any negatives to the study it is that financial discriminatory impact of tax credits and expenditures for ever singles and to some extent single parent with children family units is not fully recognized).

The author of this blog has long thought that boutique tax credits are financially discriminatory to singles.  However, we cannot even begin to articulate what Neil Brooks has so eloquently stated in his article.  The entire article is worth a read including the footnotes which provide excellent information on many commentaries and studies of this topic.  For this post, we attempted to condense the PDF from 68 pages to 8 pages, for example, by eliminating the many footnotes – see condensed version at the end of this post.  Blog author’s comments have been highlighted in blue).

This has been a very difficult post to write in terms of length as there is so many excellent points that have been made by Neil Brooks in his study, so be forewarned that the condensed version of the Brook;s article is eight pages long).

PROBLEMS WITH BOUTIQUE TAX CREDITS (AS IDENTIFIED BY BLOG AUTHOR)

SUMMARY OF TAX PROBLEMS:

Problem 1 – Conservative boutique tax credits purposely target traditional family values (single income families). Boutique Tax Credits initiated by the Progressive Conservative Party under Stephen Harper purposely target traditional family values. The party never gives a definition of traditional family values or who is included in the traditional family.  They talk about the family unit as ‘essential to the well-being  of individuals and society’.  A reflection of their belief in the importance of the role of the traditional family in society, another objective was to privilege single-earner families through the tax system (page 76).   (Blog author’s comments:  Ever singles are generally not included in these boutique tax credits).

Problem 2 -tax expenditures introduced by the Conservatives of Boutique Tax Credits were targeted at relatively narrowly defined groups of potential Conservative voters (page 67).  Finance Minister’s budget moved to put the finishing touches on building a new Conservative coalition through a series of tax cuts, rebates and other subsidies aimed at select segments of the voting population  (page 73).   By enacting these tax expenditures, as opposed to across-the-board tax cuts, the Conservatives were able, at a much lower cost, to favour middle-class families with children, middle-income and well-to-do seniors, and other much more narrowly targeted groups ( page 77).   (This is what this blog author calls ‘selective’ democratic socialism).

Problem 3 – Tax Credits and Expenditures ignore traditional tax criteria that apply to technical tax provisions, namely, equity, neutrality, and simplicity (page 69).

Problem 4 – Conservatives were “pleasing their electoral base with . . . dollars in pockets for boutique programs rewarding wealth and socially conservative values  (page 69).  An example is pension splitting where wealthy married/coupled persons benefit the most, poor and married or coupled persons with equal incomes benefited to a lesser extent.(Blog author’s comment:  Ever singles and divorced/separated persons are not able to use this tax credit).

Problem 5 – Tax Expenditures Can Serve as a Bribe to Potential Voters (page 77)    By enacting these tax expenditures, as opposed to across-the-board tax cuts, the Conservatives were able, at a much lower cost, to favour middle-class families with children, middle-income and well-to-do seniors, and other much more narrowly targeted groups.

In 2011, the average taxpayer with an income between $100,000 and $150,000 paid $3,633 less in taxes.  The average taxpayer with a very modest income of between $20,000 and $25,000 saw only $475 back in the same period.  These numbers are before the impact of the new Family Tax Cut and the doubling of the Child Fitness Tax Credit – both of which are likely to accelerate the same trend.  (/canada2020).   (Blog author’s comment:  Poor families and ever singles including seniors are least likely to benefit (senior-singles-pay-more).

Problem 6 –  It is very difficult to get rid of tax expenditures or tax credits once they are  implemented.  Political parties are reluctant to eliminate them even if they are discriminatory for fear of losing votes.  Also, tax expenditures are extremely hard to repeal, even the truly awful ones, since eliminating a tax expenditure will be framed as a tax increase (page 78).   (Blog author’s comments:  Will it ever be possible to eliminate the pension splitting from which wealthy families benefit the most?  And, who is paying for this?)    Neil Brooks calls pension splitting an “outrageous pension income splitting scheme that should be repealed and the revenue used to enrich, or reduce the clawback, of the old age security pensions” (page 122).   Reducing clawback will not solve problem of inequality if clawback is not increased for singles and reduced for married or coupled persons through income-testing.

