Policies of the Federal Parties in Personal Finance Perspective. Part 3
This is the third of four blog posts I intend to write on the election platforms of the national parties that had seats in the House of Commons at dissolution. I exclude the Bloc Quebecois because they do not appoint candidates outside of Quebec. In the previous two weeks, I wrote about the Green Party and the New Democratic Party; this week it will be the Conservative Party of Canada; in the final week, I plan to write about the Liberal Party platform.
The emphasis on these posts is to present the platforms and policies of the parties that will directly affect household income and wealth. While many policies have a broad impact on the economy which will ultimately affect our personal financial accounts, I want to focus on those policies that explicitly and directly affect “home economics,” one might say.
Part 3. The Conservative Party of Canada
The Conservative Party identifies their platform as Canada’s Recovery Plan. It can be read or downloaded here.
Small Business
Launch a program to provide loans of up to $200,000.
Provide a 5% investment tax credit for any capital investment made in 2022 and 2023, with the first $25,000 to be refundable for small business.
Provide a 25% tax credit on amounts of up to $100,000 that Canadians personally invest in a small business over the next two years.
Cover up to $10,000 of the administrative and legal costs of each of the first five patents filed by any Canadian small or medium-sized business.
Comment
In the face of COVID-19, the Conservative emphasis appears to be on getting business, particularly small business, up and running. For people considering opening their own businesses, these proposals may help sway the decision to proceed.
A word on tax credits versus tax deductions. Tax deductions reduce the income on which you are taxed. RRSP contributions create a tax deduction. If you have taxable income of $60,000 and contribute $10,000 to an RRSP, that reduces your taxable income to $50,000. A tax credit applies to the tax you owe. If you own a small business and invest $10,000 into it, $500 ($10,000 x 5%) will be taken off the taxes you owe. I assume that this is in addition to the normal depreciation that a business owner is allowed over time for a capital investment.
An additional world in refundable versus non-refundable tax credits. Non-refundable tax credits, like the basic personal amount, can be claimed but can only reduce your taxes to zero. A refundable tax credit would be something like the GST/HST credit. If you meet the criteria, the money will be delivered to you even if you didn’t pay any tax in that particular tax year. In this scenario above, it appears that small businesses would get some money back from the government, regardless of whether they actually generated taxable income. This is beneficial because in the early years, small businesses may not generate profits.
Consumer Protection
Strengthen the Code of Conduct for the credit and debit card industry.
Reject mergers that substantially reduce competition and lead to layoffs and higher prices.
Work with the provinces to adopt a grocery supply code to deal with retailers’ abusive pricing and contracting practices against farmers, producers, and processors.
Bring in legislation on open banking so that Canadians can connect with fintech companies that can provide a better offer for banking.
Order the Competition Bureau to investigate bank fees.
Require more transparency for investment management fees.
Require the banks to show investment returns net of fees.
Comment
The two main targets here appear to be the major national grocery chains and the big banks, with more emphasis on the latter. The five largest banks in Canada represent five of the top 10 companies in terms of market capitalization. They represent an oligopoly. In exchange for this level of dominance, it seems reasonable that they be subject to greater regulation and scrutiny.
In terms of pocketbook issues, these proposals suggest that bank fees could come down in the face of competition and regulatory review, benefiting retail and small business bankers.
For those who operate small businesses that supplies the major grocers, the proposals suggest that the supermarket chains are making outsized profits at the expense of small suppliers, which the Conservatives propose to fix.
Taxation
Reform the CRA to improve treatment of Canadians and small business.
Launch a comprehensive review of Canada’s tax system to improved competitiveness, bring down rates, and simplify the rules.
Allow businesses with less than $60,000 in revenues to use simple cash accounting.
Simplify the business-use-of-home deduction to provide more significant tax advantages for people starting home-based businesses.
Allow new parents to start home-based businesses without facing any loss of parental leave income.
Make foreign tech companies pay their fair share of taxes, including sales tax and a digital services tax representing 3% of the gross revenue in Canada if they don’t pay corporate income tax here.
Introduce a Construction Mobility Tax Credit to help with expenses construction workers incur when they temporarily relocate for work. It will allow workers to subtract up to $4,000 per year of temporary relocation expenses (moving, temporary lodging) from taxable income.
Scrap the carbon tax and institute a personal low carbon savings account.
Comment
The overarching theme here appears to be one of making it easier to operate a small business. Having said that, providing targeted credits, such as the proposed Construction Mobility Tax Credit, is a complication of the tax code, even if it appears beneficial. I will also admit that it is not clear to me why this is called a credit when it appears to be a tax deduction.
Child Care
Convert the Child Care Expense deduction into a refundable tax credit covering up to 75% of the cost of child care for lower income families.
Comment
This is a different proposal than the other parties are offering. As one might expect in the case of a refundable tax credit, the family that will benefit the most has the lowest income. See this article written and researched by my colleagues in the Financial Planning Association of Canada, for a more thorough analysis of the proposed childcare options.
Senior Care
Introduce a Senior Care benefit that will pay $200 per month per household to any Canadian who is living with and taking care of a parent over the age of 70.
Amend the Home Accessibility Tax Credit by increasing the limit from $10,000 per dwelling to $10,000 per person.
Allow seniors or their caregivers, including their children, to claim the Medical Expense Tax Credit for home care instead of only allowing them to claim attendant care if they live in a group home.
Comment
This is in part intended to relieve seniors and their family members of the costs associated with long-term care facilities. In the wake of the poor conditions revealed in several such facilities, this seems a prudent path to take, in addition to the general preference of seniors to “age in place.”
