Seniors and savers are the big winners in the federal budget, while the Conservative government also pledged money for transit upgrades and a new maritime centre in Vancouver to shore up votes in B.C.
A new $1-billion-a-year Public Transit Fund was unveiled that along with other infrastructure funds could deliver the federal share of money for the Metro Vancouver mayors’ proposed transit expansion plan, including new rapid transit lines in Surrey and Vancouver.
Metro mayors say the new fund should ensure the more than $1.5 billion in federal contributions assumed under their plan will materialize, provided area voters pass a referendum to raise their share through a sales tax hike.
“The fact there is new federal money focused on transit is excellent for this region,” Port Coquitlam Mayor Greg Moore said. “However we have to make sure we can bring our regional portion to the table.”
The big personal finance change in the budget is an increase in the annual contribution limit from $5,500 to $10,000 for Tax Free Savings Accounts (TFSAs) effective immediately.
TFSA contributions don’t generate a tax deduction but the interest, stock dividends and capital gains earned within them aren’t taxed and the money can be withdrawn at any time.
The higher limit will be useful to well-off seniors who must withdraw more than they need from retirement accounts. They and others will be able to gradually shield more money from tax within TFSAs rather than taxable investment accounts.
Critics say the change mainly benefits the wealthy and will threaten federal tax flows over time as more Canadian wealth is tax sheltered.
“This is so blatantly for the very rich,” said Lorraine Logan, president of the Council of Senior Citizens Organizations of B.C.
She said the budget will appeal to wealthy retirees but is silent on the concerns of lower-income seniors, from affordable housing to sustaining federal health transfers to the provinces.
A second key change will give more flexibility to retirees with Registered Retirement Income Funds. While RRSP contributions earn a tax deduction, seniors later pay tax on RRIF withdrawals and there’s a minimum withdrawal rates that rise each year after age 71.
The budget reduces those minimum withdrawals modestly, allowing seniors to keep more money tax shielded in RRIFs longer.
People caring for a terminally ill family member will now be able tap compassionate care benefits under Employment Insurance for six months instead of six weeks.
The Tories also pledged to cut the small business tax rate from 11 to nine per cent by 2019 on the first $500,000 earned.
The federal budget is balanced for the first time since 2008, with a $1.4-billion surplus that will go to pay down the debt.
Home builders applauded a targeted home renovation tax credit for seniors to help them make their homes more accessible. It rebates up to $1,500 out of $10,000 of spending on items like wheelchair ramps and walk-in bathtubs.
On the spending site, items for B.C. include $3 million to match provincial contributions to develop an International Maritime Centre in Vancouver to promote B.C. as a maritime centre and best-in-class transportation and logistics hub.
And $2 million is pledged to help the Pacific Salmon Foundation study survival problems of juvenile salmon and steelhead in the Salish Sea.
Part of the budget touts federal oil spill response preparedness but also commits to fund nearly $14 million in scientific research over five years on “the behaviour of oil in freshwater in order to contribute to the knowledge base to effectively respond to oil spills in some of the highest risk areas in Canada.”