Problem 7 – Tax expenditures that are relief measures transfer income from one group of individuals to another.  (Blog author’s comment:  Instead of these relief measures targeting lower income individuals and families, many have benefited wealthy families the most.  Ever singles benefit the least).

Problem 8 – Psychological impact of tax credits or expenditures (The Public Appears to Favour Policies Framed as Tax Breaks-page 83).  people’s psychological biases predispose them to favour tax expenditures, certainly over direct spending programs……label—tax relief versus direct outlay—matters.”  These studies are also consistent with other survey results in which respondents admit to have benefited from tax expenditures and yet deny ever having used a government social program.(Blog Author’s comments:  The reverse effects of Tax Credits and Expenditures are often not discussed, that is, the anger and financial despair that some citizens feel towards those that are receiving more of the benefits without, for example, application of income-testing  principles).

Problem 9 – Tax Expenditures Reduce the Political Pressure for Public Programs (page 84)  One of the Conservatives’ major political goals has been to resist the public provision of social programs. Hence, another explanation for the popularity of tax expenditures under the Conservatives is that they were a step forward in implementing a broader political project, a private-sector welfare state.Tax credits for private caregiving work reduce the political pressure for publicly provided long-term care facilities.. …. Supplementing the wages of low-income workers with a tax credit reduces the pressure to offer public service jobs to the unemployed…..The tax subsidization of tuition fees, textbooks, and interest on student loans reduces the political pressure for more direct government support for universities.

Problem 10 – Tax Expenditures Make the Tax System Less Transparent (page 94) and Tax Expenditures Divert the Resources of the CRA and Create Administrative Problems That Damage Its Reputation (page 94)

    • Complexity and number of tax credits make them very difficult to interpret and lawyers and accountants become intimately involved in their implementation.  As a result attention is directed towards interpretation of these credits instead of tracking abuse of the tax system.
    • Many are badly designed (page 96)
    • Tax Expenditures Often Do Not Serve Important Objectives of Government Policy (page 97)
    • Tax Expenditures Often Do Not Achieve Their Objectives Equitably (page 104)
    • upside-down effect of tax deductions
    • all tax credits should be refundable.

(Blog author’s comment:  Past posts have talked about upside-down financial effects (housing),  and tax credits should be refundable and income-tested.  To have someone else confirm these facts is reassuring.  It would be nice if political parties and governments also realized these facts.)

Problem 11 – Education – Conservatives completely exempted certain scholarships and fellowships from tax in their first budget in 2006.  The exclusion of a $10,000 scholarship for a low-income student who has no other income provides that student with no implicit subsidy. However, the same exclusion will provide an implicit subsidy of $2,200 to a higher-income student in the 22 percent tax bracket. If the point of the exclusion was to benefit needy students, this upside-down effect is perverse (page 104)

Problem 12 – Low income individuals and families benefit the least.   A credit that can be offset against a taxpayer’s tax liability is of no value to a low-income person who has no tax liability because his or her income is less than the amount of the basic personal tax credit, for example. Hence, all tax credits should be refundable (page 106)…..In terms of delivering subsidies equitably through the tax system, if the primary purpose of a tax credit is to incentivize or assist low- or middle-income individuals, entitlement to the credit should be income-tested so that it vanishes when a taxpayer’s income reaches a certain amount (page 108).  Income-testing so that it vanishes when income reaches a certain amount should vanish quicker for for married or coupled persons than singles as it costs more for singles to live than married/coupled persons as a family unit.

Neil Brooks has also stated that analysis of  financial formulas such as distributional tables should show beneficiaries by income class, gender, household type, age cohort, and geographical region.  This is based on known facts that females and disadvantaged persons based on race likely benefit least from tax credits (page 111). (Blog author’s comments:  Analysis of household types is important as ever singles and early divorced singles are likely to benefit the least from all tax credits).

Problem 13 – The proliferation of tax expenditures, such as the boutique tax credits, gives rise to significant rent-seeking social costs. (page 114) and encourages relevant interest groups to lobby for analogous tax expenditures. (page 114).  (Blog author’s comments:  Powerful lobby groups such as families and seniors often lead to tax credits and expenditures targeting these groups.   Ever singles do not have this kind of financial and lobbying power.  As a result they are likely to receive less of these benefits).

