In wake of the Canadian election last night, I can’t help but write about it. I know that mixing business with politics is a dangerous game. As dangerous as bringing up religion or abortion at a dinner party where you aren’t sure of your present company; however, my heart is bursting to write and I’ve always been a “
shoot write now, ask questions later” kinda gal.
I must admit, I have mixed feelings about last night’s election results. If you already feel yourself getting offended, please don’t read on. My intentions are not to go on a passionate political rant here nor to comment about what I think should happen next (I leave that to my personal conversations with friends and family). Additionally, this post shouldn’t be seen as a platform for political debate or policy review. This is merely a personal blog where I write about how I feel over the year of the Barter Babes journey. Right now, in this moment, I’m having major moral qualms regarding the industry I so love and my political views and I’d like to share this cognitive dissonance with my readers.
Many people are often surprised to find out that I, a person of the financial industry, don’t necessarily swing to the Right politically. Generally, those in the financial sector rightly seek lower marginal tax rates, foreign investment incentives, further tax breaks for corporations – to surge the mighty stock markets – and more personal tax sheltering for individuals who are able to save. But, what about those who are unable to save, or require government sponsored programs for their health or their jobs? Government spending and cutting taxes don’t necessarily go hand in hand.
I tend to swing to the left, and yet, I advise to take advantage of all the tax breaks out there – with fervour. How strange and uncomfortable is that?
For example, I dutifully advise my Barter Babes that a Tax Free Savings Account is the greatest gift to our generation. I go on about how we can spend a lifetime saving our money there so that in retirement we don’t have to pay taxes on any of the investment income inside! TAX SHELTERING ON ALL INVESTMENT INCOME EARNED OVER 30 YEARS!! I nearly shout it from the rooftop of the Starbucks. It really is a wonderful account for saving. We maximize the TFSA by saving up to $5000 each year and will have oodles of tax-free income in retirement. Great, right? The Right wing party began this wonderful account in 2009. Now that it holds a majority government, the maximum will likely double. Instead of $5000/year, you’ll be able to put $10,000/year away.
As a financial advisor, I should be dancing on the roof now! This is REALLY EXCITING! However, my political self is scared.
Canadians are now maxing out their TFSAs each year, earning investment income that is never taxed – ever. As an advisor, doubling the amount per person is wonderful on a household level. But I, unfortunately, believe that on the greater scheme, the Canada-as-a-whole arena, this is scary. The hundreds of millions of investment income accruing in TFSAs all across this country are no longer taxed and therefore, lost as government tax revenue. Tax revenue, is how we pay for our social programs, art incentives, health care and infrastructure. So, by increasing the amount of TFSA contribution room, we cut off the amount of tax revenue to the government and put many social programs I hold so dear at stake. Yes, there are income taxes and consumption taxes and business taxes, but aren’t those all supposed to go down as well with a Right-wing agenda? Where does the money come from when we make the resources so scarce?
This isn’t the first time I’ve thought of this problem, especially with the TFSA. I used to appease my unease by telling myself; “it’s only $5000/year” (albeit, adjusted for inflation each year) and that “large amounts of untaxed investment income will only occur once people have been investing in their TFSA for decades” and lastly, “those who invest in venture capital and double, triple, quadruple their money will be few and far between – the exception, not the rule”. These justifications allowed me some small comforts. But now, if the maximum doubles, we reduce even more tax revenue from the public purse.
Each time I advise saving to a TFSA, I feel that I’m biting the hand that feeds me. Personally and politically, I urge people to think about the bigger picture, to think beyond our front doors, yet in each financial session, I advise clients to look no further. It would be unethical to advise any different. What a conundrum I’m in.
There are many examples of this moral qualm in my professional life vs political. I advise people how to pay less taxes, yet I advocate social spending. I constantly urge business owners to ensure they qualify for the small business deduction. I advise placing Canadian equity in taxable accounts, when your tax sheltered accounts are maxed out, in order to pay even less tax by taking advantage of the Dividend Tax Credit. All this cutting and squeezing of tax revenues while foolishly hoping for more government spending for my country.
Certainly, I do not believe that the Right is the only party that cares about the economy and our personal finances. Each party has platforms that take the budget into consideration and personal tax incentives. However, some of these parties make it much easier for people to pay less tax. It is well known that these parties aim for less government intervention and social spending as a whole and therefore, the lost tax revenue is not such a blow to the public purse.
I know my posts are usually upbeat and funny, even when speaking about something serious, but I feel a bit lost today and I’m sure I’m not the only person in the world who struggles between fiscal and social responsibility.
My heart is sad today, but my professional brain is considering the possible benefits to personal finances from this election and I’m already planning great things for clients should some of these new reforms take place.
I feel like a communist fascist.
What’s a left-wing financial advisor to do?