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Tax Planning in a Questionable Future Tax Environment
December 15, 2020
2:26 pm
christinad
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The elephant in the room that no one wants to mention is that i bet everyone on this thread is a home owner and everyone has a vested interest in not paying tax on their primary home. At least be honest and don't pretend you wouldn't care if this was eliminated for your own personal reasons.

December 15, 2020
2:35 pm
christinad
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Would an increase to capital gains predominantly affect wealthy people and seniors?

December 15, 2020
3:37 pm
canadian.100
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christinad said
Would an increase to capital gains predominantly affect wealthy people and seniors?  

What is your definition of "wealthy"?

December 15, 2020
3:58 pm
christinad
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I know a lot of people who invest have enough room to invest in their tfsa and rrsp so i guess people who can invest above that. However i don't understand how small business owners fit in or who would primarily be invested in non registered over a tfsa and rrsp.

December 15, 2020
5:37 pm
christinad
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Perhaps i'll frame my question as

Would an increase to capital gains predominantly affect higher income people and seniors?

I don't want to get into a debate as to what wealthy is.

December 15, 2020
5:38 pm
Bill
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Scruge, that UK tax appears similar to a tax like the Ontario Land Transfer Tax paid by purchaser at time of purchase. Not at all akin to a capital gains tax imposed on a seller.

December 15, 2020
6:33 pm
Loonie
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christinad said
The elephant in the room that no one wants to mention is that i bet everyone on this thread is a home owner and everyone has a vested interest in not paying tax on their primary home. At least be honest and don't pretend you wouldn't care if this was eliminated for your own personal reasons.  

We may be home owners but we are not all vulnerable to the tax that has been proposed.
We have owned our home for well over 20 years, as has my mother whose house we are now preparing to sell. None of us would be affected by this tax on the sale of these houses. And mum will never be as she is now in a retirement home.

I imagine that the person here who is most in favour of it also owns a home but is perhaps concerned about children who can't get into the market easily. Perhaps you should be asking that question. There is more than one elephant in the room (or vested interest). Another one has to do with how long people have owned their house.

The tax is highly inequitable. And by the time you might make all the adjustments necessary to address such inequities, it would be a bureaucratic nightmare and the source of endless controversy and complaint. It's just a bad idea from the get-go.

December 15, 2020
6:37 pm
Loonie
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christinad said
Perhaps i'll frame my question as

Would an increase to capital gains predominantly affect higher income people and seniors?

I don't want to get into a debate as to what wealthy is.  

It would primarily affect higher net worth people who invest in the items affected by the tax outside of registered plans.

Some of these will be people with high incomes. Some of them will be seniors.

But a lot of high income people are not high net worth people because they spend a lot and have big mortgages and credit card debt. A lot of seniors have little to no discretionary funds, and they have lower incomes on average than most adults. In addition, a lot of seniors cash in their capital gains types of investments when they get old as they don't want the volatility risk at that stage of life. Depending on how they manage this transition, they could trigger a lot of cap gains over a short time and then none thereafter, which I don't think seems fair.

There are also people who "invest" but are really just gamblers but with a better sounding name. They play the market, always hoping for the big win. This activity is not necessarily related to income or age. I don't know how often they win, how often they cash in, or how often they lose and cash in. All of these things could affect their cap gains net tax.

The biggest factor might be how clever people's financial advisors and tax accountants are!

December 15, 2020
6:45 pm
christinad
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Thanks for the reply. The issue of making tax reform equitable is an interesting one. Did someone here suggest increasing the gst? Perhaps that is the best way to spread a tax increase to everyone.

December 16, 2020
7:10 am
savemoresaveoften
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Well in general most person / family should not be buying /selling more than twice.
Once for their starter home, and then maybe upgrade cuz family grows.
The 2nd home they own, they should be in that residence for at least 20 years before they need to sell, hence no need to worry about the tax anyway. And the tax free gain for the seniors help fund their retirement years too.
And if someone just want to flip houses every few years, yeah make them pay the tax when they make money on it.
I can see real estate agents and mortgage sales people would also seriously oppose the tax, as its in human nature to oppose changes that are going to negatively affect the individual.
We will never see such thing as a equitable tax to all. People complain about flat tax saying the rich not paid enuf, the rich complain about progressive tax saying they pay too much....

December 16, 2020
7:58 am
Bill
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Sales taxes are good, but in a sense they discourage our main function, i.e. to be a consumer.

And I know a retired couple, both civil servants, i.e. their earnings came 100% from Canadian taxpayers, and seems to me they try to spend all their money outside Canada. They live on the border so cross over to buy everything in USA, they spend 4 - 5 winter months in USA, and then they travel the world for a significant part of the rest of the year. So minimal sales taxes from them for Canada. That bugs me.

December 16, 2020
8:49 am
christinad
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What can the government do that's fair then? I was thinking they could roll back the changes to the tax brackets the government made 1-2 years ago. As i recall from the media they only saved people something like 100/year anyway. The government won't want to do something that makes their previous choice look foolish though.

December 16, 2020
10:34 am
topgun
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christinad said
What can the government do that's fair then? I was thinking they could roll back the changes to the tax brackets the government made 1-2 years ago. As i recall from the media they only saved people something like 100/year anyway. The government won't want to do something that makes their previous choice look foolish though.  

Liberals elected 2015 changed the middle tax bracket from 22% to 20.5% for 2016. They added a high tax bracket of 33%.

Have a Great Day

December 16, 2020
10:44 am
Norman1
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Yes, a general tax hike would work. I estimated earlier that an 8.4% increase would be enough to service $2 trillion of new debt with a 1.2% interest rate.