Problem 14 – Boutique tax credits are useless when they target everyone in a group, for example, seniors.  Giving age credit to all seniors benefits wealthiest seniors more as poor seniors do not have enough income to apply tax credits (page 122).

Problem 15 – This problem as been added by the blog author, that is there is a compounding effect to tax credits when they are applied one on  top of another for specific groups.  An example is when child tax credits are given to married or coupled family unit, who then are also able to use pension splitting credits as seniors.  As a result, married or coupled persons with children are able to gain more wealth than ever singles who are not able to use any of these credits.

Problem 16 –  This problem has been added by the blog author,  that is the so called ‘merry go round credits and expenditures which disappear and reappear.  Some citizens can never  get on the merry go round because their place in line keep getting pushed back or they are kicked out of the line or they excluded from the lines.  For example, there are some parents who have never benefited from any the child tax credits because they had no children during implementation of some tax credits only to have these tax credits abolished when they do have children.

CONCLUSION

(Blog author’s comments: it would seem that a solution to the elimination of Tax Credits and Expenditures with fairness, equality, neutrality and simplicity for all, perhaps, should be to provide three government funded basic rights: healthcare, college/university education, and universal day care).

THECASEAGAINSTTAXCREDITSANDOTHEREXPENDITURESCONDENSED

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.

POLITICIAN’S RESPONSE LETTER DOES NOT UNDERSTAND SINGLES’ FINANCES

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POLITICIAN’S RESPONSE LETTER DOES NOT UNDERSTAND SINGLES’ FINANCES

These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice.

The post on Fort McMurray Fire Disaster relief (fort-mcmurray-fire-disaster)showed how family units comprised of singles received the lowest financial assistance of all family units.  This information was sent to Province of Alberta politicians to make them aware of this situation.

One of the politician’s (right wing Conservative) response to this information is outlined here.  This letter continues to show the financial misunderstanding and financial discrimination of singles in this country.

A portion of the letter is reproduced as follows:

“Data from Statistics Canada Table 203-0023 concerning total household expenditures shows that Alberta government and Red Cross financial assistance for single person households, lone parent households, and couples without children total between 50% and 63% of typical monthly expenditures for those household types. The only household type to receive financial assistance approximating their average monthly household expenditures were couples with children. The same data shows that a two person household with no children has almost twice (184%) the household expenses of a one person household.

Given that shelter, food, household operations, transportation, healthcare, and recreation are the largest components and total approximately 50% of household expenditures of all the household types, and given that most of those goods/services are provided without cost or at steep discounts to evacuees, and given that those goods/services are used in reduced amount during evacuation, the level of temporary financial support provided does not appear unreasonable. However, given that some organizations’ aid programs are focused on the needs of mothers, seniors, and other demographics, there may be an opportunity for more organizations or programs focused on single adults.

It is true that two parent families with two or more children receive more financial assistance than the other family types, however we are not aware of a compelling public benefit to reducing financial assistance to individuals living as two parent families with children on the basis of their family status.

With respect to potential human rights violations, the financial assistance appears to be provided without discrimination on the basis of any protected human rights grounds, with the reasonable exception of children who have lower financial needs than adults and seniors. As far as we are aware, “financial human rights” is an interesting concept but not currently a well-founded legal doctrine in Canada or any other jurisdiction. In order for treatment of particular social groups to amount to persecution, any alleged violation of basic human rights would need to arise out of repeated or mistreatment which causes personal harm the affected individuals. All of the available evidence suggests that the relevant governments intend to rebuild the wildfire-affected areas and to resume providing services to individuals communities in the same ways as before the wildfires.”

First, the Conservative right wing politician’s letter refers to Statistics Canada Table 203-0023 showing 2013 household expenditures for family units of one person households, lone parent with children, couples without children, couples with children as well as other family unit types.  It is interesting to note that this data was based on surveys and these expenditures include tobacco and alcohol as well as games of chance.  These are wants, not needs and do not deserve to be included in any discussion of fairness of financial expenditures or financial disaster assistance of family units.

Second, the letter readily admits that two parent with children family units received the most assistance. The statement also is made as follows:  “we are not aware of a compelling public benefit to reducing financial assistance to individuals living as two parent families with children on the basis of their family status”. Now that is real fairness!

