Personal finance writer Rob Carrick discusses the 2009 federal budget, which offers modest cuts to personal taxes but contains a temporary new Home Renovation Tax Credit, a win for homeowners, in his column Small tax cuts, and help with the kitchen reno
Rob has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November, 1998.
After starting his career at The Canadian Press in Toronto covering general news and business, Rob moved to CP's Ottawa bureau, where he served as senior economics writer and covered the Department of Finance. He holds a Bachelor of Arts in political science from York University, an Honours Bachelor of Journalism from Carleton and is a graduate of the Canadian Securities Course.
Rob is the author or co-author of three investing books, the most recent of which is How to Pay Less and Keep More for Yourself: The Essential Consumer Guide to Canadian Banking and Investing. His previous two books are E-Investing: How to Choose and Use a Discount Broker and The Online Investor's Companion: 50 Essential Investing Websites.
Rob is often asked to provide his perspective on investing and personal finance issues at conferences and seminars. He also appears on ROBTV and contributes regularly to Globe websites and Globe Investor magazine.
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Eric Atkins, ReportonBusiness.com
Hello Rob Carrick. Thanks for joining us today. Let's get right to the questions.
Ed Long writes:
Prior to Davos, 2009, Price Waterhouse has released a survey of 1100 global CEOs. 21% see an increase in revenues in 12 months and 34% in 36 months. 1 in 10 CEOs now see a scarcity of natural resources. Does this budget acknowledge these projections?
Ed, you seem to be suggesting with the stats you quote that we're in for tough times in the next year or two. It looks like the Finance Department people who crafted the federal budget would not agree with you.
The widely held view is that the budget treats the current downturn like a serious event that will quickly recede following massive intervention by global governments to stimulate economies.
As my colleague Heather Scoffield reports, the budget assumes things will improve rapidly enough to allow the government to eliminate deficits and be in surplus again by 2013. This doesn't exactly square with the Price Waterhouse finding that only 34 per cent of global CEOs see a revenue increase in 36 months. That's actually a scary finding. If it proves true, the feds will be way offside on their budget projections and we will be in for years of red ink.
Doug McGraw writes:
First I have to say that although I do not have any party loyalty, I do vote, so I believe that I have a right to question those people who seek public office. The only thing that I ask is that they conduit themselves as a servant of the people and not simply posture themselves into a 'good gig'.
With that in mind do you find that today's governmentt highjinx are accountable to Canada's current situation, or simply political gamesmanship?
Doug, I'll address my comments to the budget because that's been the main focus of government for the past while.
I hate to sound like I'm waffling but I'd say there's a mix of gamesmanship and accountability here. On one hand, the government has abandoned the idiotic stance taken in the fiscal update last November that we're basically fine here in Canada and that no special measures need to be taken to address the global economic downturn. The budget handed down yesterday contains a variety of measures to stimulate the economy and take the edge of the effects of the recession.
But that said, I do see some political game-playing in the tax cuts and tax credits that were handed out in the budget.
The personal tax cuts are not substantial enough to make a tangible difference in a family's cashflow. So you can argue the government would have been better off to keep the cash and deploy it more strategically. The same goes for the home renovation tax credit, which can cut your taxes by up to $1,350 if you spend $10,000 to fix up your house.
This tax break was introduced as an economic stimulant, and maybe the building trades and retail stores like Rona will benefit. But it also seems like pandering to the many people whose intense interest in homes and home renos has fuelled all those home-and-garden magazines and TV shows out there. At very least, however, we can now say we have a government that recognizes the severity of the economic situation and has tried to do something about it.
Elwan Lobo-Pires writes:
Any number of studies have shown that almost half of those who pay into EI do not benefit at all. I think that at least 90% of them would be minimum wage workers. This was started by Canada's financial 'Saviour Paul Martin' and not modified inspite of the fact that Canada had surplus budgets for almost ten years.
Policemen, clergy, firemen and doctors are among the millions of Canadians who pay into EI and never have to collect EI.
So what is the problem in either lowering the number of hours worked to allow workers to collect EI , or allowing a carry over of hours to subsequent years so that workers become eligible to collect EI? Federal politicians collect lifelong pensions after working for six years.
Elwan, these enhancements to EI make sense to me, but I don't claim to be an expert on this topic.
I think of EI as being like any other kind of insurance, which is to say it's costly to many, useless to most in the end and difficult to deal with if you need to make a claim. It's also better than the alternative, which is no insurance at all.
The problem in reforming EI is that there's no influential constituency to advocate for it with government.
Mack the Knife writes:
It is unconscionable that Flaherty has left the EI benefits such that he only allowed for two extra weeks of compensation.