People with Disabilities
Double the Disability Supplement in the Canada Workers Benefit from $713 to $1,500, providing a major boost to lower-income disabled Canadians on top of our increase in the Canada Workers Benefit.
Overhaul the complex array of disability supports and benefits to ensure that working always leaves someone further ahead.
Work with the provinces to ensure that federal programs are designed to work with provincial programs.
Reduce the number of hours required to qualify for the Disability Tax Credit (DTC) and the Registered Disability Savings Plan from 14 to 10 hours per week.
Make it easier to qualify for the tax credit, thus also making it easier to qualify for the RDSP, which provides up to $3,500 per year in matching grants for Canadians with disabilities.
Comment
People with disabilities are often forced to live on lower incomes and also find that the benefits they receive are clawed back if they are able to earn an income over specific thresholds. Qualifying for the Disability Tax Credit is also a challenge, requiring complex paperwork, the good will of medical staff, and meeting the precise criteria of the Canada Revenue Agency. Anything that minimizes the hoops one must jump through is a good idea, in my view.
Jobs
Double the Apprenticeship Job Creation Tax Credit for the next three years to help create more places for apprentices.
Create the Canada Job Training Fund and Working Canadian Training Loan to support skills training in needed areas and help people who want to upgrade their skills.
Double the Canada Workers Benefit up to a maximum of $2,800 for individuals or $5,000 for families and pay it as a quarterly direct deposit rather than a tax refund at year-end.
Give someone making $20,000 per year a $1/hour raise.
Double the disability supplement from $713 to $1,500. This will help almost 90,000 disabled workers.
Launch a Super EI that temporarily provides more generous benefits (75% of salary instead of 55%) when a province goes into recession (a 0.5% increase in the unemployment rate, as defined by the “Sahm Rule”). EI will return to normal levels once the recession is over, as evidenced by three months of job gains.
Require gig economy companies to make contributions equivalent to CPP and EI premiums into a new, portable Employee Savings Account every time they pay their workers. The money will grow tax-free and can be withdrawn by the worker when needed.
Increase EI sickness benefits to 52 weeks for those suffering from a serious illness. The current EI sickness benefit limit is 15 weeks is not enough for those undergoing treatment for serious illnesses like cancer. We will ensure that ill workers receive the support they need to recover.
Comment
The general approach here appears to be encouragement to participate in the workforce. I am struck by the proposal for an Employee Savings Account to act as a functional substitute for CPP and EI. While better than the status quo, does this really bring “gig economy” workers into a position comparable to those with fulltime employment?
Cellphone and Internet
Accelerate the plan to get rural broadband built. Build digital infrastructure to connect all of Canada to High-Speed Internet by 2025.
Lower cellphone and internet bills. Allow foreign telecommunications companies to provide services to Canadian customers, provided that the same treatment is reciprocated for Canadian companies in that company’s country.
Comment
Rural broadband appears to be an essential across the political spectrum. As for the costs, allowing foreign telecom firms to compete may help to lower prices, but again, we’re dealing with a tight oligopoly of national carriers so I’m not sure if competition alone will break that degree of power.
Pensions
Ensure that pensioners have priority in bankruptcies or corporate restructuring.
Prevent executive bonuses during restructuring if the pension plan is underfunded.
No longer force underfunded pensions into conversion into annuities, which locks in losses.
Require clarity in the reporting of pension plan funding status.
Comment
My personal feeling is that when employers provide a pension, they need to stick to their commitments. It should be regarded as a bill that needs to be paid in order to stay in operation. Anything that pushes that sort of responsibility forward is good, in my estimation. However, having said that, these rules may force corporations that still provide defined benefit plans to move toward defined contribution plans.
If that is indeed the case, increased competition among annuity providers, particularly for the single premium immediate type, should be encouraged to effectively allow people to replace their defined benefit plans with functional equivalents.
Home Prices
Release at least 15% of federal government real estate for housing.
Allow deferral of capital gains when rental housing is sold and reinvested in new rental housing.
Enhance the viability of using Community Land Trusts for affordable housing by creating an incentive for corporations and private landowners to donate property to Land Trusts for the development of affordable housing.
Implement comprehensive changes to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, and give FINTRAC, law enforcement, and prosecutors the tools necessary to identify, halt, and prosecute money-laundering in Canadian real estate markets.
Establish a federal Beneficial Ownership Registry for residential property.
Implement at the federal level the findings and recommendations of the Commission of Inquiry into Money Laundering in British Columbia.
Ban foreign investors not living in or moving to Canada from buying homes for a two-year period after which it will be reviewed.
Encourage foreign investment in purpose-built rental housing that is affordable to Canadians.
Re-implement the Housing First approach to aid in the fight against Canada’s addictions crisis.
Encourage a new market in seven- to ten-year mortgages to provide stability both for first-time home buyers and lenders.
Remove the requirement to conduct a stress test when a homeowner renews a mortgage with another lender instead of only when staying with their current lender.
Increase the limit on eligibility for mortgage insurance and index it to home price inflation.
Fix the mortgage stress test to stop discriminating against small business owners, contractors and other non-permanent employees including casual workers.
Comment
Most of these proposals appear to address the supply side, which is good. I do have to question, though, any proposals that increase demand, as that will only tend to reverse the positive impact of an increase in supply.
You can read the entire Conservative Party of Canada Platform here.
This is the 114th blog post for Russ Writes.
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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.