The statement “The same data shows that a two person household with no children has almost twice (184%) the household expenses of a one person household” is inherently false.  There are many sources of information showing that it costs singles 60-70 per cent of what it costs a married/coupled family unit to live (moneysense).

For a more accurate comparison of percentage of living expenses incurred by family units, one could use living wage analysis and equivalence scales.

Two Living Wage studies for Canadian cities are Guelph and Wellington and Grande Prairie (table at end of post) show living expenses (not middle class living, but bare bones living to prevent homelessness).  In both of these studies, it should be noted that singles are not allowed the purchase or use of a vehicle.  Instead, they have to rely on transit and taxis.

The Guelph and Wellington 2013 study (livingwagecanada-FINAL)  showed living expenses for singles at $25,380, lone parent with one child $40,704, and two parent family with two children $56,796.  The Grande Prairie 2012 study (GP.pdf) showed living expenses for singles $19,284, lone parent with one child $41,844 and two parents with two children $62,844.   Calculation of Guelph and Wellington percentages for single in comparison to lone parent with a child is 62 per cent and in comparison to two parents with two children 45 per cent.  Grande Prairie percentages of single in comparison to lone parent with one child is 46 per cent and to two parents with two children 30 per cent.

(It should be noted that one of the significant differences for Grande Prairie percentages of singles to other family units is shelter where single is allowed to share a two bedroom apartment.  If $859 rent is for allowed for not shared one bedroom Grande Prairie apartment to equal one bedroom apartment in Guelph/Wellington study, then the total annual expenditure becomes  $29,592 or 70% of lone parent with one child and 47 per cent of two parent with two children.  The percentages for singles then become more closely aligned between the two studies).                                         

It is very difficult to find Canadian living wage statistics on married/coupled persons with no children as they are never included in these studies.  If a few statistics from the USA living wage studies are used (New York 2016 (counties) example single adult $21, 382 and two adults  with no children $34,582; Salem, Oregon (Salem-OR) single adult $28,140 and married couple with no children $37,536) then percentage of singles to married or coupled and no children households is calculated as 62 per cent and 75 per cent respectively.

To summarize, the Living Wage studies for Canada and USA show that percentages of singles cost of living to lone one parent one child or two person no children households ranges from 62 to 75 per cent.

The table at the end of this post using Statistics Canada data shows that singles and lone parent families are not doing very well with respect to incomes.  Present median incomes are equivalent to living wage incomes (bare minimum to prevent homelessness).  Likewise, median net worth shows these same households are at the bottom of the scale in comparison to households with two adults.

Equivalence scales have also been used to provide comparisons of costs of living between different family units (households).  The OECD (Organization for Economic Cooperation and Development) modified equivalence scale and square root equivalence scales are two examples.  The basis for equivalence scales are described as follows:  The needs of a household grow with each additional member but – due to economies of scale in consumption– not in a proportional way. Needs for housing space, electricity, etc. will not be three times as high for a household with three members than for a single person. With the help of equivalence scales each household type in the population is assigned a value in proportion to its needs. The factors commonly taken into account to assign these values are the size of the household and the age of its members (whether they are adults or children).

Table for two equivalence scales:

equivalence scales

Statistics Canada 75F0002M – Section 2 ‘The LIM and proposed Modifications’ (75f0002m) provides an excellent overview of what is happening in Canada.  This paper proposes  modifications to the existing LIM (Low Income Measure) methodology.

“The first is to replace economic family by household as the basic accounting unit in which individuals pool income and enjoy economies of scale in consumption.   Secondly and equally if not more important, household is the international standard in comparative statistical surveys of income and well-being while the economic family concept is rarely employed by other countries.  Under the proposed modification, an individual will be defined as in low-income if the household as a whole is in low-income which in turn will generate different low-income statistics.   Adopting the square root equivalence scale – the square root has declining factors for each subsequent member while the LIM scale does not, and thus flattens out after the third member.. Furthermore, under the Square Root scale one needs only consider how many people are in the family whereas using the LIM scale one needs to keep in mind both the age of family members as well as whether the family is a single parent family”.

(It should be noted that there is no perfect system, however, equivalence scales system is one method that provides a decent measure of  financial fairness with respect to cost of living assessments for all members of family units regardless of marital status).