5% GST would become 5.42%. That 20.5% middle tax bracket would become 22.22%. The 33% bracket would become 35.77%.

December 16, 2020
11:14 am
Norman1
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savemoresaveoften said
Well in general most person / family should not be buying /selling more than twice.

The smart ones do.

One smart cab driver explained how he was able to own a house without having a mortgage larger than $50,000.

He bought a $50,000 condo first. When that was paid off, he bought $100,000 townhouse with the $50,000 from selling the condo as down payment.

Eventually, he paid off the $50,000 mortgage on the townhouse, sold it, and used the proceeds to buy a $150,000 house, again with only $50,000 mortgage.

As for affordability, those of us who don't live in Vancouver or Toronto really don't care much for those who do live in those really expensive areas who also try to make their problems our problems as well.

My advice to those who can't afford their dream home in Vancouver or Toronto? MOVE!

That's the other elephant in the room: Some of us can't afford a house in Toronto or Vancouver and are actually smart enough to realize we can move!

There is more to Canada than Vancouver or Toronto. There are lots of places where one can buy a nice home without spending $1 million. Some people have done just that.

Years ago, there were stories, like this Globe & Mail one, in the media about a single woman, income $31,000 a year, who was able to buy a three-bedroom detached house for under $200,000 in Belgrave, Ontario.

December 16, 2020
12:56 pm
Jon
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Someone need to foot the bill for this crisis, sales tax is a good way to do so with as little distortion to the economy as possible. However, sales tax is actually a regressive tax as low income individuals spend a greater portion of their income.

If we are going to increase sales tax, it is best to also increase sales tax rebate for the low income individuals. In the meantime, in light of the situation describe by Bill, it is best to put a head tax on anyone that cross the boarder by land between US and Canada, so we can get our "sales tax" back. (Except for those that travel between Canada and Point Roberts, Northwest Angle, and Saint Pierre and Miquelon.)

As members previously mentioned, I think it is a good idea to reduce the starting threshold for OAS clawback, people that have more than 70000 CAD a year as income when they retire does not require this level of assistance from the government (I am bias here because I am young).

I also believe we should have clawback of OAS and GIS on anyone that are very asset rich. It is a choice to live in a 2 million dollars mansion with only 24000CAD of income, other taxpayer should not foot the bill for this.

I think reintroduction of gift and will tax is also a good idea, however, the truly wealthy that have an army of lawyers and accountant will be able to conduct financial alchemy that make sure the tax man cannot get hold of their money.

More importantly, we need a line by line review of government expenses (Something that Stephen Harper have done before) to cut out the unnecessary parts, and to cut off all types of financial assistance from our governments to any government or quasi - government entities of the PRC and Russia, as they are enemy nations.

Most importantly, we need to have a regulation bonfire (large scale deregulation) to improve the productivity of our economy, so we can grow it and gain more tax out of it without increasing the tax rate. (Canada's economy also have lower productivity compare with the US, and we need to do something about it.) Consider how expensive it is to travel internally, and how expensive our telecommunication bills are, let's start with the transportation and telecommunication sector!

We also need to have a much better relationship with our first nation, as our resources extraction industries require certainty for it to be successful, but this is a giant can of worm.

December 16, 2020
1:25 pm
pooreva
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Jon said
It is a choice to live in a 2 million dollars mention when only 24000CAD of income, other taxpayer should not foot the bill for this.

Sorry but you are wrong.
If somebody bought house 20 years ago for 250K in the 'middle of nowhere', it is not his/her fault everything around that property is build up and (s)he actually lives in the middle of nice neighborhood where houses change hand for 1.5-2 mill.
And if you have 24K income/year you can easily live in such house. Property tax will be around 10K, utilities/food 5K, 5K for unexpected emergencies and the rest is left for 'luxuries'. No need to move at all.
And how taxpayers actually 'foot the bill' for that dwelling?????????

December 16, 2020
1:31 pm
Jon
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pooreva said

Jon said
It is a choice to live in a 2 million dollars mention when only 24000CAD of income, other taxpayer should not foot the bill for this.

Sorry but you are wrong.
If somebody bought house 20 years ago for 250K in the 'middle of nowhere', it is not his/her fault everything around that property is build up and (s)he actually lives in the middle of nice neighborhood where houses change hand for 1.5-2 mill.
And if you have 24K income/year you can easily live in such house. Property tax will be around 10K, utilities/food 5K, 5K for unexpected emergencies and the rest is left for 'luxuries'. No need to move at all.
And how taxpayers actually 'foot the bill' for that dwelling?????????  

The dollar amount maybe a bit off, but my idea is sound.
Let say the house now worth 3 million and the person only take home 18000CAD a year with GIS and OAS included, my argument will make a better sense here.

December 16, 2020
1:49 pm
savemoresaveoften
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Jon said

The dollar amount maybe a bit off, but my idea is sound.
Let say the house now worth 3 million and the person only take home 18000CAD a year with GIS and OAS included, my argument will make a better sense here.  

Actually ur argument is still flawed. An asset (in this case the principal residence) that does NOT produce any income does not pay ur daily expenses. It is simply fundamentally wrong to "force" the person to sell the asset to pay for the living expenses. In fact, I always preach to those that listen to NOT count on your house as a real asset (In other words, have real savings, investments, etc.) If anything a house is a massive cash drain and the only time it perform is when you sell it.

December 16, 2020
2:22 pm
Jon
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savemoresaveoften, I agree house is a drain of financial resources, and ideally, no one should be force to do anything. But money is tight right now, and we need to spend money on things that matter more.

Have I forget to mention reverse mortgage here.... Thats a solution too.

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