Canada's generous (to the rich) Federal legislators

joyfulguyFebruary 26, 2007

No, they didn't vote themselves a 25 - 30% bonus, like the provincial trough-hoggers did ... they're operating a minority government (5 parties - but the Green Party lacks a single seat).

They did arrange, though, for people earning solely one kind of income to have a 50% increase in such income before they became liable to pay income tax - last year it was about $27,000., this year it's about $40,000.00. While the average person becomes tax-liable at just around $10,000. income.

Three provisos:

1. Ya gotta be rich (well, in today's economy, at least moderately so).

2. Ya gotta have only one kind of income.

3. Ya can't work. Well, if you feel socially obligated to work, to pay your way in society, justify your spot on the earth, etc., fine - just don't take pay for it.

If they have a spouse with income under about $10,000., are aged over 65, receive a private pension, make substantial contributions to charity and/or a political party, or have qualifying medical expenses above 3% of net income - they can push their level of tax-free income even higher.

If, however, you choose to accept your pay - or I accept my pensions - the benefit mentioned still works.

It's just that we can't (well, probably can't, depending on certain parameters) avoid paying even a cent of income tax.

The regular "taxpayer" was able last year to pay no tax on income solely as dividends from Canadian corporations up to about $27,000.

This year, thanks to a different system of calculation, that tax-free amount has risen to around $40,000. - with possible extensions above that amount, as mentioned.

If one receives dividends at a rate of 4%, a million invested would do it ... but that average rate's a bit difficult to obtain, investing responsibly.

More like $1.3 million at 3%.

But very likely total portfolio much larger, as some stocks pay a much lower rate, and quite a few that many investors, especially young ones, would find attractive - pay none at all.

Probably total portfolio somewhere in the neighbourhood of $2.5 - 5 million.

Quite a nice windfall, huh?

ole joyful

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housenewbie

They must have been studying the 'tax reform' that our pals in Washington like to enact.

    Bookmark   February 27, 2007 at 12:35PM
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joyfulguy

Our current government is very interested in being good buddies with the crowd in Washington.

o j

    Bookmark   February 27, 2007 at 6:32PM
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joyfulguy

My accountant friend tells me that it's probably closer to $50,000. available tax free, given the above scenario.

The calculation method causes a probable increased amount of one pension to be clawed back quite likely, after age 65.

Plus greater reduction in age credit for seniors.

But - nearly $50,000. tax-free income ... isn't too shabby!

ole joyful

    Bookmark   March 6, 2007 at 3:42AM
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joyfulguy

I did the calculation as to the amount that can be earned tax-free, last night, after doing some preliminary work on my income tax (due Apr. 30).

Single taxpayer (so no additional credit for low-income spouse) under 65 can earn $49,850. before being required to pay $1.00 of income tax - but he will be required to pay $600.00 provincial health care levy.

But - must be wealthy, have only one source of income ... and can't work.

The federal credit still has some extra value, so if the "taxpayer" could live in a province taxed at a lower rate, or lower threshold, the tax-free level could be somewhat higher.

As it could be with a low-income spouse, or if the person gives to charity or makes political contributions. True also for medical costs, but the threshold is higher, due to an automatic escalator that affects the basic income.

At 65 Canadian residents, with some years of residency requirements, become eligible for about $5,400. Old Age Security. But if their earnings are over about $55,000, it is partly clawed back, with full clawback at about $85,000. And this becomes harder hit by that automatic escalator in the income that qualifies for the tax-free status. Also, it screws up the tax-free suituation, but the benefit still works, it just means that the manager of the money deosn't escape tax-free.

There's an age credit that kicks in at age 65, as well ... but this is hit harder by the automatic escalator, as well.

There's a fuller description of this situation elsewhere on this forum, re Canadians earning $40,000. income tax-free. Plus I posted one about it over on "Money Saving Tips" earlier today.

Hope you all have a trouble-free weekend (i.e., your taxes were done earlier ... or you have conned someone else into doing them!).

ole joyful

    Bookmark   April 12, 2007 at 6:13PM
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