Finally, in regards to the letter and human rights discrimination in relation to singles finances, singles are discriminated against every single day.  This  has been described in a past post.  Re Allowance Program and Credits benefits, 2009 Policy Brief, “A Stronger Foundation-Pension Reform and Old Age Security” by Canadian Centre for Policy Alternatives, page 4 (policyalternatives.ca), states:

“This program discriminates on basis of marital status as confirmed by case brought under the Charter of Rights where federal court agreed program was discriminatory and ruled it would be too expensive to extend program on basis of income regardless of marital status”.

As well, the Progressive Conservative Party has been very diligent in implementing boutique tax credits which have consistently benefited families more.  One major example of this is pension splitting in which senior married/couple household benefit, but singles get nothing.  How is this not financially discriminatory?

CONCLUSION

  • Politicians need to become more financially intelligent about what it costs singles to live in this country and the financial formulas the country is using, for example, equivalence scales.
  • Financial formulas need to include singles equally to family households.  Singles need to be Included in the financial family.
  • All household types including singles need to be included in financial disaster recovery programs with equal dignity and respect.  Singles, after all, also donated to the Red Cross program.  A solution to distribute disaster monies equally could be to use household and equivalence scales formulas.
  • Politicians, government, families and organizations like the Red Cross need to educate themselves  on  what financial discrimination is and to include singles equally in financial formulas.
  • What is not needed is more ‘organizations’ and aid programs focused on the needs of mothers, seniors, and other demographics (single adults)’.  (Habitat for Humanity does not include ever singles in their building program).  These are only band aid solutions to what is the real problem, financial inequity of financial formulas.  What is needed is for financial formulas  to treat all households fairly and equally by using equivalence scales.
  • How about another novel idea – treat benefits (benevolent programs) equally to expenditure programs (boutique tax credits) using equivalence scales.  The Alaska Permanent Funds Dividends and Ralph buck programs (money-benefit-programs) grossly discriminated against singles by giving monies to children who have not contributed one cent to the economy.  Singles paid taxes for these dollars that are distributed to children who have paid nothing.
  • Regarding financial human rights and discrimination, the government has to yet provide an answer as to why the Allowance Program and Credit benefits is being continued through to at least 2029 even though the courts ruled it to be discriminatory.

 

living wage in dollars

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.

RETIREMENT INCOME SECURITY FINANCIALLY DISCRIMINATORY FOR EVER SINGLES AND EARLY DIVORCED/SEPARATED PERSONS

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RETIREMENT INCOME SECURITY FINANCIALLY DISCRIMINATORY FOR EVER SINGLES AND EARLY DIVORCED/SEPARATED PERSONS

(These thoughts are purely the blunt, no nonsense personal opinions of the author and are not intended to provide personal or financial advice).

This blog post was updated on December 1, 2017 replacing 70% information with 1.4 equivalence scale for couples to that of singles, not 2.0.

So here we go again, several organizations, primarily Chambers of Commerce and financial planning and insurance associations, have taken out a full page in newspapers across the country for an article called “It’s time for national cooperation on retirement income security” and is addressed to Federal, Provincial and Territorial Finance Ministers (clhia).  In this article, widowed elderly are highlighted over single elderly seniors in regards to living below the poverty level.

The article talks about being proud of Canada’s retirement system.  It then goes on to say: ‘That said, there are pockets of our population who are not as well-prepared for retirement as they could be.  These shortfalls are specific to certain segments of our populations. Hence, any ‘one-size-fits all’ approach could prove harmful to the economy as a whole and be unnecessary for many.We believe that the time has come to take a targeted approach to addressing any shortfalls.  Such an approach should be national in scope..  It should be fair, so that it doesn’t introduce inter-generational transfers or require over-saving where it is not needed.  It should be cost efficient and easy to implement.  It should minimize administrative burdens for employers.  And it should be good for the economy.

