The Big Red “Soak the Rich” Budget

Depositphotos_1830058_s-2015My low expectations for Budget2016 apparently weren’t low enough, with a sea of red ink projected as far as the eye can see. Spending, spending everywhere. Not that we should be surprised: the die was cast with the election, this is merely the other shoe dropping.

In this article by Garry Marr, the Financial Post aptly describes it as a “Soak the Rich” Budget. It quotes CIBC Wealth’s Jamie Golombek to the effect “the government is taking away some key tax planning vehicles that allow the wealthy to rebalance their portfolios without incurring a deemed disposition, meaning they will face immediate tax consequences.” As of October 1st, there will no longer be tax-free switches for those in corporate class mutual funds.

And the return of a 15% federal tax credit for Labor-Sponsored Investment Funds is hardly any consolation!

As expected, income splitting for couples with kids under 18 will be eliminated but fortunately, pension splitting remains intact. (sigh of relief!)

Capital gains tax inclusion rate still at 50%

As for the rumoured  sweeping changes to capital gains taxes, you’ll need to dig into the supplementary budget documents that are aimed at measures for those in the new 33% tax bracket. We will update this paragraph as it becomes more clear but based on this report today by, the capital gains inclusion rate remains at 50% and won’t rise to the feared 67 or even 75%.

GIS sweetened for low-income seniors and couples living apart

As expected, the age for commencing Old Age Security (OAS) benefits will remain at 65, so it won’t be moving gradually up to 67, as previously was planned for some younger folk. The least fortunate seniors who qualify for the Guaranteed Income Supplement to the OAS may get up to an extra $947 a year. Support is being raised for senior couples living apart, with GIS benefits based on individual incomes if they have to live apart for “reasons beyond their control.”

CPP expansion looming

The long-expected expansion of the Canada Pension Plan is also on the horizon. As Benefits Canada reported today, Ottawa will be launching consultations on this, with probable expansion within a year.

As expected, the new Canada Child Benefit will replace the combination of the National Child Benefit Supplement, Canada Child Tax Benefit and Universal Child Care Benefit.

The Globe & Mail’s Rob Carrick provides his usual good overview in a piece entitled Ten ways the Budget will affect your finances. At least three of them affect students and young people: The Canada Student Grant rises to $3,000 a year from $2,000 for the 2016-17 academic year for those who quality; however, the education tax credit and textbook tax credit are being eliminated as of 2017. Students now do not have to repay money borrowed under the Canada Student Loan program until they are earning at least $25,000 per year.

For other coverage, here is CP’s coverage as carried by the National Post.

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