Doesn't he recognize that after they run out that peoples only choice will be the dole which will have to be funded from tax funds. This only strips people of their dignity and doesn't result in a forward movement toward alternate employment.
Mack, as I wrote to the previous questioner, there doesn't seem to be anyone or any organization that is capable of taking the EI cause to government and getting it to listen to ideas about making improvements. But it's early on in this recession.
As the unemployment numbers worsen, we may see increasing pressure on governments to make EI more generous or more responsive to a bad economic environment.
Ryan Fillmore writes:
This budget does nothing to help me personally.
I'm not able to take advantage of the new home owner benefits, because of my damn national student loan. Until I have completely paid my student loan, I do not qualify for any mortgages, even with RRSPs.
I don't support this budget or the government that tabled it. I'll give up all the other 'tax breaks' and 'benefits' they are handing out, if I can get my damn student loan forgiven.
Ryan, you have just raised an issue that I think we'll hear more about in the next couple of years.
Soaring costs to attend university and college have forced students to take on stagging debt loads in some cases. These students have been able to justify these debts in the belief that they would be able to pay them off once they got into the workforce and started earning a salary.
Now, we have a recession on and the job market is sagging. We also find that students are in a position such as yourself, where they cannot really get on with their lives as adults (ie. buy a home) because of their debt loads.
Unfortunately, I'm note sure what the solution is here. Governments have tried to attack this issue by improving registered education savings plans, a vehicle in which parents save for a child's education, and they have introduced some tax breaks for education costs. But the issue of student debt has not been tackled, as you well know. I think politicians need to be wised up on this issue, and it's up to student groups to do it.
Alicia De Souza writes:
I installed new hardwood floors last February and the payment option was not to pay for 14 months which will be in April, 2009.
Will this 'renovation' be covered to receive the tax credit up to 15% or a maximum of $1,350 as payment is not due till 2009?
Alicia, here we have one of those painful issues that arises any time the government introduces a new tax break like the temporary Home Renovation Tax Credit, which offers up to $1,350 for people who spend between $1,000 and $10,000 on home fix-ups after Jan. 27 and before Feb. 1, 2010.
The issue: what if you did something to qualify for the tax break, but before it was introduced?
Unfortunately, it doesn't look good for your hardwood floors qualifying for the home reno tax credit.
The language used by the government says: "The HRTC will apply to eligible home renovation expenditures for work performed, or goods acquired, after January 27, 2009 and before February 1, 2010, pursuant to agreements entered into after January 27, 2009."
So while you may pay for your floors during the period in which the home reno tax break is available, the key is the date on which the work was done.
Terry Zavitz writes:
Can you give an example of using the home-renovation tax credit and the ecoEnergy program?
Terry, I'm glad you asked this question because it points out a rare opportunity to double dip on benefits to taxpayers related to home fix-ups.
On one hand, we have the new home reno tax credit, which I've described earlier in this online discussion. On the other, we have the ecoEnergy Retrofit program, which the government beefed up in yesterday's budget.
The ecoEnergy program offers grants of up to $5,000 for projects that enhance a home's energy efficiency. An example would be adding a new high-efficiency furnace.
In the budget lockup yesterday, I specifically asked a Finance Department official if you could qualify for both the home reno tax credit and the ecoEnergy program with the same fix-up project. The answer was yes.
You must first qualify for the ecoEnergy program and then make your application for grant money. Then, you'd submit the receipts for the project with your 2009 tax return to claim the home reno tax credit.
The two programs work separately, then, but can be combined for double savings.
Bill Moses writes:
What is your opinion on when we will know that we are on the road to recovery? What will be the markers?
We'll know we're on the road to recover not when all the economic indicators start improving, but when they stop dropping in ways the scare the heck out of everyone. Example: when the unemployment rate rises by just a bit after months of alarming jumps.
Another way we'll know we're on the right road is when the stock markets shake off last year's disaster and mount a sustained rally.
Stock markets are a leading indicator, which means they fall ahead of the worst economic news and rise ahead of the day that the finance minister or someone in the economics dept of a big bank declares the recession over.
I should add that parts of the economy will take longer to rebound than others. Economic output may start to increase again (right now, it's contracting), but that doesn't mean people who got laid off have all found gainful new employment.
Eric Atkins, ReportonBusiness.com:
Thanks for joining us today, Rob. Before we go, any final advice on how to make the most of the 2009 federal budget?
Thanks for all the questions, everyone, and take advantage of that home renovation tax credit if you've been thinking of fixing up your home and are confident in your job situation. The amount of that tax credit, up to $1,350, is far larger than the token personal income tax savings you're going to see in 2009.