There are three specific segments not on track to maintain their standard of living in retirement:

  1. A small percentage of lower-income Canadians live below the poverty level, particularly the widowed elderly.  The commitment in the federal budget to increase Guaranteed Income Supplement (GIS) payments will provide some assistance in easing this situation  But more could and should be done, such as eliminating the claw-back for a surviving spouse under the Canada/Quebec Pension Plan.
  2. Up to 25% of modest-income Canadians (say above $27,500) are not on track, largely because they do not save outside of the public system and/or do not have workplace plans.  This group could benefit most from a modest increase in C/QPP contributions that would help meet their needs.
  3. Up to a third of higher-income Canadians are not on track to maintain their standard of living in retirement because they do not have a workplace plan or don’t maximize their participation in one, or they do not have sufficient private savings.  This group as well as all Canadians should have access to a retirement plan at the workplace, where it is easiest to save.

The undersigned urge all government to pursue a national, multi-faceted approach to improve retirement income security for all Canadians’.

The article is then signed by fifteen different organizations.

Statistics show that in 2014 there approximately 6 million seniors age 65 and over.  From BMO “Retirement for One-By Chance or By Design” (bmo) in 2008, approximately 57 percent of seniors were married; of the remaining 43 per cent of single status, 30 per cent were widowed and 13 per cent were divorced/separated or never married (ever singles).

BMO goes on to say that one of the realities for ever singles is that they lack survivor benefits.  The following table shows that ever singles and widowed persons, both with employer pensions will still probably have the same income.  For widowers with a spouse who also had an employer pension, the widower will have a higher income level from spousal employer pension survivor benefit.

income advantage senior widow over ever single2

Persons who become widowed are now ‘single’ so why should they receive special privileges like no income claw back for surviving spouses?  What do ever singles and early divorced/separated persons get that is comparable?   Studies repeatedly show that according to equivalence scales (equivalence-scales) it costs a married/coupled person family unit without kids 1.4 times that of a single person household, not double..

This blog has published several posts where it has been shown that financial advisors have no clue about the financial affairs of ever singles and early in life divorced/separated persons.  One wonders what  financial experience Chambers of Commerce have that they can comment on the financial affairs of singles.

Once again, the widowed elderly have been highlighted as an area of concern while ever singles and early divorced/separated persons are left out of the financial discussion.

There is complete financial illiteracy by most people on what it truly costs to live as a single person.  The post ‘Real Financial Lives of Singles’ (singles) gives five case studies, four of which contribute to employer pension plans, and one widowed person who has considerable wealth and is concerned that he can no longer pension split and may have his OAS clawed back.  Even with an employer pension plan it is not easy for singles to have a decent financial life.  Another post ‘Continued Financial Illiteracy of Financial Gurus Equals Financial Discrimination of Senior Singles’ (senior-singles) shows the financial silos that have been created by governments where married/coupled persons as one family unit and some widowed persons as one family unit receive more financial  benefits than ever singles and early divorced/separated persons family units.

To ensure financial equality between singles, widowers and married/coupled persons, the following measures need to be taken:

    • change financial formulas so that senior couples receive 1.4 equivalence scale only of whatever is given to a single senior person household as it costs more for single senior person household to live than it does married/coupled family units because of economies of scale
    • financial formulas should be revised to include all senior persons regardless of marital status in one financial formula.  To eliminate financial silos that benefit married/coupled persons most, delete benefits already given to married/coupled persons such as pension splitting (benefits the rich most) so that there is a level financial playing field for all regardless of marital status. (It is understood that it is expensive to raise children and  benefits given for children should last for first twenty years of the life of the child. However, beyond the twenty years of the children, any other benefits given to married/coupled persons should be deleted or revised to a rate of 1.4 to that of a single person)
    • create a side-by-side list of all possible benefits under categories of married/coupled, widowed and single and analyze what each category gets in benefits.  Financial formulas should be created equally for all categories, not just the married/coupled and widowed.
    • delete allowance benefit that has been ruled to be discriminatory by the courts
    • education, education and more education on financial literacy for singles.  Think tanks, financial gurus and married/coupled people need to educate themselves on what it really costs singles to live.
    • financial benefits should be income-tested for all family unit types.  Income testing should include housing and savings.  It is likely to cost ever singles more to live as they are more likely to rent while widowers are more likely to own their own homes.
    • all financial formulas for singles should include ever singles, early divorced/separated persons and widowers on an equal basis.

This blog is of a general nature about financial discrimination of individuals/singles.  It is not intended to provide personal or financial advice.