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Originally Posted by Zarley
I'm well aware of what they are proposing and I don't think that is a fair assessment at all for a number of reasons:
- Around 60% people who have maxed our their TFSAs at the current limited make under $60,000.
- The Liberals define the middle class as those earning between $44,700 and $89,401. Individuals earning near the upper reaches of this bracket can surely take advantage of the increased contribution limit (I myself am somewhere in the middle, so while I doubt I'll be able to max out under the new limit, I can certainly take advantage of the increased room now and the unused contribution space in the future)
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That's not really unexpected, given that individuals earning less than $60K make up about 80% of tax filers. The fact remains that something like only 1 in 20 Canadians earning less than $60K a year were able to max out their TFSA at the $5K level.
And when you really dig into the numbers, it's pretty clear that a good portion of that 1 in 20 aren't really typical middle earners. 25% of the sub-$60K earners who maxed out TFSAs made less than $20K, and a good chunk made less than $5K. To me, that looks like higher earners shifting money to lower earning family members. In fact, of the 1.1M people making under $60K who maxed out their TFSAs, the majority earned less than $35K. Maybe some of the people earning that little manage to sock away 20-50% of their after tax income, but I really doubt that's what's going on with most of them. Or to put it another way, there were as many people maxing out their TFSAs with $10-15K income as there were with $55-60K in income.
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- My main issue is that the reduction is a disincentive towards investment and savings. The government should be encouraging citizens to make disciplined financial decisions and this is a negative signal. It basically says to your average Joe that "investing is for rich people and you shouldn't worry about it". I've heard a number of middle class people say things like "I'm not rich enough to even have a TFSA," and that's a very unfortunate sentiment.
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How is maintaining the rules that have existed for most of the last decade disincentivizing investment and savings?
And really, TFSAs haven't really done a great job of that anyway. Nearly 2/3rds of those eligible haven't even opened an account, and among those that have, maximization rates have fallen dramatically, and are 1/4 of what they were in 2009.