Image courtesy of tausend und eins, fotografie
It’s that time of year again where people will dress up, disguise their identities and go knocking on your door, saying “Trick or Treat”. The experience at the doorstep can be either very pleasant, or highly terrifying. Personally, I’ve always been fascinated by the full range of disguises people manage to wear. Some people dress up to be as scary as possible, while others go severely out of their way to appear much more docile and tamer than they are in real life. The spectacle is quite impressive.
I did some advanced polling in my neighborhood, and there’s some creative costumes being put together this year for our neighborhood contest. Andrew decided that he’s going to dress up as a regular working Joe, so he doesn’t scare anyone. Elizabeth is making sure her costume has no plastics and is environmentally friendly. Yves-Francois has been a ghost the last few years, but he’s thinking about being more visible in this year, now that other kids aren’t taking over his neighborhood. Jagmeet wants to go trick-or-treating in Quebec where Yves-Francois hangs out, but it turns out he’d have to dress differently than he normally does to qualify according to their recent legislation, so it’s put him in a very awkward position. Everyone seems to think that Maxime is dressing as the boogeyman, and Justin…well, he’s come right out said he’s over the whole costume thing all together from this point forward!
It’s going to be tough to judge the contest this year. Everyone who’s supposed to be a judge has a different opinion on who’s costume is the scariest, and there doesn’t seem to be a clear winner.
Forget Halloween – the Federal Election will give us all the willies!
Historically, the treats often have turned out to be tricks
One alarming trend I’ve noticed in recent years is sometimes parties promise to give you a treat, but it turns out to be a trick. You may not notice this until your belly hurts, and you realize the candy they were handing out wasn’t quite what you expected. It’s very hard to tell though, at the door, if what you’ve been promised is a good treat or a bad trick. It’s important to realize is that virtually all parties have done this in recently, and that sometimes our political system causes us headaches when we try to plan:
Prior to the last federal election, the Conservatives lowered the minimum withdrawals for RRIFs for those forced to draw from their RRIF at 72. They made this seem like a beneficial tax cut – except for those who were chronic savers. For them this meant the government would generally get way more tax revenue from their estate, as the full balance of any RRIFs remaining at the death of the second spouse could end up being taxed at the highest marginal tax rate in the province. Here in Ontario, I saw many people defer taking out RRIF money at a tax rate of 35% or so, only to have it be taxed in their estate at 53.5%. In the end, the total tax they paid on their RRIF ended up being significantly higher at death than it would have been if they took more out in their lifetime.
This is a classic example of a “stealth tax” – it would be political suicide to raises taxes directly – so the government found a way to spin a tax increase to look like a tax break. If you’ve been putting off withdrawing your RRIFs, then it might be time you sit down with someone to discuss if this is the right option for you.
The latest federal Liberal government introduced new small business tax measures that created utter havoc in the planning community shortly after their election, making it seem like it would only affect those abusing the tax system to shelter funds. Unfortunately, this was not the case – past governments wrote the tax rules to encourage small business owners to save via their corporations, in lieu of access to pensions and other benefits that might be found in traditional employment.
Our tax system was built on the concept of equal tax consequences to keep funds held in corporations roughly equal in taxation personally. The new rules altered this significantly to encourage business owners to stop holding wealth in their corporations. The initial proposed rules would have been highly punitive (almost retroactively) to those who followed the rules in good faith for nearly 30 years. After consideration and consulting with various professions, the government finally settled on a more reasonable approach that met their policy objectives, but also allowed some breathing space for business owners. Many of us still argue, however, that the final version of the rules punishes small business owners unfairly, but the situation is significantly better than it could have been based on the government’s initial position.
One of the worst “tricks” has been when one party replaces another and wants to “wipe the slate clean” for ideological reasons. In Ontario, one example that comes to mind is the basic income pilot project that was running to determine if a government-backed guaranteed income program might be less costly than running welfare and social services support programs. Unfortunately, when our government changed part way through the 3 years of the project, the new government killed the pilot almost instantly, without a chance to analyze the results. In my mind, that was horrible “trick” and a shame – the concept has been talked about for years in Canada, and it was finally being scientifically tested to see if it was a net positive or net loss – and now we’ll never know. That could have had a significant positive impact on retirement planning, especially for low-income seniors if the theory was true.
Make your vote count
Your retirement plans, investments and estate plans may all hinge on the results of the election and who comes to power. CBC has published a very well laid out website that allows you to read through a detailed but high-level summary of each party’s promised candy at:
Take the time, do your research and think about the impacts your vote might have on your investments, retirement and estate plans. Be sure to reach out and ask questions of your professional advisors in tax, law and financial planning. Hopefully, that’ll help us all keep the candy-induced stomach aches away for another four years. Most of all remember not to
eat vote for any candy where the package has been tampered with!